Companies' total expenditure plummets 24% in three months to June

Some of this may have to do with pruning of some costs that they would have otherwise incurred, had business been normal; analysis looked at 402 firms that have declared June results

The financial results released by listed companies show a significant decline in their expenses. Total expenditure was down around 23.7 per cent in the three months ended this June, from the year-ago period. It was down over 27 per cent when compared to March.

Some of this may have to do with the pruning of some costs that they would have otherwise incurred, had business been running normally. The analysis looked at 402 companies that have declared June results and for which comparable data is available.

Sales have been in decline in the June quarter as most of the period was spent under a lockdown. The government shut down the country towards the end of March to curb the spread of the Covid-19 pandemic. An analysis of expenditure as a percentage of sales shows that the reduced costs are in line with the fall in business.

Expenditure is around 79.8 per cent of net sales for June 2020, similar to the 79.1 per cent level of June 2019.

A sectoral comparison shows a similar trend. Most sectors recorded lower expenditure than in the same quarter last year.  This includes sectors like cement, power and information technology.  There are a few exceptions like the pharmaceutical industry, which has seen more resilient demand. The expenditure has accordingly moved up.

  

Source: Capitaline, Business Standard Research Bureau

Note: Based on 402 companies with declared results and comparable data