A favourable commodities environment has bailed out India Inc at a time when companies are finding it hard to grow their top line in a weak demand environment.
With revenue growth remaining subdued, a very modest increase in the raw materials and wage bill has helped India Inc post a smart jump in operating profit margins and Ebitda (earnings before interest, tax, depreciation and amortisation) in the March quarter earnings season.
For 1,099 companies (including banks and financials), operating profit has jumped nearly 15% on year but the rise in the top line is just 6.5%.
If banks and financials are excluded from the sample, input cost has dropped by 52 basis points, the best levels in at least four quarters. It is not just benign raw material costs that have helped boost the Ebitda in Q4FY25, expenses on employees too have gone up only slightly.
While consumer-oriented companies, especially fast moving consumer goods players, have struggled to push through volumes, auto manufacturers too have reported poor volumes.
The increase in the total expenses for these companies has been the slowest in at least four quarters.
For 923 companies, other income has fallen, implying that cash has been used for the operations.
Interestingly, the increase in depreciation is the slowest in at least four quarters, reflecting the slow addition to fixed assets during the quarter. This is not surprising as private sector capex is yet to see a meaningful pick-up.