'India Inc confident but inflation may be a blip'
India Inc’s entering a new phase of growth driven by commissioning of additional capacities across sectors. But inflation may be a blip on the radar.
By Karan Sehgal, TNN |
A larger number of companies expect a growth in pre-tax profits, sales and production in the latest round of the survey compared to the previous round.
The optimism with regard to profits, which was evident in the previous round, has been further strengthened in the current round. Nearly 70% of the respondents expect a rise in profit before tax (PBT) in the next two quarters, against 68.7% in the previous round.
A significant change is that the percentage of companies expecting more than 5% rise in profits has increased sharply to 26.5% from 22.4% during the previous round. But respondents in the consumer durables and capital goods sectors are exceptions to this trend, as a lesser number of respondents in these two sectors expect an increase in profits.
There has been a moderate increase in the proportion of respondents expecting sales to rise by more than 5% in the next six months. Companies in the intermediate goods sector are most upbeat, with 54% of the respondents forecasting over 5% sales growth, against 48.5% in the previous round. The companies likely to take maximum hit belong to the consumer non-durables sector, wherein the proportion of firms expecting an increase in sales has fallen from 54.2% to 50.8%. However, the outlook is weakest for the consumer durables sector, in which the percentage of companies expecting an increase in sales is the least.
The survey also indicates that cost pressure is building up. The proportion of companies expecting an increase in prices of raw materials, power and labour over the next six months is far higher than those who feel that prices of such inputs have actually risen during the past three months.
However, results of the previous survey indicate that most often, companies are over-cautious or pessimistic about input costs. For instance, in the previous round of the survey, nearly 72% of the respondents had projected a rise in their raw material costs, but only 64% actually witnessed such an increase in the past three months.
Most companies plan to pass on higher input costs to their consumers by taking a pro-rata price increase. The proportion of companies expecting an increase in ex-factory prices of their products has risen from 47.2% to 54.6% in the current round.
Although the proportion of companies expecting a price hike has jumped across all categories, the rise has been steepest in the case of consumer non-durables firms. Nearly two-thirds (61.8%) of the respondents in this sector say they will go in for a price hike, compared to 51.5% in the previous round.
At the macro level, the production outlook appears to be in line with the sales outlook. There is a marginal improvement in the number of respondents who feel production will increase over the next six months.
However, companies belonging to the consumer non-durables sector are an exception to this trend ��� there has been a fall of 8.2% in the number of respondents in this sector who feel output will increase over the next six months. This indicates the inventory build-up in the consumer non-durables sector due to an increase in interest rates. The fact that the number of companies which expect production to increase by more than 5% is least in this sector further substantiates this observation.
Companies from the capital goods and intermediate goods sectors steal the show. The sales, production and profit outlook for these companies are on the higher side and have improved compared to the previous round of the survey. Across sectors, the outlook is weakest in the case of consumer durables and consumer non-durables companies.
The previous round of the survey had indicated that consumer durables firms are likely to face hard times and the outlook for these companies has deteriorated further in the current round. Consumer non-durables companies are better placed in terms of sales outlook, but their production forecast indicates weak demand. The bearishness in these two sectors will increase if the cost-push factor in raw material prices creeps into the prices of finished products.
Future���s Bright: The optimism among intermediate goods manufacturers indicates a robust production environment. This can be attributed to gradual commissioning of capital expenditure (capex) projects currently under implementation by companies across sectors.
The new projects will raise the demand for intermediate goods such as metals, chemicals, plastics and fibres. These goods serve as inputs/raw materials for companies manufacturing various consumer and industrial goods. Expectation of faster growth in these two sectors is a sure sign of a turn-around in industrial production in the country.
The optimism with regard to profits, which was evident in the previous round, has been further strengthened in the current round. Nearly 70% of the respondents expect a rise in profit before tax (PBT) in the next two quarters, against 68.7% in the previous round.
A significant change is that the percentage of companies expecting more than 5% rise in profits has increased sharply to 26.5% from 22.4% during the previous round. But respondents in the consumer durables and capital goods sectors are exceptions to this trend, as a lesser number of respondents in these two sectors expect an increase in profits.
There has been a moderate increase in the proportion of respondents expecting sales to rise by more than 5% in the next six months. Companies in the intermediate goods sector are most upbeat, with 54% of the respondents forecasting over 5% sales growth, against 48.5% in the previous round. The companies likely to take maximum hit belong to the consumer non-durables sector, wherein the proportion of firms expecting an increase in sales has fallen from 54.2% to 50.8%. However, the outlook is weakest for the consumer durables sector, in which the percentage of companies expecting an increase in sales is the least.
The survey also indicates that cost pressure is building up. The proportion of companies expecting an increase in prices of raw materials, power and labour over the next six months is far higher than those who feel that prices of such inputs have actually risen during the past three months.
However, results of the previous survey indicate that most often, companies are over-cautious or pessimistic about input costs. For instance, in the previous round of the survey, nearly 72% of the respondents had projected a rise in their raw material costs, but only 64% actually witnessed such an increase in the past three months.
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Most companies plan to pass on higher input costs to their consumers by taking a pro-rata price increase. The proportion of companies expecting an increase in ex-factory prices of their products has risen from 47.2% to 54.6% in the current round.
Although the proportion of companies expecting a price hike has jumped across all categories, the rise has been steepest in the case of consumer non-durables firms. Nearly two-thirds (61.8%) of the respondents in this sector say they will go in for a price hike, compared to 51.5% in the previous round.
At the macro level, the production outlook appears to be in line with the sales outlook. There is a marginal improvement in the number of respondents who feel production will increase over the next six months.
However, companies belonging to the consumer non-durables sector are an exception to this trend ��� there has been a fall of 8.2% in the number of respondents in this sector who feel output will increase over the next six months. This indicates the inventory build-up in the consumer non-durables sector due to an increase in interest rates. The fact that the number of companies which expect production to increase by more than 5% is least in this sector further substantiates this observation.
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Companies from the capital goods and intermediate goods sectors steal the show. The sales, production and profit outlook for these companies are on the higher side and have improved compared to the previous round of the survey. Across sectors, the outlook is weakest in the case of consumer durables and consumer non-durables companies.
The previous round of the survey had indicated that consumer durables firms are likely to face hard times and the outlook for these companies has deteriorated further in the current round. Consumer non-durables companies are better placed in terms of sales outlook, but their production forecast indicates weak demand. The bearishness in these two sectors will increase if the cost-push factor in raw material prices creeps into the prices of finished products.
ADVERTISEMENT
Future���s Bright: The optimism among intermediate goods manufacturers indicates a robust production environment. This can be attributed to gradual commissioning of capital expenditure (capex) projects currently under implementation by companies across sectors.
The new projects will raise the demand for intermediate goods such as metals, chemicals, plastics and fibres. These goods serve as inputs/raw materials for companies manufacturing various consumer and industrial goods. Expectation of faster growth in these two sectors is a sure sign of a turn-around in industrial production in the country.
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