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High input, interest costs hitting profitability of cos

Mumbai: Rising input costs and higher interest rates impacted the profitability of India Inc during the first half of the current fiscal, according to a Reserve Bank analysis.

"… Despite robust revenue growth, companies in aggregate could not generate higher profit margins (during April-September, 2010-11), primarily on account of higher input prices and a rise in interest outflow," the RBI said while analysing the performance of the private corporate sector.

The report, which was based on a review of the financial results of 2,576 listed companies, said that sales growth — which remained flat in April-September, 2009 — was robust in the first half of the current fiscal, mainly on the back of a pick-up in demand.

Sales growth, it added, was more prominent for companies in the manufacturing sector compared to those in the services sector.

"However, profit growth in both the sectors was hit during the first half of 2010-11", the analysis said.

It further said the performance of companies engaged in manufacturing activities dominated the overall performance.

Their sales and net profits grew by 24.8 per cent and 12.2 per cent, respectively, during the six-month period vis-a-vis the corresponding period of the previous year.

Companies engaged in IT services performed well, registering 15.9 per cent growth in sales during April-September, 2011, compared to the same period last fiscal, but their net profits grew by only 5.9 per cent due to higher interest and tax payments.

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