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MOSL: ECOSCOPE-Corporate sector improved in 3QFY17, but interest coverage worsened

​ECOSCOPE: Corporate sector improved in 3QFY17, but interest coverage worsened; RBI data confirm higher manufacturing GVA growth

• The Reserve Bank of India’s (RBI) recent data on the private corporate business sector show that aggregate sales growth was at a nine-quarter high of 2.8% YoY in 3QFY17, while expenses grew at a faster rate of 5% due to increasing raw material costs. Consequently, the differential between sales and expenses growth was the highest in almost five years.
  
• Surprisingly, interest payments grew sharply in 3QFY17. In comparison to a year ago, the interest coverage ratio fell below 1x for three industries – textiles, construction and telecommunication. On the other hand, the ratio improved from 0.8x to 1.1x for the iron & steel industry.
  
• The EBIDTA margin also eased marginally to 19%, but remains close to the highest level of 20% seen in the first two quarters of FY17.
  
• Finally, manufacturing GVA growth – as per the RBI sample – doubled to 22.2% YoY in 3QFY17, confirming higher growth shown by the Central Statistics Office (CSO) in its national GVA/GDP data released last month.