Stringent Cost Controls Help Raise Profit and Income of Indian Companies

Stringent cost controls and a fall in commodity prices have pushed up the net profit and core business income of Indian companies, growing at the fastest rate in at least eight quarters.

 

Livemint reports that the earnings of 129 companies that have announced their results for the December quarter and for which data is available for the past eight quarters showed that while net sales grew 19.35%, below the 30.22% growth recorded in the year-ago quarter, operating profit, or income from core business, rose 36.34%—the highest in at least two years.

 

Decline in input costs and employee expenses also helped boost corporate income.

 

Net profit of these companies rose 43.12%, the fastest in at least eight quarters.

 

Net profit margin rose 11.43%, the second highest in four quarters, as raw material costs as a percentage of sales dropped to a five-quarter low of 56.09%. Employee costs as a percentage of sales was 9.34%, the lowest in three quarters.

 

“Indian companies have an inherent ability to control costs during crises. Though top-line growth is nothing much to cheer about, margins continue to grow as they have in the past. That, along with the fact that raw material costs have come down, is an important signal that the worst may be behind us,” said C.J. George, managing director, Geojit BNP Paribas Financial Services Ltd., in an interview with Livemint.

 

 

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