Sales of manufacturing companies declined by 7.4 per cent during 2019-20 as against 14.8 per cent growth in the previous year, said the RBI statement on performance of private corporate business sector in FY20. The data on the performance of the private corporate sector during FY20 was taken from the abridged financial results of 3,064 listed non-government non-financial companies. Service sector companies in the information technology (IT) and non-IT sectors recorded sales growth of 8.4 per cent and 6.9 per cent, respectively, during 2019-20 which was lower than their growth in the previous year, the data revealed. Subdued production related activities resulted in lower expenditure on raw materials by manufacturing companies during the year. Growth in staff cost remained steady for services (IT and non-IT) sector companies but decelerated for the manufacturing companies.
Interest expenses of services sector companies (IT and non-IT) surged during 2019-20 as the new accounting norms2 prescribed inclusion of lease payment obligations under this head. The interest coverage ratio (ICR)3 of manufacturing companies declined to 4.3 in 2019-20 from 5.4 in the previous year; ICR remained very high for IT companies but it slipped below the unity level for non-IT service companies. Subdued demand conditions resulted in 11.0 per cent decline in net profits of manufacturing sector companies during 2019-20 as against 42.2 per cent growth in the previous year and the net profits of the services (non-IT) sector companies remained in contraction; net profits of IT companies, however, increased.
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