Growth slowdown hit Indian Inc sales, profit margins

New Delhi, April 19 (IANS) The slowdown in economic growth has hit Indian companies' sales and profit margins, Associated Chambers of Commerce and Industry (Assocham) said in a report.

Amidst slow growth in net sales, corporate India has shown downfall in terms of net profit margin in the fourth quarter of the financial year 2012-13.

"The decline in growth rate of sales could be attributed to the low industrial production numbers with slack demand conditions in the economy," Assocham president Rajkumar Dhoot said in the report.

India's GDP growth slumped to 4.5 percent in the third quarter of 2012-13, the weakest in the past 15 quarters. What is worrisome is that services sector growth, hitherto the mainstay of overall growth, has also decelerated to its slowest pace in a decade.

"Along with the deceleration of overall economic growth, financial performance of industry also witnessed deceleration," Assocham said.

Financial performance of 45 industry players in fourth quarter of 2012-13 indicated that their aggregate net sales declined by 2.9 percent. While in the previous quarter of the same year, net sales have grown by 7.9 percent on quarter on quarter basis.

"This reveals suboptimal scale of operations in Indian Industry," Dhoot said.

Aggregate expenditure of the sampled firms witnessed negative growth rate of 2.5 percent in the fourth quarter whereas expenditure witnessed positive growth rate of 3.7 percent in the previous quarter. It indicates the cost cutting measures that the industries in general are resorting to in this difficult period.

Manufacturing sector sales dropped by 10.3 percent in January-March quarter, while profit increased marginally by 1.6 percent.

However, IT sector performed better. Sales of IT sector increased by 16.8 percent, whereas the expenses increased by 27.4 percent and profits increased by 8.2 percent during the quarter under review.

Banking and services sector has shown an increase in sales by 5.2 percent, expenses 6.4 percent and profits by 8.2 percent. Although the sector has shown growth in all parameters but in contrast to the previous quarter, sales and profits have declined but expenses have increased, Assocham said in the analysis report.