Now Reading: West Asia shock cuts India Inc margins to three-year lows
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West Asia shock cuts India Inc margins to three-year lows
Raw materials consumed nearly 45% of net sales and 50% of total expenditure at 642 non-BFSI companies in April-June, according to a Mint analysis. Both figures exceeded the 42% and 47% recorded…
The Story in Brief
Raw materials consumed nearly 45% of net sales and 50% of total expenditure at 642 non-BFSI companies in April-June, according to a Mint analysis. Both figures exceeded the 42% and 47% recorded during the Russia-Ukraine commodity shock in the first quarter of FY23. Aggregate net profit fell nearly 9% year-on-year, while operating and net profit margins dropped to 15.3% and 8.4%, their lowest levels since FY23.
Input costs rose nearly 45% year-on-year and 20% sequentially, as the West Asia conflict disrupted oil and gas supplies. The full effect may emerge in the next two quarters when companies replace cheaper inventory. Chemicals, paints, auto ancillaries and packaging face higher risks. Lower energy intensity, stronger balance sheets and reduced debt offer some protection.
The Indian Opinion
The loudest claims will either call this a repeat of the 2022 crisis or dismiss it as a short-lived oil shock. Neither view fits the data. Margins have already taken a sharper single-quarter hit, but companies also use less power and carry stronger balance sheets than before. The practical test is Q2 and Q3: do raw material costs push margins below the current 15.3% operating level?
Source: livemint.com
This story was synthesised by AI from the source linked above.
