Chennai: Private sector non-finance firms reported a 41 per cent growth in net profits during the July-September quarter, despite higher expenditure, as other income contributed to growth, a study made by the Reserve Bank of India, said.
The apex bank took into consideration combined net profits of 2,700 non-finance listed firms and stated that profits rose 41 per cent to Rs 72,000 crore (year-on-year) during Q2 this year, from Rs 48,000 crore a year ago.
The central bank attributed this to the strong growth in manufacturing sector profits, which received support from other income.
Pricing power in terms of operating profit and net profit margin declined slightly for the manufacturing sector. For the services (non-IT) sector, operating profit margin dipped further, but net profit margin witnessed improvement primarily due to higher non-operating income, the report said.
Sales rose 18.2 per cent to Rs 9.8 lakh crore, compared to 7.2 per cent growth and turnover of Rs 8.3 lakh crore in the same period a year ago. Significantly, combined expenditure of these firms rose 22 per cent during the quarter to Rs 8.5 lakh crore, compared to Rs 6.8 lakh crore or 5.9 per cent growth in the same period a year ago.
Demand conditions in the manufacturing sector maintained its pace in Q2 as reflected in strong sales growth (y-o-y), said the report.
“The manufacturing sector sales growth was mainly supported by robust demand conditions in chemical and chemical products; iron and steel; and petroleum products industries coupled with significant improvement recorded by textile industry. On the other hand, heavy moderation was seen in the sales growth of motor vehicles and other transport equipment, driven in part by a large adverse base effect, and pharmaceuticals and medicines industries,” it said.
The information technology sector recorded higher sales growth over the preceding quarter. Despite continuous contraction in the telecommunication, the services (non-IT) sector posted a turnaround riding on the support from wholesale and retail trade.
As for the expenditure, manufacturing companies continued to face rising input cost (cost of raw materials; staff cost) pressures. Staff costs accelerated in the IT sector in tandem with the improvement in sales growth.