Nearly one in every four companies that have declared their results for the quarter ended March has reported negative sales growth.
DNA Money analysed 285 companies from amongst the BSE 500 pack, excluding companies from the financial and banking sectors.
As many as 66 of these have reported negative figures, ranging from -0.1% for Cairn India to in excess of -40% for companies such as Titagarh Wagons, MMTC and 3i Infotech.
Growth in sales overall was the lowest this quarter out of at least the last six.
Average net sales for the sample rose 16.1% year on year, down from levels of 24.9% seen in the last quarter and 26% in January-March 2011.
The slowdown in sales is a combination of the macroeconomic situation as well as the slowdown in demand, said Rajat Rajgarhia, director research at Motilal Oswal Financial Services.
“Average inflation over the last quarter is lower than previous quarters and whenever that happens, the topline is also affected.
Volume growth has been affected due to the demand slowdown, which is reflected in the sales numbers,” he said.
Average inflation for the fourth quarter was 7.05%, the lowest in six quarters.
A lack of continuing investments and negative sentiment also impacted sales, suggested Prasanth Prabhakaran, president, retail broking, India Infoline. “There has been very little in the form of continuing investments in recent years. This will eventually have an impact on sales. Sales will not pick up until confidence returns to the market,” he said.
The companies sold goods and services worth a total of Rs6.97 lakh crore during the last three months of the financial year, up from Rs6.45 lakh crore in the previous three month period and 6.01 lakh crore in the same period last year.
While net sales growth is likely to be lower this fiscal, compared with the last, margins are likely to remain volatile, said Rajgarhia. “Raw material prices have been going down but the currency fluctuation has hit margins. Also the slowdown in volume growth would have an impact in terms of operating leverage,” he said.
The operating profit margin of companies, or the margin at which they generated profits purely from business activities, was at 14.5%, compared with 16.5% in the fourth quarter last year.
A Morgan Stanley India Strategy Report noted that seven out of 10 sectors in their coverage universe have seen margin contraction. “Raw material costs for the companies that have reported are up 20% YoY, driving down Ebitda (earnings before interest, tax, depreciation and amortisation) margins, as has been the case for several quarters now,” said the report dated May 23, authored by analysts Sheela Rathi, Ridham Desai, Amruta Pabalkar and Utkarsh Khandelwal.
Meanwhile, net profits have been negative for the third straight quarter. The companies analysed made a net profit of Rs54,125 crore in March quarter, 6.3% lower than the corresponding period last year.