1. Finances of Non-Government Non-Financial Public Limited Companies: 2014-15
This article analyses the financial performance of select 16,923 non-government non-financial (NGNF) public limited companies for the financial year 2014-15 based on their audited annual accounts closed during April 2014 to March 2015. These 16,923 companies accounted for 29.5 per cent of population paid-up capital.
The aggregate results of the select NGNF public limited companies in 2014-15 revealed moderation in sales growth and improvement in net profit growth. Growth in gross value added (GVA) improved marginally to 10.5 per cent in 2014-15 as against 10.4 per cent in 2013-14.
Mining sector, ‘textiles’, and ‘iron and steel’ industries in the manufacturing sector, electricity sector and ‘telecommunications’ industry in the services sector were the worst affected in terms of sales growth.
Except for mining, electricity and construction sectors, the operating profit margin improved in other sectors in 2014-15.
Leverage ratio of the select companies continued to increase while interest coverage ratio (ICR) stabilised in 2014-15. Electricity and construction sector and ‘transportation’ industry in services sector witnessed high total borrowings to equity ratio.
Of the total companies, 9.1 per cent companies had their leverage ratio more than 200 per cent and ICR less than one or negative net worth. Such companies accounted for 21.8 per cent of total bank borrowings of select 16,923 companies in 2014-15.
Share of funds raised through external sources by the companies declined in 2014-15.
Share of funds used for fixed assets formation was higher in 2014-15 whereas that for non-current investments was lower as compared to the previous year.
2. Performance of Non-Government Non-Banking Financial and Investment Companies: 2014-15
This article presents an analysis of performance of Non-Government Non-banking Financial and Investment (NGNBF&I) companies (excluding insurance and banking companies) for 2014-15 based on audited annual accounts of 23,293 companies. The article presents a comparative picture over the three years period 2012-13 to 2014-15 based on a common set of companies.
The overall performance of select NGNBF&I companies improved in 2014-15 as compared to the previous year. Gross value added grew at a significantly higher rate in 2014-15.
Growth in financial income accelerated during 2014-15, mainly due to higher interest income. Total expenditure, on the other hand, grew at a lower rate as compared with total income, leading to significant growth in operating profit (EBDT) during 2014-15 as compared to the previous year. Further, growth in interest expenses also moderated in 2014-15.
Total borrowings by select NGNBF&I companies grew at a higher rate during 2014-15 as compared to the previous year. However, growth in borrowings from banks decelerated marginally in 2014-15.
Although overall performance of select NGNBF&I companies had improved in 2014-15, leverage ratio and bad debt to expected receivables ratio increased in 2014-15.
Share of short-term and long-term borrowings in total equity and liabilities increased during 2014-15 as compared to the previous year, whereas the share for shareholders’ fund declined gradually over the three years period.
On the assets side, share of short-term loans and advances increased during 2014-15, whereas the share of long-term loans and advances as well as non-current investment declined in 2014-15.
The select NGNBF&I companies continued to rely mainly on external sources of funds for business expansion; however, their share in total sources of funds declined marginally during 2014-15 as compared to the previous year. The funds were used predominantly for expanding their investment as well as short term loans and advances portfolios.
As with general trend at aggregate level for select NGNBF&I companies, operating profit margin as well as return on assets and return on equity of Chit Fund and Mutual Fund companies improved in 2014-15.
The data release pertaining to the performance of Non-Government Non-banking Financial and Investment (NGNBF&I) companies for 2014-15 was published on the RBI website vide Press Release No. 2251 on March 23, 2016.
3. Union Budget 2016-17: An Assessment
This article analyses the key features of the Union Budget 2016-17 and presents an assessment of the likely fiscal situation in 2016-17.
Budgeted targets for the revenue deficit (RD) and gross fiscal deficit (GFD) for 2015-16 were met through a combination of higher tax and non-tax revenue and lower non-plan capital expenditure.
The commitment to fiscal consolidation is set to lower the GFD by 0.4 percentage points of GDP in 2016-17 (BE) marking a stepped-up pace of fiscal adjustment and imparting credibility to the achievement of the target of 3.0 per cent for 2017-18 under the amended FRBM targets.
The growth in revenue expenditure is set to accelerate in 2016-17, reflecting provisions made for implementation of the seventh central pay commission (CPC VII) and one rank one pension (OROP) in defence services. Central government’s expenditure on pensions is budgeted to grow by 28.9 per cent as against 2.3 per cent in 2015-16 (RE).
In continuation of the process of subsidy reforms, expenditure on major subsidies is estimated to reduce to 1.5 per cent of GDP in 2016-17 from 1.8 per cent of GDP in 2015-16 (RE).
Growth of capital expenditure is budgeted to decelerate sharply to 3.9 per cent in 2016-17 with capital outlay (excluding defence) estimated to grow at a modest rate of 2.3 per cent.
Notwithstanding the shortfall in achieving the targets set in the past, including in 2015-16 (about 64 per cent), aggregate disinvestment receipts are budgeted to grow by 123.2 per cent in 2016-17.
The Union Budget 2016-17 strives to balance growth-stimulating investment thrust and structural reforms with more empowering federalism. Rationalisation of duties and tax structuring, the introduction of the goods and services tax (GST), better targeting of subsidies and robust efforts to step up disinvestment hold the key to enriching the quality and sustainability of central finances.