Corporate India’s Sales to Grow 21.6% in 2011-12, as per Centre for Monitoring Indian Economy Review

Centre for Monitoring Indian Economy (CMIE) estimated Corporate India’s sales to grow 21.6% in 2011-12. However, profits are expected to fall by 7.2% in the financial year 2011-12. Excluding petroleum product companies, India Inc is expected to see a 19% growth in sales in March 2012 quarter.

As per the review,  sales of the manufacturing sector are expected to have expanded by 20.7% and that of the non-financial services sector by 18.2. Income of the financial service have grown by a strong 32% due to high interest rates and healthy credit growth.

CMIE however expects corporate sales to drop to 16.8% in the March 2012 quarter due to a sharp drop in expansion of petroleum products.

Profits fell  13.2% in the first half of 2011-12 due to steep rise in raw material and fuel prices, high interest rates and delay in payment of cash subsidy to the oil marketing companies (OMCs) by the government. Also, a sharp depreciation in rupee since September 2011 brought mark-to-market (MTM) losses to firms and thus further pulled down profits.

In a situation where high input costs and interest rates continue to haunt Indian companies, the corporate affairs ministry provided some relief by allowing capitalisation of MTM losses on long-term loans taken for the acquisition of fixed asset till March 2020.

The exemption was earlier available only till March 2012 and only to companies which had opted for it in 2008-09. In spite of this, corporate India is expected to report substantial amount of forex losses in the December 2011 quarter since major chunk of the forex liabilities of corporate India are short-term, CMIE noted.

Forex, however, expected to rise by 9.9% in the January-March quarter riding on the back of robust 40.2% rise in net profits of the banking industry. The net profits in the banking industry was attributed to lower provisions and low base.