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Corporate Sector Has Given Impressive Performance This Quarter: BoB Report

Sales of a sample of 2598 companies covering 38 sectors witnessed growth of 39.8 per cent in net sales

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India Inc has presented a very positive performance in the first quarter of the financial year which is also in consonance with various statistical numbers that have been released at the macro level. This does tempt one to conclude that the sector is on a fast track mode with sales growth of around 40 per cent, says a Bank of Baroda report. 

A deeper analysis does however reveal that just as is the case with the macros, base effects have tended to magnify the performance. Nonetheless, it may still be fair to conclude that the worst is behind us and that several sectors are on the fast track while others continue to face some challenges.

Sales of a sample of 2598 companies covering 38 sectors witnessed growth of 39.8 per cent in net sales compared with 43.1 per cent last year, the report said. This does sound impressive considering that barring mining, all sectors witnessed positive growth this quarter.

Madan Sabnavis, Chief Economist, BoB said, "The performance of the corporate sector has been quite impressive this quarter and gels with the high frequency indicators that are released by the government like IIP growth, PMIs, tax collections and so on. A deeper look at the performance in terms of growth in sales shows that the base effects are significant; and therefore we have looked at a CAGR for three years instead to iron out the sharp changes. The performance is still good at the aggregate level with sales growth of 13.3 per cent during this period compared with 39.8 per cent when reckoned over FY21. The positive thing is that all sectors are now free of any restrictions which is getting reflected in turnover and profits. The next 2 quarters will be critical as it will indicate sustenance as well as revival in consumption and investment."

Mining was an exception with coal being under pressure which also played out as the power crisis in this period. It must however be pointed out that interpretation of data must be qualified as the preceding two years witnessed unusual lockdowns- in 2020 there was a total lockdown for two months while in 2021 the first quarter was subject to different lockdowns imposed by various states which impeded performance. Therefore, we believe that a more pragmatic way to look at growth in turnover would be to use the CAGR concept with 2019 as the base. This will give a more moderate view of growth as after a slump in 2020 there was an equally sharp uptick in 2021. 

Sales for the sample companies had declined from Rs 18.01 lakh crore in 2019 to Rs 13.10 lakh crore in 2020. Subsequently there was a recovery back to Rs 18.75 lakh crore in 2021 and further to Rs 26.22 lakh crore in 2022. With the lockdowns affecting performance in 2 years, growth over 2019 can be looked at for assessing the same. In fact growth in 2021 over 2019 was just 4.1 per cent and only 17 of the sectors had sales level higher than that in 2019.

CAGR in sales was 13.3 per cent per annum for the sample companies between 2019 and 2022 which is indicative that there is still some distance to be traversed as this number has been in the region of 15-18 per cent in the past. 


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corporate sector bank of baroda