Operating profit margin of 625 listed companies hits multi-year low

The operating margin of most listed companies fell to a multi-year low in the September quarter, even as their revenue rose 27 percent year-over-year and 3 percent sequentially.

A study by ICRA of the financial statements of 625 listed companies (excluding financial sectors) showed that all major sectors recorded year-on-year revenue growth in the September quarter, with sectors such as hotels, oil and gas, airlines and energy reporting significant increases, albeit on a lower base. .

However, companies were unable to realize the benefits of revenue growth, with operating profit margin shrinking to a multi-year low, the study said.

Kinjal Shah, Vice President and Group Co-Head, Corporate Ratings, ICRA said the year-on-year growth in revenue was mainly driven by increased realization levels on account of input cost inflation, while volume growth was relatively weak. Many consumer-oriented sectors such as consumer durables, retail, and FMCG have been affected by demand moderation due to the inflationary environment and weak demand in rural areas.

ICRA analysis shows that OPM of India Inc. It contracted 4.55% year-over-year to 14.5% for the quarter. It said that while margin pressures are likely to ease gradually from the December quarter, uncertainties remain given the evolving geopolitical situation.

Overall, despite some softening and stabilization in commodity prices over recent months, India Inc’s ability to stem the decline in earnings will depend on headwinds such as energy cost inflation, developing recessionary trends in developed markets and the impact of volatility in the import and export sectors, she said. .

The construction, automotive and airline sectors recorded significant revenue growth on a sequential basis due to successive increases in prices and steady demand. At the same time, sectors such as hotels, energy, oil and gas, metals and mining, textiles and consumer durables saw consecutive revenue declines during the quarter.

While a few sectors such as logistics, tires and auto OEMs reported sequential expansion of operating profit margin driven by a combination of factors such as gradual recovery in demand and correction of commodity prices, majority of sectors reported sequential contraction in OPM due to their inability to pass rising cost input. Metals, mining, cement, iron and steel were among the few sectors that experienced a sharp decline in operating profit margin during the previous quarter.