MOSL: EcoScope-Higher costs offset better sales for India’s listed corporate sector in 1QFY18-RBI data confirm sharp slowdown

​EcoScope: Higher costs offset better sales for India’s listed corporate sector in 1QFY18; RBI data confirm sharp slowdown in manufacturing GVA growth

• Reserve Bank of India (RBI) data for private corporate sector (2,744 listed non-government non-finance companies) indicate that aggregate sales and expenses grew at 18-quarter high of 7.6% and 11% YoY, respectively in 1QFY18. At 3.4pp, the gap between expenses growth and sales growth was the highest in five years.
  
• Interest payments declined 1.5% YoY for the second consecutive quarter. Interest coverage ratio was 1x or lower for four industries – textiles, construction, iron & steel and telecommunication.
  
• Owing to the sharper rise in raw material expenses vis-à-vis sales, operating profits contracted by 10% YoY, marking the first decline in four years. EBITDA margin dropped to a 9-quarter low of 17.2%.
  
• Finally, manufacturing GVA growth – as per the RBI sample – declined by a sharp 9.6% YoY in 1QFY18, because of a sharp decline in the manufacturing sector’s net profit. This confirms the slowdown in GDP growth in 1QFY18.