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"India Inc. benefitted from higher price realization "

Posted on Jan 24, 02:55PM | IBNS

The present state of domestic and rest of the world macroeconomic conditions are taking a toll on the performance of Indian industry and this is amply evident from the latest quarter results, according to the just released ASSOCHAM study.

While majority of the Indian corporate citizens are announcing either indifferent or mellowed performance, a considerable section of firms have successfully weathered the recessionary conditions to register impressive growth figure, said the study.

As regards the performance trends, even the overall mood on economic growth continues to be muted, global corporations successfully leveraging technology to drive revenues and productivity. Indian large enterprises have benefited by shifting to the usage of cheaper raw materials in view of cooling of international raw material market.

They have also been benefited from the higher price realization.

The analysis carried out by ASSOCHAM research bureau says the manufacturing sector, despite witnessing challenging business conditions through out the year so far, their volumes remain mostly unaffected.

On the labour front, while there is no perceivable fall in the number of employees, there has been focused attempt to improve the productivity of the existing employees.

Despite prevalence of challenging business environment, the subsequent slowdown in economic growth, sustained elevated inflation levels and perceptions of hike in taxes, the FMCG sector has performed well.

On the other hand, ASSOCHAM President Rajkumar Dhoot said, production of Indian steel industry has affected despite the country seeing a moderate growth of 3.9 pc steel consumption.

"It is because the foreign firms, particularly from countries like Japan and South Korea, are gaining at the cost of domestic firms by exporting their surplus capacity to the Indian market under the aegis of bilateral trade agreements," he said.

On the services front, again the performance of traditional and strategic business services segments have performed differently. Hotel and tourism firms have recorded subdued performance owing to economic slow down.

IT sector has seen a mixed trend of muted volume growth, lesser business in the non-discretionary spend, moderate sequential dollar revenue growth combined with more productivity and better price realization. Indian IT firms are seen tightly monitoring a programme of managing internal costs and driving productivity.

Despite uncertainties continue to prevail in the IT services market, the deal pipeline continues to be healthy.

The performance of banking and financial sector says the ASSOCHAM Chief was improved by growth in interest income. The ratio between advances towards retail and wholesale segment further skewed towards the retail.

The net sales going into the performance details have remained more or less at the same level, although a marginal decline has been registered from 27.0pc in Dec, 2011 to 26.9pc in Dec, 2012.

There has been a decline in the cost of raw materials which can be attributed to efficient cost management methods adopted by companies which have further helped the companies to report better results for the quarter. Interest payments have also seen a decline due to a decline in the amounts of total borrowings by the overall industry.

Although the industry has registered an increase in the profits level which were recorded as negative in Dec, 2011.

This increase in profits is due to a fall in the total expenses. There has been a decline in both sales as well as expenditure, but the rate of decline in expenditure is higher than the rate of decline in sales, which has resulted into an increase in the total profits from 8.3pc in Dec, 2011 to 52.4pc in Dec, 2012.

According to the Q3 results, some sectors have outperformed and some have underperformed in the quarter ending December 2012.

Considering the manufacturing sector, there has been an increase in the net sales from 11.8pc to 39.3pc and decline in the total expenditure which has resulted into a tremendous rise in the amounts of profits from -83.3pc in December 2011 to 629.4pc in December 2012.

Although the sector has registered a fall in the total borrowings, still the amount of interest payments has shown a massive rise from 29.8pc to 103.3pc . The increasing amounts of profits show a bright performance of the economy.

The services sector, Dhoot said, has shown a decline in the net sales as well as a decline in the total expenses.

The fall in net sales from 36.7pc to 16.9pc over a year is an indicator of poor performance of the sector in the economy, which thereby affects the overall growth of industrial sector, also adversely affecting the growth of the economy.

The fall in the total expenditure is even higher. The manufacturing sector has recorded a decline in the amounts of interest payments, this decline can be attributed to a decline in the total borrowings.

Taking a look at the profits of the services sector, it has witnessed a decline from 35.3pc to 9.9pc . Declining profits highlights the dismal performance of the sector.

The banking and financial services sector has helped in developing the vital sectors of the economy and usher in a new dawn of progress on the Indian horizon.

The sector has shown a decline in the net sale as per the results posted for Q3.

Also, a decline in total expenditure is seen, but the rate of decline of expenditure is higher as compared to rate of decline in net sales, consequently the sector has registered an increase in total profits. The interest payments have more or less remained the same, whereas the sector has recorded a decline in total borrowings.

The financial services sector witnessed a decline in both net sales and expenditure and also a decline in short term investments. A fall in the profits level from 38.8pc to 25.5pc is seen.

The IT sector has also seen a decline in its net sales from 39.9pc in Dec 2011 to 18.6pc in Dec 2012. The sector has registered a fall in total expenditure from 34.2pc to 13.9pc . Total borrowings have declined thus the interest payments have also declined.

Total profits have also registered a downfall from 34.0pc to 10.3pc . So, overall there has been a downturn of IT sector.

Most of the sectors of the economy have witnessed a downfall in the third quarter of FY12-13, although a few sectors have registered a positive growth rate, still industrial performance is a matter of concern for Indian economy.