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IDBI's Q1 study reveals downtrend in metals, upswing in electronics

The net margin on sales of a sample of 200 Industrial Development Bank of India-assisted companies improved to 4.6 per cent during the first quarter of 1998-99 from 3.9 per cent in the same quarter of the previous year. Gross margin also improved to 12.4 per cent from 11.8 per cent.

According to a study conducted by the IDBI on the first quarter financial performance of these companies, net sales increased by 12 per cent to Rs 156.85 billion. Of the 200 companies, as many as 142 (71 per cent) companies made net profit during the quarter in spite of high depreciation and interest burden. Despite the increase in the tax provisions by 17.6 per cent, net profit grew by 30.7 per cent to Rs 7.23 billion.

Of the 32 industry groups covered in the sample, 21 groups earned higher net profit during the quarter and prominent among these are chemicals, cement, electronics, leather and leather products, electrical, sugar, machinery, pharmaceuticals, paints, aluminium, motorcycles and scooters. Industry groups which reported decline in net profit included among others auto accessories, cotton textiles, spinning, iron and steel, metal products and basic chemicals.

The sample companies recorded an increase of 12 per cent in sales turnover during first quarter of 1998-99, with 26 industry groups recording sales growth. The electronics industry recorded the highest growth (14.3 per cent). Within electronics group, info-tech sector grew impressively by 53 per cent.

Industry groups like services-hospitals (37.4 per cent), dry and wet batteries (34.3 per cent), sugar (29.2 per cent), other food products (26 per cent), motorcycles and scooters (24.3 per cent), fertilisers (23.2 per cent), pharmaceuticals (23 per cent), aluminium (21.6 per cent) and cotton textiles-spinning (18.7 per cent) witnessed higher than average growth in sales.

Basic chemicals, leather and leather products, electrical machinery, metal products, other textiles, services-restaurants and hotels, rubber and plastic products and machinery recorded lower than average growth. Sales of tyres and tubes, motor vehicles, auto accessories, iron and steel, cotton textiles- composite and paper and paper products declined.

Gross profit (after depreciation but before interest) rose by 17.3 per cent during the period. Industry groups such as electronics (125 per cent), leather and leather products 992.5 per cent), cement (79.5 per cent), motor vehicles (53.2 per cent), chemicals (51.5 per cent), aluminium (42. 2 per cent), pharmaceuticals (41. 9 per cent) and motor cycles and scooters ( 35 per cent) recorded high growth in gross profit.

Interest charges of the sample companies increased by 9.4 per cent during the period. However, its share in the cost of production (including interest) declined marginally to 6.9 per cent from 7 per cent in Q1 of 1997-98.

Ratio of interest to cost of production increased for 12 industry groups during the period. Basic chemicals (17 per cent) service-hospitals (16.4 per cent), fertilisers (15.2 per cent), sugar (13.1 per cent), non-metallic mineral products (12.9 per cent), cement (12.2 per cent), services-restaurants and hotels (11.5 per cent), electricity generation and distribution (10.3 per cent), paper and paper products (9.2 per cent), metal products (9.1 per cent), machinery (8.4 per cent), aluminium ( 7.4 per cent), electronics (7.3 per cent) and dry and wet batteries (7.1 per cent) had higher than average interest to cost of production ratio.

UNI