Rising input cost, crude shave off corporate margins by 220 bps, roiling Q2 earnings: Icra report

Mumbai: Rising input costs and crude prices have impacted India Inc’s profitability in the September quarter despite good revenue growth, as operating margins declined by 2.20 percent, says a report. The corporate sector has reported a revenue growth of 23.9 percent for the September quarter over the same period last year, domestic rating agency Icra said on Monday, based on its analysis of 176 companies. [caption id=“attachment_4495585” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] However, the operating margins got impacted by 2.20 percent compared to year ago period and 0.70 percent when compared to the preceding quarter, its vice-president for corporate sector ratings Shamsher Dewan said. This was largely on a rise in energy and raw material costs as well as adverse impact of the Rupee’s nearly 15 percent depreciation during the year, he explained. Dewan said 21 of the 32 sectors analysed by the agency saw a decline in operating profit margins, adding airlines, cement and building materials were impacted by sharp increase in fuel prices, while auto, consumer durables, paints and print media were hurt by rising input costs. From a revenue growth perspective, commodity-linked sectors like iron and steel, oil and gas, and cement witnessed an increase in revenues, it said. The commodity-linked sectors posted a 61 percent revenue growth as compared to last year, supported by higher oil and steel prices, and healthy demand for cement, it said. If one were to exclude the commodity-linked sectors, the rest of companies recorded a revenue growth of 13.7 percent, which is higher than the previous quarters.