CII: Growth in sales down from 8.8% to 2.8%, corporate profits go into negative

By Jag Jivan

The Confederation of Indian Industries (CII), India’s powerful organization of top corporate giants, has declared that the “corporate results at the end of first quarter of current fiscal (2015-16) painted a rather gloomy picture, as the financial performance of Indian companies, especially manufacturing sector firms, deteriorated.”
In a just-released analysis, the CII said, “A lower than expected 7.0 per cent GDP growth in the reporting quarter could not salvage the cause, even as the rate cuts by the RBI provided some respite.” It added, even the ambitious Make in India campaign of Prime Minister Narendra Modi has failed to make a difference, with India “struggling to keep face in the international trade arena.”
Giving an analysis of the financial performance during the first quarter of 2015-16 of 2,422 manufacturing companies and 1167 service firms extracted from the Ace Equity database, the CII said, “Growth in net sales on an aggregate basis stood at a measly 2.8 per cent at the end of first quarter of 2015-16, as compared to 8.8 per cent in the same quarter a year ago.”
“The growth of net sales for manufacturing firms was as low as 0.5 per cent during the quarter as compared to 8.8 per cent in the same quarter a year ago”, the CII said, adding, “Firms in the service sector fared no better, with their net sales growing at a softened pace of 6.4 per cent in the first quarter of current fiscal as compared to a growth of 8.8 per cent in the same quarter in the previous year.”

“The low net sales of firms were reflective of the lack of ample demand in the economy, a scenario that has been persistent for quite some time now”, the CII commented, adding, “The slowing demand in the external markets has been doing no good either.”
Pointing out that the total expenditure “decelerated sharply” to 3.1 per cent in the reporting quarter as against a growth of 11.2 per cent in the corresponding period of 2014-15, the CII said, this “to some extent mitigated the impact of the current bout of economic crisis characterized by falling growth in net sales”.
But it said, “The reduction was not large enough to provide cushion to the bottom- Among the major reasons for reduction in expenditure included reduction in in the interest rates by the Reserve Bank of India (RBI), on one hand, and raw material cost, on other hand, reduced expenditure costs, the CII said. It added, despite this, the profit after tax (PAT) contracted by 9.2 per cent in the April-June 2016 quarter as compared to a growth of 25.2 per cent in the first quarter of 2014-15.”
It added, “PAT contracted for manufacturing firms by 18.6 per cent in the first quarter of current fiscal as compared to a growth of 33.9 per cent in the same quarter of last year. The service sector also lagged behind as PAT witnessed de-growth by 0.8 per cent in the reporting quarter as against a growth of 18.3 per cent seen in the corresponding quarter of last year.”
The CII further said, “Operating profits too followed fairly similar trends and on an aggregate level, the growth in operating profits fell to the tune of 4.3 per cent in the first quarter of 2015-16 against a growth of 10.9 per cent over.”

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