High input costs weighed on profit margins in FY25, says RBI study

The OPM of manufacturing firms moderated by 20 basis points (bps) from 14.4 in Fy24 to 14.2 per cent in Fy25

The operating profit margin (OPM) of Indian private corporations across manufacturing and services sectors moderated in the financial year ended March 2025 (FY25) amid high input costs, showed a Reserve Bank of India (RBI) study released on Thursday. The pace of listed non-government non-financial (NGNF) companies’ operating profit growth was also impacted in the past year.

 

Manufacturing firms’ OPM moderated by 20 basis points (bps) to 14.2 per cent in FY25 from 14.4 per cent the previous year. The decline was sharper for companies in the information technology (IT) services sector, with their margins reducing 80 bps to 21.9 per cent, followed by a 30-bp erosion for non-IT services entities to 22.1 per cent.

 

The RBI study analysed the performance of the private corporate sector in FY25, drawing from abridged financial results of 3,902 listed non-government non-financial (NGNF) companies.

 

The manufacturing companies faced input cost pressure, with their expenses on raw material rising by 6.6 per cent during the year. Their raw-material-cost-to-sales ratio increased to 55.7 per cent from 54.2 per cent in FY24. 

 

The staff cost rose 10 per cent for manufacturing firms, 4.4 per cent for IT firms, and 12 per cent for non-IT services companies. The staff-cost-to-sales ratio broadly remained stable for manufacturing companies, while it moderated for services companies, the study revealed.