Corporate India's net profits are expected to grow by a robust 24.5% in FY 13 on account of softening of commodity prices and steady interest rates, economic think-tank CMIE has said.
"We expect net profits of corporate India to grow by a robust 24.5% in FY 13, after falling by 0.6% in FY 12. The net profit margin of corporate India too is expected to inch up to 7.2% from 6.8% in FY2011-12," Centre for Monitoring Indian Economy (CMIE) said in its monthly review.
The factors that are expected to moderate the topline growth -- softening of commodity prices and steady interest rates, will provide a boost to its bottomline. A slower growth in other expenses compared to FY2011-12 is also expected to help.
The companies are also unlikely to incur similar forex losses in FY2012-13. The rupee had depreciated by around nine% in each of the two quarters ended September, 2011 and December 2011. Compared to that, the rupee depreciated steeply in only the first quarter of the current year. "We expect the rupee to remain stable in the second quarter and start appreciating thereafter," CMIE said.
However, sales growth is expected to slump to 13.2% in FY'13 from over 20% in the preceding two years, it said. The growth is expected to decelerate sharply to 15.9% in the first half of FY'13 and to 11.4% in the second.
"The corporate sales growth is expected to decelerate only on account of a major slump in the sales growth of the petroleum products and the banking industry, which together account for 43% of corporate sales," CMIE said.
The sales growth of the petroleum products industry has been volatile and subject to major price fluctuations and government regulations. The sales growth of banking industry is a function of interest rate changes and credit demand.
"We expect net sales of the petroleum products industry to grow by 9.6% in FY 13, compared to a much higher growth of 33% in FY12. A slower rise in prices of administered as well as non administered petroleum products is expected to pull down the growth of the industry in the current year. We expected average unit realisation of the industry to rise by only six% in FY 13 as compared to 25% in FY 12," CMIE said.
The growth in the income of the banking industry too is expected to slow down to 16.4% in FY 13 from 33.7% in FY 12. This will be mainly because of stable interest rates. Interest rates had risen rapidly last year and had pushed up the income growth.
CMIE expects rest of the corporate India to see only a mild deceleration in sales growth to 14.3% in FY 13 from 16.1% in FY 12. This slight moderation in sales growth will be mainly a reflection of lower inflation.
"We expect inflation in manufactured products to come down to 6.6% in FY 13 from 7.2% in FY 12," it said.