Top Corporates Sales Growth Flags
The companies are Reliance, Telco, Tisco, Mahindra & Mahindra and Bajaj Auto, and dominate key sectors like textiles, petrochemicals, automobiles and steel. Seen in isolation, their performance seems healthy but a comparison with 1995-96 first-half figures reveals them in poor light. Growth in sales, operating profit and net profit has been less this year with RIL being the worst off.
The Dhirubhai Ambani-controlled textiles and petrochemical major saw its sales growth plunging from 20 per cent in April-September 1995-96 to 1.8 per cent in April-September 1996-97. Its operating profit growth dropped to 0.2 per cent from 25 per cent, while net profit growth was 2.8 per cent against 33 per cent in the same period last year.
At the other end is Bajaj Auto, the two- and three-wheeler giant, which has fared better. Its operating profit growth was up 29.6 per cent this year against 27.22 per cent in 1995-96. Sales growth dropped to 25.12 per cent from 29 per cent while net profit growth slowed to 27.15 per cent from 30.05 per cent. These falls are comparatively small compared with that of Reliance and Telco.
These results are part of a wider economic trend. Latest government data show that growth in the manufacturing output in first half of 1996-97 and exports has slowed down. Against 15 per cent growth last year, the manufacturing sector has grown only by 11 per cent. Exports grew by just 9.91 per cent against a much higher growth last year.
Telco's sales rose 58 per cent in first half 1995-96. This year, the growth is down to 37.65 per cent. Operating profit growth this year was 61 per cent, last year it was 82.76 per cent. The steepest fall has been in net profit: from 230.45 per cent last year it grew by only 45.9 per cent this year.
Group company Tisco saw a similar decline. Like Telco, its net profit grew by only 25 per cent this year against a 132-per cent jump last year. Sales grew by 29.3 per cent in 1995-96 but dropped to 21 per cent this year. Operating profit was up by 23 per cent this year against 56 per cent last year.
The decline can be partly attributed to higher interest and tax payments. Telco is a classic example. Its interest cost more than doubled from Rs 69 crore to Rs 130 crore while tax payments nearly doubled to Rs 142 crore from Rs 75 crore last year.
Ditto with Tisco, which had to pay out Rs 37 crore in taxes under the 12.9-per cent minimum alternate tax (MAT) proposed in this year's budget.
But that's only a part of the story. In case of both these companies, sales of vehicles and steel dropped sharply. Telco's vehicle sales were 22.15 per cent this year against 52.21 per cent last year. Tisco's steel sales were only eight per cent this year against 21 per cent last year. Bajaj has not been hit as hard as the others. Its sales growth dropped only by 0.33 per cent from 18.11 per cent in 1995-96 to 17.78 per cent in 1996-97. Thus Bajaj has managed to keep its costs down while operating in a slow-growing environment.