The Reserve Bank released data on the performance of the private corporate sector during 2018-19 drawn from abridged financial results of 3,151 listed non-government non-financial (NGNF) companies. Demand conditions in the manufacturing sector strengthened in H1:2018-19 as reflected in sales growth in respect of petroleum products; chemical and chemical products; textiles and pharmaceuticals and medicines; however, sales growth decelerated in H2:2018-19 across major industries.
The information technology (IT) sector posted strong improvement with sales growth rising from 5.0 per cent in 2017-18 to 16.2 per cent in 2018-19. The services (non-IT) sector also recorded a rise in sales growth, riding on the support from transport and storage services and wholesale and retail trade; on the other hand, the telecommunication sector continued to experience contraction in sales.
Manufacturing companies continued to face input cost pressures in the form of cost of raw materials, which increased from 12.5 per cent to 18.0 per cent. Staff costs accelerated in the IT sector in tandem with the improvement in sales growth. Supported by an increase in the value of production, operating profit in the manufacturing sector picked up year-on-year from 10.4 per cent to 16.3 per cent, in spite of the increase in input costs. Operating profits of the services (non-IT) sector companies remained in contraction.
Interest expenses in the manufacturing sector rose by 2.8 per cent in 2018-19, marginally slower than in the previous year. Interest expenses incurred by companies manufacturing iron and steel and motor vehicles and other transport equipment contracted in line with the overall reduction in debt levels. The interest coverage ratio (ICR) of the manufacturing sector hovered around five1, while the ICR for the services (non-IT) sector at 1.4 showed no sign of improvement, primarily on account of telecommunication companies. Operating profit and net profit margin remained stable around 14.6 per cent and 6.8 per cent respectively, for the manufacturing sector. The net profit margin for the services (non-IT) sector improved, supported by non-operating income
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