NEW DELHI: Slowing discretionary consumption and sluggish rural demand have dragged down sales growth of India Inc in the quarter ended September 30, with revenue dropping marginally, the first decline in nine quarters.
Net profit, however, grew in double-digits, helped by a cut in corporate tax rate and buoyed by the financial sector.
A sample of 1,600 firms that declared results for the September quarter reported a 20 per cent Y-o-Y rise in aggregate net profit, while revenue fell one per cent.
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Experts say corporate India’s topline has been under pressure due to weak demand and is expected to remain in single digits for the next quarter. "The topline has been under pressure due to weak demand both at business and consumer levels and is expected to remain in single digits," said Deepak Jasani, research head, HDFC Securities.
"The slowdown in consumption demand is reflected in the RBI’s Consumer Confidence Index as well that declined to 89.4 in September compared to 95.7 in July 2019," noted India Ratings.
Brokerage firm Kotak also noted that 2QFY20 EBITDA of the Nifty-50 Index declined six per cent Y-o-Y, led by a sharp decline in volumes of auto firms and lower profitability in the case of metal and oil firms.
Also, the impact of tax reduction was not the same for all sectors. While aggregate auto net profit remained flat, the FMCG sector was able to report 25 per cent net profit growth as most of the FMCG firms are high taxpayers.
However, this factor did not benefit the infotech sector much as most of the companies were already enjoying several tax exemptions.