Q1 FY21 corporate performance mimics record GDP contraction

During Q1 FY21 aggregate net sales of companies fell sharply by (-) 25.3 per cent. Net sales registered a contraction of (-) 25.3 per cent in Q1-FY21 compared to 5.7 per cent growth in the corresponding period last year. This reflects the stress on the finances of companies owing to COVID-19 pandemic and the subsequent lockdown.

The decline in the topline of companies led firms to resort to expenditure rationalisation. The same is reflected in the negative growth of total expenditure by (-) 29.4 per cent during the first quarter of FY21.

The decline in expenditure has been led by a steep fall in cost of raw materials (-51.5 per cent) owing to fall in global commodity prices and low production activity.

Operating and manufacturing expenses contracted by (-) 9.4 per cent in Q1 FY21 as compared to a growth of 4.1 per cent in Q1 FY20. This is due to notable decline in electricity (partial closure of factories due to lockdown) and fuel cost (-34.2 per cent) on account of fall in global crude oil prices.

The growth in employee cost for companies is 5.1 per cent as compared to the growth of 12 per cent in Q1 FY20. Out of the 65 industries, 52 have recorded less than average growth. Out of the 52 industries, 46 industries have recorded de-growth in employee cost.

Operating profits of the companies too fell by (-) 13.1 per cent in Q1-FY21 after improving moderately by 5.1 per cent last year.

Net profits of the sample companies declined by almost (-) 60 per cent during the quarter as against a growth of 4.7 per cent in corresponding quarter last year.

The net sales of companies (excluding banks and finance) have fallen by (-) 34.5 per cent y-o-y in Q1 FY21 when compared with 3.7 per cent growth last year, painting a rather grim picture.