Reserve Bank data show sales growth moderation in FY12

Sales growth of large-sized listed public sector companies had moderated in 2011-12 and this was steeper in services than in the manufacturing sector, showed data issued on friday by the Reserve Bank of India (RBI) on the finances of non-government and non-financial large public limited companies.

“As operating expenses continued to grow at a rate higher than sales, earnings before interest, tax, depreciation and amortisation (Ebitda) and net profit (after tax) declined. Consequently, gross saving by the selected companies also declined. Profit margin of the selected companies was also lower in FY12 than in FY11,” went the main finding.

Analysis showed that in the smaller companies, with sales below Rs 25 crore and Rs 50-100 crore, sales declined in FY12 compared with FY11. The Ebitda margin fell across all sales-size groups. Many with sales below Rs 25 crore continued to make operating losses.

The moderation in growth of sales was steeper in services than in the manufacturing sector but the margin declined by a smaller amount in the former. “Companies in the transportation and real estate industries performed poorly, in terms of sales and Ebitda. Companies in chemicals and chemical products, cement and cement products, iron and steel, construction, computer and related activity industries recorded higher growth in sales in FY12,” went the findings.

The growth rate in FY12 total borrowing was at the same level as in FY11. Companies with sales above Rs 1,000 crore recorded the highest growth in borrowing, while the smallest ones, with sales below Rs 25 crore, borrowed less in FY12, the data suggested. “Companies in food products and beverages continued to borrow significantly, recording high growth in FY12, like in FY11. Besides, high growth in borrowing in FY12 was observed in machinery and equipment (non-electrical), construction, chemical and chemical products industries,” said the main findings.

Total net assets grew at a lower rate in 2011-12 compared with 2010-11. A similar trend was seen across most of the groups and in most industries.

The debt to equity ratio (debt as percentage of net worth) increased on the whole in FY12 from FY11. However, it declined for companies in the Rs 500–1,000 crore sales group, and in food products and beverages, pharmaceuticals, electrical machinery, motor vehicles, transport equipment, and computer and related industries. The ratio continued to be high in transportation, textiles and iron and steel industries, showed the data.

About 60.8 per cent of incremental funds during FY12 for the selected companies came from external sources (other than companies’ own sources). The share of borrowing in total sources of funds increased, while that of fresh capital issue declined.

As compared to FY11, a significantly higher share of funds raised during FY12 was used for acquiring plant and machinery. Similarly, funds used for financial investment during the year were higher than the previous year, states the main findings.