Corporate profits

Corporate profits hit record high in September quarter: crisis

Corporate profits rose 15% to a record high in the September quarter as margins widened on lower input costs and better utilization levels, the research arm said on Monday. from the main rating agency Crisil.

From an absolute perspective, Earnings Before Interest, Taxes, Depreciation and Amortization (Ebitda) hit an “all-time high” of Rs 1.60 lakh crore in the September quarter, compared to Rs 1.02 lakh crore in the previous June quarter, he said.

It may be noted that the trend of corporate earnings growth even as the economy shrinks in the wake of the pandemic has led some observers to express concern, saying it illustrates widening inequality.

Crisil, who analyzed a sample of 800 listed entities representing 85% of NSE’s market capitalization across non-banking and finance and oil and gas sectors, said improved utilization levels, along with better management electricity, fuel and raw material costs by large companies contributed to the strong profit growth.

Overall operating profit margins improved by more than 1% despite higher raw material costs in the quarter, he said.

From a labor cost perspective, which raises concerns, he said 370 manufacturing companies in his sample showed a contraction of 4%, while the same for the services sector reported “moderate growth”. .

Profit growth came even as revenue did not rise, the report said, noting that revenue was “flat” in the second quarter compared to the year-ago period after falling 29 % during the April-June quarter.

Small businesses have been hit hard by the impact on revenue compared to large ones, he said.

“The big players saw moderate revenue growth. However, the smaller players, who typically have little bargaining power and lack cash flow, remained in the red. The smaller the business, the more excruciating the pain “, did he declare.

He pointed out that less than 20% of the smallest 400 companies saw revenue growth, compared to nearly 35% of the top 100 companies that grew in the first half of the fiscal year.

In consumer and commodity-related sectors, most of the big players recorded growth in the second quarter, while their smaller counterparts slowed, while among exporters, smaller textile companies – ready-to-wear and Cotton Yarn – suffered from chronic pain, while IT services showed resilience with large and small players showing steady sequential growth.