India Inc's sales, profit growth weakest in 2 yrs

India was the world's second-fastest-growing economy in 2014-15, with its gross domestic product (GDP) growing 7.3 per cent, next only to China's 7.4 per cent. This bullishness about the economy, however, did not reflect in India Inc's books of account Stock Market Trading Tips

The combined net sales of around 1,700 Indian companies (excluding financial and oil & gas ones) rose 5.9 per cent on a year-on-year basis - the slowest rate in two years. India Inc's bottom line fared worse, with core operating profit (excluding other income) declining 0.5 per cent annually, and net profit falling 7.45 per cent. In 2013-14, these companies' net sales and operating profit had grown 9.6 per cent and 11.6 per cent, respectively, while their net profit had grown 1.7 per cent.

Historically, when India's GDP has grown 7.5 per cent at constant prices, corporate revenues have grown an average 14-15 per cent, and profits about 20 per cent.

India Inc's scorecard in the quarter ended March 2015 was even weaker, with near-flat revenue growth and decline in profits. While companies' net sales grew only 0.4 per cent on a year-on-year basis during the quarter, their operating and net profits declined 22.2 per cent and 59.9 per cent, respectively. The numbers were the worst in three years Free Stock Share Tips

By comparison, India's GDP growth rate, according to the Central Statistics Office (CSO), accelerated to 7.5 per cent in the quarter from 6.6 per cent the previous one.

This growing variance between India Inc's performance and headline GDP numbers seem to have baffled economists and analysts. "Corporate numbers and the new GDP series present contrasting pictures of the economy. This is a conundrum, but we have to accept GDP numbers as another official fact," says Devendra Pant, chief economist and head of public finance at India Ratings. He attributes the gap partly to the unorganised sector's inclusion in CSO's calculation methodology; corporate numbers essentially correspond to only the organised sector Intraday Trading Tips