Page 15 - CII Artha Magazine 2022
P. 15

Domestic Trends

 Corporate  60.0    Broad Trends in Corporate Performance  18.0  External risks            chains and led to shortages
                                                                                           and delays in critical inputs
                                                                                           of raw materials. These
                                                                                           could be seen as a drag on
 Performance:  40.0  8.4  1.6         9.1  23.5  47.4  40.3  16.0  corporate               the corporate profitability in
                                                                                           the fourth quarter of FY22.
                                                                                           However, some sectors are
                                                                outlook mixed
                                                                                           likely to gain from the high
 Slowdown,  -20.0  Q4'FY19  Q1'FY20  -5.1 Q2'FY20  -3.1 Q3'FY20  -10.7 Q4'FY20  -31.4  Q1'FY21  -0.6 Q2'FY21  Q3'FY21  Q4'FY21  Q1'FY22  Q2'FY22  Q3'FY22  6.0  The spectre of the   which is likely to show up
                                                                                           global commodity prices
                                                                                           positively on their PAT
                                                                Russia-Ukraine war has
                                                                                           margins. These factors will
                                                                further raised commodity
                                                                                           keep corporate performance
                                                                prices, elevated logistics and
                                                                                           mixed for the fourth quarter
 Revival  Sectoral     Net Sales (% Y-o-Y)  PAT margin (%, rs)  also disrupted global supply   of FY22.
                                                                transportation costs. It has
                       Source: CII Research analysis using Prowess data
                                     cut into their profit margins.
 and Risks  Q2 AND Q3 OF FY22   FY21 (period of pandemic   Trends: A mix   On the other hand, mines and
                                     metals recorded high profits
                                     at the back of rising
                                     commodity prices viz metals.
        of good, bad
 and nation-wide lockdowns).
                                     decline in y-o-y growth in net
 CORPORATE   Corporate profitability too   and possibly   Consumer durables showed a
 remained strong as PAT
                                     sales, while their profitability
 PERFORMANCE   margin almost doubled from   marginally rose however,
 DESPITE CONSTRAINTS  the pre-pandemic levels. PAT   ugly  sectors like automobiles,
 margin (per cent) rose from
 15.7 per cent in Q1 to 16.3         construction and real estate,
                                     construction material and
 Pre-Pandemic blues  Pandemic strikes  revival, both in terms of net   per cent in Q2 of FY22. This   The sectoral performance for   textiles saw a decline in both
 was reflective of
                                     y-o-y net sales and PAT
 E ven before the pandemic   Poor corporate performance   sales and PAT margins. Also,   improvements in capacity   Q3 of FY22 has been mixed,   margin (per cent). This
 utilisation and cost
        both in terms of net sales and
                                     signified a broader slowdown
 continued into the Q1 of
 this was broad-based across
 struck, net sales of
 corporates were declining on   FY21 as the pandemic struck.   sectors. In part this was   optimisation.   profitability.   in the economy with declining
 a year-on-year (y-o-y) basis.   Lockdowns were imposed and   driven by a low base effect.   Sectors like FMCG and   consumer demand cutting
 Using the data extracted from   this impeded the   But easing of lockdown   Emerging signs of cost   power have seen their net   revenues and high input &
 CMIE’s Prowess database , it   manufacturing and   restrictions and revival of   pressures  sales go up, however rising   logistics costs eating into
 can be seen that net sales of   service-based activities. As   economic activity also played   raw material and input costs   profits.
 the corporate sector had   people were forced indoors,   a major role. Pent up demand   However, the third quarter of
 contracted on a y-o-y basis   discretionary spending fell   from the rural areas, running   FY22 saw the PAT margin
 through Q2, Q3 and Q4 of   considerably. Global trade   down of precautionary   (per cent) moderating to 14.5
 FY20. PAT margin (per cent),   activities slowed down, hurting   savings made during the   per cent from 16.3 per cent   Snapshot of sectoral performance in Q3FY22
 too, declined from 15.2 per   both exports and imports of   pandemic, low cost of capital   in the previous quarter. This
 cent in Q2 to 9.6 per cent in   raw materials. Only pharma   as average Marginal Cost of   showed that the signs of   25
 Q4 of FY20. This was despite   sector recorded a y-o-y   Lending Rate (MCLR) came   strain seem to have emerged.   IT & ITES  Metals and Mining
 the corporate tax rate cut   expansion in net sales in this   down by 51 basis points from   Brent crude price rose by 79   20  FMCG
 reducing the tax burden of   quarter. In order to minimise   July 2020 to June 2021 – all   per cent on y-o-y basis in   Pharmaceuticals  Total Q2FY’22
 corporates. This slowdown   losses, corporates resorted to   supported good corporate   Q3FY22, while steel prices   15  Total Q1FY’22
 was across the board, except   cost rationalisation and   performance.    rose by 48 per cent and   PAT Margin ( per cent)  Construction materials  Textiles  Total Q3FY’22
 for power sector which   increased efficiency, which   aluminium by 41 per cent.   10  Chemicals
                                        Capital goods
 maintained steady growth in   pulled up the PAT margin (per   Q2 and Q3 of FY22 saw   Even gas and coking coal   5  Consumer durables
 net sales even though its   cent) from 9.6 in Q4FY20 to   steady corporate   prices shot up multi-fold.   Automotive  Real estate & Construction
 y-o-y profitability declined.   10.7 per cent in Q1FY21.   performance despite   These high raw material and   0 -20  0  20  40  60
 This disappointing   constraints. Net sales shot up   input costs ultimately   Net Sales (per cent Y-o-Y)
 performance was indicative of   significantly from the previous   squeezed corporate
 overall slowdown in the   The Revival   quarter, even though the y-o-y   profitability of manufacturers,
                       Source: CII Research analysis using Prowess data
 economy and weak consumer   Q2 of FY21 to Q1 of FY22   growth showed a decline due   despite sales growth in some   Note: Power sector was an outlier with Net Sales (Y-o-Y) of 268.6% and PAT Margin (%) of 11.9%
 demand.    was marked by corporate   the low base effect from Q1   sectors.
                                                                                           QUARTERLY JOURNAL OF ECONOMICS
 MAY 2022                                                                                               MAY 2022
   10   11   12   13   14   15   16   17   18   19   20