Corporate profits rose 15 per cent to touch an all-time high in the September quarter as margins widened on softer input costs and better utilistaion levels, the research arm of leading rating agency Crisil said on Monday.
From an absolute perspective, the earnings before interest, tax, depreciation and amortisation (Ebitda) touched an “all-time high” Rs 1.60 lakh crore in the September quarter, as against Rs 1.02 lakh crore in the preceding June quarter, it said.
It can be noted that the trend of companies' profits growing even as the economy contracts as a result of the pandemic has led some watchers to express concern claiming this is illustrative of widening inequalities.
Crisil, which analysed a sample of 800 listed entities comprising 85 per cent of NSE's market cap in sectors excluding banking and finance and oil and gas, said improving utilisation levels, along with better management of power, fuel and raw material cost by large companies contributed to the handsome profit growth.
Aggregate operating profit margins improved by over 1 per cent despite a rise in raw material cost during the quarter, it said.
From an employee costs perspective, which is leading to the concerns, it said 370 manufacturing firms in its sample showed a contraction of 4 per cent while the same for service sector reported a “moderate growth”.
The growth in profits came even as the revenues did not go up, the report said, pointing out that the topline was "stable" in Q2 as compared to the year-ago period after falling 29 per cent in the April-June quarter.
The small enterprises have taken a brunt of the hit in revenue impact as compared to the large ones, it said.
"Large players saw muted revenue growth. However, small players, which are typically low on bargaining power and cash crunched remained in the red. The smaller the company, the more excruciating the pain," it said.
It pointed out that less than 20 per cent of the smaller 400 companies logged revenue growth, as against nearly 35 per cent of the top 100 companies that grew in the first half of the fiscal.
In consumption- and commodity-linked sectors, most large players logged growth in the second quarter, while their smaller counterparts de-grew, while among exporters, smaller textile businesses – readymade garments and cotton yarn – suffered chronic pain, while IT services showed resilience with both large and small players showing steady sequential growth.