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The private corporate sector showed improvements across various segments in the third quarter of the current financial year (Q3FY25), with the operating profit margin of listed non-financial companies increasing sequentially by 50 basis points (bps) to 16.2 per cent, according to the Reserve Bank of India (RBI) data released on Monday.
Sales of listed private non-financial companies increased by 8.0 per cent during Q3FY25, compared to 5.5 per cent in the corresponding quarter a year ago. It was, however, 5.4 per cent in Q2FY25.
Among these, sales growth of 1,675 listed private manufacturing companies rose to 7.7 per cent, primarily driven by higher sales in automobiles, chemicals, food products, and electrical machinery industries.
However, industries such as petroleum, iron and steel, and cement faced annual contraction in sales revenue.
Information Technology (IT) companies recorded a rise of 6.8 per cent year-on-year (Y-o-Y) in sales, while non-IT services companies exhibited an impressive 11.5 per cent sales growth (Y-o-Y) during Q3FY25, continuing their strong performance from the previous year.
Manufacturing companies' expenses on raw materials rose by 6.3 per cent (Y-o-Y) in line with their sales growth, whereas their staff costs increased by a higher 9.5 per cent.
Staff cost increases were also noted in IT and non-IT services companies, at 5.0 per cent and 12.4 per cent, respectively.
The staff cost to sales ratio for manufacturing, IT, and non-IT services companies moderated sequentially, reflecting improving operational efficiency.
The interest coverage ratio (ICR) for manufacturing companies moderated to 7.6 during the quarter, while IT companies maintained a ratio of above 40.
Non-IT services companies also witnessed an ICR exceeding 2, indicating that their earnings before interest and tax more than doubled their interest payments.
Meanwhile, the financial performance of non-government non-financial (NGNF) private limited companies improved during 2023-24 (FY24), with operating profit growth accelerating in both manufacturing and services sectors, leading to higher profit margins.
Net sales increased by 10.8 per cent during the year, following a strong growth of 21.8 per cent in the previous post-pandemic year.
Despite a relative normalisation in activities, all major sectors, including mining, manufacturing, electricity, construction, and services, recorded low double-digit sales growth during FY24.
Leverage, in terms of debt-to-equity ratio, remained stable at 45.2 per cent, and interest coverage improved to 3.1 from 2.7 the previous year.
The financial performance of NGNF public limited companies also showed positive developments in FY24, with operating profits rising by 15.3 per cent, driven by cost rationalisation.
The services sector posted particularly strong growth in profit after tax (PAT), with a 38.1 per cent increase, while manufacturing companies saw a 7.6 per cent rise.
Operating expenses increased by a lower 3.4 per cent, reflecting slower growth in both manufacturing costs and employee remuneration.
As a result, leverage moderated, and interest coverage improved to 4.1, with the manufacturing sector maintaining stability and the services sector showing marginal improvement.
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