The operating margin of most listed companies fell to multi-year lows in the September quarter, even as their revenues jumped 27 per cent year-on-year and 3 per cent sequentially.

A study by ICRA on the financials of 625 listed companies (excluding financial sectors) has shown that all the major sectors reported growth in revenues year-on-year in the September quarter, with sectors such as hotels, oil and gas, airlines, and power reporting sizeable increases, albeit on a low base.

However, the companies were unable to realise the benefits of revenue growth, with the operating profit margin contracting to multi-year lows, said the study.

Kinjal Shah, Vice-President & Co-Group Head, Corporate Ratings, ICRA said the YoY growth in revenues was primarily driven by increased realisation levels on account of input cost inflation, while volume growth was relatively subdued. Several consumer-oriented sectors such as consumer durables, retail and FMCG were impacted by moderation in demand on account of the inflationary environment and softness in rural demand.

ICRA’s analysis shows that the OPM of India Inc. contracted by 4.55 per cent on a YoY basis to 14.5 per cent during the quarter. While margin pressures are likely to ease gradually from the December quarter, uncertainties remain given the evolving geo-political situation, it said.

Overall, despite some softening and stabilisation of commodity prices over recent months, India Inc.’s ability to arrest the slide in earnings will be dependent on headwinds such as energy cost inflation, evolving recessionary trends in developed markets and the impact of fluctuations in forex in both the import and export-oriented sectors, she said.

Construction, automotive and airlines reported significant growth in revenues on a sequential basis due to successive price hikes and steady demand. At the same time, sectors such as hotels, power, oil & gas, metals and mining, textiles, and consumer durables witnessed a sequential decline in revenues during the quarter.

While few sectors such as logistics, tyres and automotive OEMs reported sequential expansion in operating profit margin driven by a confluence of factors such as a gradual revival in demand and correction in commodity prices, a majority of sectors reported sequential contraction in OPM due to their inability to pass on input cost hikes. Metals & mining, cement and iron and steel were a few of the sectors which saw a steep sequential decline in operating profit margin during the quarter.