The overall corporate performance in the December quarter showed net profit growth as muted, despite double-digit growth in net sales. The net sales grew 16.6 percent in the quarter ended December 31, 2018, for 2,167 companies on the back of demonetization and GST which gradually subsided, according to CARE Ratings. Net sales growth stood at 9.2% during the same quarter last year.
Net profit of the companies grew marginally at 0.8 percent in the third quarter, compared to 8.8 percent in the year-ago quarter. Net profit margin witnessed a contraction of about 90 basis points y-o-y during the quarter, noted CARE Ratings.
Large companies with sales of over Rs 1,000 crore dominated the overall performance, accounting for 83.6 percent of the share in terms of total net sales, and registered the sharpest growth of 19.2% in net sales. However, net profit witnessed a decline of 6.5% at these companies in the December quarter, compared to a growth of over 27% during the corresponding quarter last year.
Companies with sales of Rs 500 to Rs 1,000 crore posted an increase of 13% in net sales. Their net profit increased by 11.8% in the quarter, compared to higher growth of 19.6% in the Q3 FY18, according to the report.
While the overall aggregate picture of the industry has improved post GST implementation, the smaller companies with sales below Rs 50 crore sales continue to be on the back foot and registered a net loss in Q3 FY19.
In Q3 FY19, the companies despite posting net loss were better off when compared with Q3 FY18. Net loss of companies in size range between Rs 10 to 50 crore stood at Rs 741 crore and that of companies in size range less than Rs 10 crore stood at Rs 314 crore during Q3 FY19, added CARE Ratings.
During the quarter, raw material costs, power and fuel expenses, and personnel costs contributed most to expenditure, which rose about 19.8% (for aggregate companies excluding banks and finance) in the third quarter, compared to growth of 9.8% in the year-ago period, said Darshini Kansara, deputy manager, industry research.
Higher crude oil prices—up 10.8 percent y-o-y during the quarter—led an increase of 26 percent in raw material costs for major industries.