'Poor demand shaves off top companies' profit margin by 37% in FY14'

Net profit of 880 companies was up by 8.2% in FY14

India Inc witnessed a massive 37.4% drop in profit growth and narrowing of margins in FY14 due to muted investments and lower demand, says a report by Care Ratings.

Net profit of 880 companies, excluding SBI (which reported its numbers earlier in the day), was up by 8.2% in the recently concluded FY14, down 37.4%, as against the 13.1% achieved in the previous fiscal, it said in a note today.

Net profit margins narrowed moderately to 9.5%, as against 9.8% in the previous fiscal. Net sales increased 12% as against 15.3% in the year-ago period, it said.

"The deterioration in the overall performance has been the outcome of muted investment and lower market demand... corporate performance during the year was affected by the muted pace of economic growth." the agency said.

The government expects the economy to grow below 5% mark in FY14, up from the revised number of 4.5% in FY13. A slew of reasons, including an alleged inaction of the then government on policy front, slowdown in the global markets and high interest rates have been blamed for the slowdown in the economic growth to under 5%.

On the expenses side, it said the total expenditure by 880 companies was up 11.4% in 2013-14 as against 14.5% in the previous fiscal.

The softening in rates got reflected in the interest expenses as well, it said, adding growth on this front dipped to 17% from the 27.3% in FY13.

With worries over asset quality due to gloomy economic environment dominating the discourse in banking sector, the Care Ratings note said there was a 37% rise in provisions and contingencies by lenders.