Private companies saw their profits rise last fiscal despite contraction in sales, a first in the last 15 years, according to the Reserve Bank data of nearly 3,000 firms.
At the aggregate level, operating profit grew by 10.2 per cent in 2015-16 compared with 5.3 per cent in the previous year, boosted mainly on account of sharp contraction in raw material expenses.
"Net profit grew by 9.3 per cent in 2015-16 as against Y-o-Y contraction of 0.7 per cent in the previous year mainly on account of higher operating profits and lower tax provisions growth. Y-o-Y growth in net profits improved across all sectors," RBI said.
Overall sales totalled Rs 29,898 billion (over Rs 29.98 lakh crore) last fiscal, as against Rs 31,191 billion in 2014-15. Net profits, on the other hand, were up at Rs 1,966 billion (over Rs 1.96 lakh crore) as against Rs 1,825 billion.
"Boost in profits and profitability despite contraction in sales performance of the private corporate business sector during 2015-16," the central bank said while releasing the data today.
The data relates to 2,932 companies. RBI compiles and releases data based on abridged financial results of listed non-government non-financial listed companies quarterly and annually.
Sales of the private corporate business sector contracted in 2015-16 both at the aggregate level and for manufacturing sector. Performance of the manufacturing sector was affected by the fall in global commodity prices.
However, operating profit growth was boosted mainly on account of fall in raw material expenses, which recorded higher contraction than that in the value of production.
In 2015-16, cost of raw materials (CRM) to sales and staff cost to sales reached their minimum and maximum levels over the last fifteen years, respectively, RBI said.
As per the data on the performance of non-financial private corporate business sector during 2015-16, sales contracted by 1.6 per cent and 3.7 per cent at the aggregate level and for the manufacturing sector, respectively.
"This contraction was observed for the first time in the last fifteen years," it said. However, sales growth improved for services (non-IT) and IT sector in 2015-16 year-on-year.
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Pricing power measured by operating profit margin
improved significantly for the manufacturing sector and services (non-IT) sector. Net profit margin improved across all sectors.
Further, year-on-year (Y-o-Y) interest expenses moderated for the manufacturing sector, while it increased significantly for the services (non-IT) sector on the back of contraction in the previous year. Within the services (non-IT) sector, 'Telecommunications' industry showed a significant increase in interest expenses on account of large borrowings.
RBI said that at the aggregate level and for the manufacturing sector, contraction in expenses on raw material was significantly higher than the previous year.
Y-o-Y growth rate of staff cost increased significantly for the IT sector.
The cost of raw materials to sales ratio declined significantly at the aggregate level and for the manufacturing sector.
