COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Industry showed 17.5 per cent drop in sales

There is a slowdown in the economy during the year.

This was revealed by a study - with a sample of 550 companies in the private corporate sector during the fiscal year 1996-97 -- conducted by the Industrial Development Bank of India.

The net sales of the companies increased by 12 per cent as compared to last year. The gross profit recorded a marginal increase of 3 per cent while net profit fell by 18.2 per cent during 1996-97.

Of the sample, 462 companies earned profit and 447 companies exported goods worth Rs 154.55 billion during the year.

In absolute terms, sales increased from Rs 1,323.93 billion in 1995-96 to Rs 1,482.85 billion in 1996-97. The growth in value of output at 10.6 per cent was much lower than 28.1 per cent achieved during 1995-96.

Other income witnessed a growth of 16.5 per cent during 1996-97 as against 13.6 per cent in the previous year. The total income grew at a moderate rate of 10.7 per cent (27.6 per cent).

The cost of production increased to Rs 1,314.06 billion from Rs 1,170.78 billion in 1995-96. Consumption of raw materials increased by 9.7 per cent as against 29.1 per cent during 1995-96.

Its proportion to cost of production declined marginally from 63.5 per cent to 62.1 per cent. The share of manufacturing costs (raw materials, components, consumables, stores and spares, power and fuel and other manufacturing expenses), in the overall cost of production declined marginally from 74.6 per cent in 1995-96 to 73.5 per cent during the year. The provision for depreciation increased by 26.6 per cent during the year (27.4 per cent).

Gross profit (after depreciation) increased to Rs 231.85 billion during the year from Rs 225.12 billion in 1995-96.

Interest and financial charges were up by 29.4 per cent (27.8 per cent). The proportion of interest and financial charges in the value of output increased to 7.4 per cent during the year (6.3 per cent). However, profit after tax fell by 14.6 per cent during 1996-97 as against an increase of 25.7 per cent in the preceding year.

Corporate tax grew lower at 11.2 per cent as against an all time high of 43.1 per cent in 1995-96. PAT declined by 18.2 per cent to Rs 98.21 billion during 1996-97.

Margin on sales (gross profit after depreciation as a percentage of sales) declined from 17.0 per cent to 15.6 per cent in 1996-97.

Net margin (profit after tax as a percentage of sales) also declined from 9.1 per cent to 6.6 per cent in 1996-97.

The return on capital employed (gross profit after depreciation as a percentage of capital employed) declined from 16.9 per cent to 14.8 per cent in 1996-97.

Corporate tax as a percentage of profit before tax increased from 12.4 per cent to 16.1 per cent in 1996-97. Profit after tax as a percentage of net worth declined from 16.0 per cent to 11.8 per cent in 1996-97.

The gross fixed assets increased by 22.6 per cent during the year as compared to 23.0 per cent in 1995-96.

Inventories increased by 9.6 per cent during the year as compared to 23.0 per cent in 1995-96. The net worth of sample companies also exhibited an increase of 11.6 per cent against 26.2 per cent in 1995-96.

Gross capital formation (incremental sums of gross fixed assets and inventories) of the companies marginally declined by 0.8 per cent during 1996-97.

The total requirement of funds of the companies declined by 7.4 per cent during the year as against a marginal increase of 1.4 per cent in the previous year.

The growth in sale based on paid-up capital reveals that companies worth Rs 500 million and above registered highest growth in sales of 14.7 per cent, followed by the companies worth Rs 300 million to Rs 400 million (13.6 per cent) and Rs 200 million to Rs 300 million (12.1 per cent).

The gross profit and net profit of the companies in the mid-corporate segment (size group of Rs 200 million to Rs 300 million) recorded the highest growth of 18.0 per cent and 1.9 per cent respectively during 1996-97. The growth in net profits was negative for all other groups.

Performance of large companies (sales exceeding Rs 5 billion) has direct impact on the overall performance of the industry groups which they belong to.

Large companies (numbering 67) formed 12.2 per cent of the total number of sample companies (550). Their sales (Rs 879.83 billion) accounted for 59.3 per cent of the total sales of the sample companies in 1996-97.

Although the margin on sales of large companies declined marginally to 16.6 per cent during 1996-97 from 18.4 per cent in 1995-96, it was higher among the sample companies. Profit after tax as a percentage of sales witnessed similar trend and declined to 7.7 per cent in 1996-97 from 10.4 per cent in 1995-96.

UNI