Corporate sales growth hit a post-crisis low of 2.6% in Q1-FY’14: RBI

Corporate sales growth continued to decelerate hitting a  post-crisis low of 2.6 per cent in the first quarter of the current financial year, RBI data released on Friday showed.

Total expenditure growth in the private corporate sector also declined to 2.2 per cent, mainly due to a contraction on raw material expenses, RBI said.

Earnings before interest, tax, depreciation and amortisation (EBITDA or operating profits), on the other hand, grew marginally by 1.1 per cent against near stagnation seen in the previous quarter. However, net profit contracted for the second consecutive quarter.

While EBITDA margin remained range bound, net profit margin declined further.

Manufacturing sector sales remained almost stagnant with a growth of only 0.8 per cent in Q1 of FY14. EBITDA and net profits contracted and profitability in terms of EBITDA and net profit margins worsened, RBI said in its report on the performance of private corporate sector.

Sales growth for the non-IT services sector was lower than that of the previous quarter. EBITDA recorded a meagre growth of 1.3 per cent but net profit contracted. EBITDA and net profit margins recorded some improvement.

The IT sector, however, recorded improvement in sales. EBITDA also grew at a higher rate in comparison to the previous quarter. Net profit increased after contraction in Q4 of FY13. While EBITDA margin improved, net profit margin continued to decline.

Growth in interest expenses recorded increase in Q1 of FY14 at the aggregate level and also for the manufacturing sector.

Interest coverage ratio (earnings before interest and tax/interest expenses) contracted for manufacturing and service (other than IT) sectors.

RBI said the decline in sales growth was spread across most of the industries. Sales contracted in the motor vehicles, iron and steel, cement, coke and refined petroleum products and electrical machinery and apparatus industries among the major industries.

Cement, iron and steel and construction industries witnessed significant contraction in EBITDA and net profit. Profit margins contracted in all these industries. Interest coverage declined in most of the industries.