High energy cost and supply chain disruptions continued to haunt India Inc even as topline of most companies posted a growth in the June quarter.
A list of 620 companies (excluding financial sector entities) studied by ICRA Research have posted a revenue growth of 39 per cent year-on-year on a low base of the previous year, which was impacted by the second wave of the pandemic and the price hikes implemented across several sectors.
However, sequentially the growth in revenues in the quarter was dismal at 1.5 per cent and the trends varied across sectors. Moreover, companies were unable to realise the benefits of the revenue growth in their earnings performance, with the operating profit margin contracting both year-on-year and sequentially in the June quarter.
ICRA believes the September performance of India Inc would face similar constraints as supply chain issues are easing only gradually, while commodity-led headwinds continue with elevated crude oil prices, rupee depreciation against dollar and the geo-political developments. Further, the progress of monsoon will be critical to support demand recovery in rural markets, which have been subdued.
Kinjal Shah, Vice-President, ICRA, said prices of most commodities have moved up over the last four-five quarters and consequently the operating profit margin contracted by 2.13 per cent to 18 per cent during the quarter. While these have seen some softening over the recent months, they remain at elevated levels. In addition, several sectors also faced slack rural demand which impacted revenues and margins to an extent. Nevertheless, price hikes taken by several entities across sectors, coupled with the softening in input costs during September quarter, should provide some comfort to profit margins going forward, said Shah.
While sectors such as hotels, power, retail and oil and gas, among others, reported significant quarter-on-quarter growth in revenues, others such as airlines, construction, capital goods and iron and steel witnessed sequential decline in revenues.
Sruthi Thomas, Assistant Vice-President, ICRA Ratings, said the ongoing geopolitical developments and changes in Monetary Policy, including firming up of interest rates and its impact on the demand environment, remains to be seen.
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