The “India Shining” marketing slogan was created back in 2004 by the BJP and truly India Inc lived up to it for as many as seven years in a row. But sadly this is about to change and clear signs of it now visible from both market and macro data reported in last one year. Worsening manufacturing data, sliding of GDP to multi-year low, out-of-shape Balance of Payment and virtually toothless government’s inability to put the economy back on growth track leaves India with only one alternative – the RBI.
In this article, we will take a closer look at India Inc’s annual earnings performance in last 8 years. As seen from the chart, India Inc posted a robust growth of 30% plus in FY06 to FY08. However, there was de-growth in the bottomline for the financial years 2009 and 2012. The year 2009 was plagued by US subprime mess while domestic mess is hurting 2011-12. The most disconcerting figure is the FY12 net profit margins of 6.8% at the right bottom corner of the table. This is the rock-bottom levels Corporate India has reported in last eight years.
The cost of basic raw materials input like chemicals, metals, food items shot up denting operating margins. Also elevated inflation levels forced the RBI to raise policy rates in first nine months of 2011 which in turn raising interest costs for most of the companies. The margins got squeezed as the companies were unable to pass on the interest cost to consumers/clients.
Out of 2676 companies that reported their FY12 earnings, 617 companies or nearly 23% of the India Inc booked losses last year. Also there is one major difference if one compares the slowdown in 2008-09 and 2011-12. In the first period under consideration, the government had cut excise duty by 2% which fuelled the growth while in the second period under consideration the government rolled back the same in its union budget presentation. Unless, the government changes its stance, a dismal FY13 corporate scorecard is in the offing.
* All figures Rs in Cr