Despite the economic slowdown caused by the COVID-19 pandemic, sales of listed private manufacturing companies surged 31 per cent on a year-on-year (Y-o-Y) basis in Q4 of FY 2020-21 in comparison to growth recorded in the previous quarter of the same fiscal, according to RBI data.
The Reserve Bank of India (RBI) on Friday released the data on performance of the private corporate business sector during Q4 of FY 2020-21. Due to the COVID-19 pandemic, the Securities and Exchange Board of India (Sebi) had extended the deadline for submission of financial results for Q4 of FY 2020-21 by listed companies to June 30.
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Drawn from abridged quarterly financial results of 2,6081 listed non-government non-financial (NGNF) companies, the RBI data showed that sales of 1,633 manufacturing companies surged by 31 per cent. The rise is significant compared to 7.4 per cent growth in the previous quarter of FY 2020-21.
The rise in sales as per the RBI was broad-based, and was supported by favourable base effect as well as price effect. Compared to the manufacturing sector, sales growth of IT sector companies accelerated to 6.4 per cent (YoY) in Q4 FY 2020-21.
However, sales of non-IT services companies recorded marginal growth (YoY) after declining in the previous three quarters. The RBI said the improvement was largely led by trading companies.
On the expenditure front, the RBI said the manufacturing companies increased their expenditure on raw materials in tandem with the rise in sales during Q4 in FY 2020-21. While the staff cost growth (YoY) increased for manufacturing companies, it remained steady for IT companies in Q4 of FY 2020-21. However, the staff growth remained in contraction zone for non-IT services.
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The COVID-19 pandemic has led to the widespread imposition of restrictions, including long periods of complete lockdown. The operating profits of manufacturing companies accelerated (YoY) in Q4 of FY 2020-21. The gains in profit can be attributed to rise in sales compared to expenditures.
The RBI stated the operating profits of services sector companies, including IT and non-IT companies, also expanded.
With a rise in profits and persistent reduction in interest outgo, the Interest Coverage Ratio (ICR) of manufacturing companies improved to 7.3 in the fourth quarter of FY 2020-21 from 6.6 in the previous quarter.
The ICR is a measure of debt servicing capacity of a company. The minimum value for a viable ICR is 1. Overall, the operating profit margin remained stable across sectors during the fourth quarter of the last financial year.
Explaining the data generated, the RBI said the coverage of companies in different quarters varies, depending on the date of declaration of results, but is not expected to significantly alter the aggregate position.
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