RBI study of Non-Government Non-Financial Large Public Limited Companies shows declining profit margin in 2012-13
March, 08th 2014
The Reserve Bank of India today released on its website the data related to Finances of Non-Government Non-Financial (NGNF) Large Public Limited Companies, 2012-13.
The data have been compiled based on audited annual accounts of 2,657 large (each with paid-up capital of `10 million and above) NGNF public limited companies. It draws a comparative picture over the three year period 2010-11 to 2012-13. ‘Explanatory notes’ on data are given in Annexure.
Sales growth decelerated steeply during 2012-13. Growth in operating expenses also registered similar decline resulting in moderate growth in Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA). However, net profit, i.e., Profit after Tax (PAT) and gross saving by the select companies declined in 2012-13.The profit margins of the select companies displayed a downward trend during the three-year period 2010-11 to 2012-13.
Interest payment and staff cost as percentage of total expenditure increased marginally in 2012-13 as compared to that in 2011-12.
Barring companies in sales size groups ‘`1 billion- `5 billion’ and ‘above `10 billion’, sales declined in 2012-13 from that in 2011-12 in all the other groups. Companies in these sales size groups also recorded net losses in 2012-13. Smallest companies in the sales-size group ‘below `250 million’ recorded operating (EBITDA) as well as net losses in all the three years 2010-11 to 2012-13. Both interest payment and staff cost, as percentage of total expenditure, increased more in case of lower sale size groups.
Companies in the services sector performed relatively better than the manufacturing sector in terms of growth in sales and EBITDA. The profit margin declined in both manufacturing and services sector. In the manufacturing sector, companies in the ‘Food products and beverages’, ‘Textiles’, Chemical and chemical products’ industries recorded higher growth in profits and improved profit margin in 2012-13 while those in the ‘Iron and Steel’, ‘Machinery and equipments’, ‘Electrical equipments’ and ‘Motor vehicles’ industries performed poorly. In the services sector, companies in ‘Computer and related activities’ industries performed relatively better.
Growth in total borrowings during 2012-13 was lower than that in 2011-12 but long term borrowings grew at a higher rate. The borrowings from banks also grew at a slightly lower rate in 2012-13. For companies in ‘Cement and cement products’, ‘Iron and steel’, ‘Motor vehicles’ industries, borrowings grew at higher rates in 2012-13 than in 2011-12
Leverage, measured by both total borrowings to equity ratio and debt (long-term borrowings) to equity ratio, displayed an upward trend during 2010-11 to 2012-13 together with gradual fall in interest coverage ratio. The ‘Transportation’ and ‘Textiles’ industries continued to be very highly leveraged with low interest coverage ratio. In the ‘Iron and steel’ industry, interest coverage ratio fell steeply during the period with rise in leverage.
The share of external sources (other than companies’ own sources) and internal sources of funds during 2012-13 remained similar to that of 2011-12. Share of reserves and surplus in total sources of funds fell in 2012-13 on account of lower profits. Share of funds raised through non-current liabilities increased in 2012-13 while that through current liabilities declined. Share of funds used in fixed assets formation was similar in 2011-12 and 2012-13.Share of funds used for financial investment during the year declined.