Sales growth won’t help Indian firms’ bottomlines: CMIE
23 Jan 2012
Indian companies could see their profits dwindle by 7.2 per cent even as their sales grow by 21.6 per cent in the current financial year ending in March, the Centre for Monitoring the Indian Economy (CMIE) says in a study.
It says profits have fallen 13.2 per cent in the first half of 2011-12. It attributes this to a steep rise in raw material and fuel prices, high interest rates and delay in payment of cash subsidies to the oil marketing companies.
Another factor is the sharp depreciation of the rupee since September, which caused mark-to-market losses to firms and further pulled down profits, the independent think tank said in its monthly review.
High input costs and interest rates continue to haunt Indian companies, but the ministry of corporate affairs has provided them some relief by allowing capitalisation of losses on long-term loans taken for the acquisition of fixed assets up to March 2020.
This exemption was earlier available only till March 2012; and only to companies which had opted for it in 2008-09.
Indian companies are expected to report substantial foreign exchange losses in the quarter ended November because a major chunk of the forex liabilities of are short-term, CMIE noted.
However, corporate profits are expected to rise by 9.9 per cent in the January-March quarter driven by a robust 40.2 per cent rise in net profits of the banking industry due to lower provisions - and a low base, the research outfit stated.
CMIE expects India Inc to record a robust 21.6 per cent growth in sales in 2011-12, on top of 20.3 per cent rise in FY'11.
.webp)
