Despite the economic slowdown caused by the Covid-19 pandemic, sales of publicly traded private manufacturing companies rose 31 percent year over year in the fourth quarter of FY2020-21 compared to the same tax year, according to RBI data.
The Reserve Bank of India (RBI) released data on the performance of the private corporate sector for the fourth quarter of FY2020-21 on Friday. Due to the Covid-19 pandemic, the Securities and Exchange Board of India (Sebi) had extended the deadline for the submission of financial results for the fourth quarter of FY2020-21 by listed companies to June 30th.
Derived from the abridged quarterly financial results of 2,6081 publicly traded non-governmental non-financial companies (NGNF), the RBI data showed that 1,633 manufacturing companies had their sales increased 31 percent. The increase is significant compared to a 7.4 percent growth in the previous quarter of FY 2020-21.
According to RBI, the increase in sales was broadly based and supported by both a favorable base effect and a price effect. Compared to the manufacturing sector, the sales growth of companies from the IT sector accelerated to 6.4 percent (year) in the fourth quarter of FY 2020-21.
However, revenue from non-IT service companies saw modest growth (YoY) after declining for the previous three quarters. The RBI said the improvement was mainly led by retail companies.
On the spending front, the RBI said that manufacturing companies increased their raw materials spending in line with the increase in sales in the fourth quarter of FY 2020-21. While labor cost growth (yoy) increased for manufacturing companies, it remained stable for IT companies in the fourth quarter of FY2020-21. In the case of non-IT services, however, the increase in personnel remained in the decline.
The Covid-19 pandemic has resulted in widespread restrictions, including long periods of full lockdown. Manufacturing companies’ operating profits accelerated in the fourth quarter of FY2020-21 (year over year). The profit growth is due to the increase in sales compared to expenses.
The RBI also reported the operating profits of companies in the service sector, including IT and non-IT companies.
With an increase in profits and a sustained decrease in interest expenses, the interest coverage ratio (ICR) of manufacturing companies improved from 6.6 in the previous quarter to 7.3 in the fourth quarter of FY 2020-21.
The ICR is a measure of a company’s debt servicing ability. The minimum value for a viable ICR is 1. Overall, the operating profit margin remained stable across all industries in the fourth quarter of the last fiscal year.
To explain the data generated, RBI said that company coverage varies in different quarters depending on the date of the earnings statement, but the overall position is unlikely to change materially.
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