Sale and profit margin in manufacturing companies and -non-IT firms have come down sharply, according to a RBI report on the performance of private corporate sector during the fourth quarter of 2019-20.
Sales of manufacturing sector companies declined by 15.6 per cent (Y-o-Y) in fourth quarter of 2019-20 as compared with 5.9 per cent growth in the corresponding period in 2018-19. But, services sector companies recorded deceleration in activities; sales growth (Y-o-Y) for information technology and non-IT services sector companies increased by 8 per cent and 0.8 per cent, respectively during the same period
Subdued production resulted in lower expenditure on raw materials for the manufacturing sector in the fourth quarter of last fiscal. Staff cost growth (Y-o-Y) moderated in manufacturing and IT services sectors and declined for non-IT services sector. Lower sales led to decline in operating profits of manufacturing companies and IT and non-IT companies owing to moderation in sales growth.
Interest expenses of services sector companies have surged owing to inclusion of lease payment obligations. Interest coverage ratio (ICR)3 of the manufacturing companies moderated to 3.5 from 4.3 in the previous quarter because of lower earnings.
Profit margins too dipped for manufacturing companies and non-IT companies. It remained steady for IT companies, the report added.