How did corporate India perform in the final quarter of 2022-23?

India’s GDP grew 6.1% in Q4 2022-23, as per official estimates, higher than the 5.1% forecast in Bloomberg's survey of economists. How did India Inc perform?

An HT analysis of the latest annual financial statements from the Centre for Monitoring Indian Economy (CMIE) Prowess database – it is among the largest databases of corporate performance – sheds more light on this. There are 2,138 non-financial companies in the Prowess database for which quarterly results are available for the last five years. To be sure, this sample pertains to only publicly listed companies and the overall picture may change if data is made available for a larger

A look at how corporate India performed in the quarter ending March 2023

The numbers that matter

• 
  Inflation-adjusted sales are losing growth momentum

  Having recovered from the impact of the pandemic in the September 2021 quarter, inflation adjusted sales grew in double digits in the subsequent quarters till September 2022. The latest analysis of the Prowess data shows that the sales lost growth momentum in the last two quarters of 2022-23. On a year-on-year basis, inflation-adjusted sales grew at 2.7% in March quarter, slower than 9.1% in December 2022 quarter. As mentioned earlier, the trend might change if data is available for a larger sample of companies.
• 
  The biggest firms are leading this sales growth

  Not all companies grew sales. This is visible once companies are classified by revenue. Distribution by of sales shows that companies with quarterly sales below ₹500 crore have seen a fall in their inflation-adjusted sales in the March 2023 quarter when compared to the March 2022 quarter. This shortfall is even greater for firms with lower revenue.
• 
  Profits shrank across firms of all sizes

  A year-on-year comparison shows that inflation adjusted (net) profits of companies shrank by 8.1% in the March 2023 quarter when compared to the March 2022 quarter. To be sure, this is a smaller contraction than the double-digit fall in profits in the previous two quarters (22.2% in December 2022 and 28.3% in September 2022). The year-on-year contraction of profits in the March 2023 quarter was also evident across firms of all revenue sizes. Big firms or those with quarterly sales between ₹100 and ₹500 crore took the biggest hit, while small firms or those with quarterly sales between ₹10 and ₹25 crore were the least impacted.
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  But costs are showing a moderation in growth

  What makes the March 2023 quarter results interesting is that for the first time in five quarters inflation adjusted costs have grown at a slower pace than sales. This was due to the fact that the major component of costs – raw materials – grew at a pace lower than 1% (0.7%) in the March 2023 quarter. To be sure, this number was 64% in the June 2022 quarter and stayed in double digits till the December 2022 quarter. Another component of costs, real salaries, also fell from 7.5% in June 2022 quarter to 6.6% in the March 2023 quarter.
• 
  Manufacturing performance

  Of the total sample analysed, 61% of the non-financial companies belong to the manufacturing sector. Since these numbers are from publicly listed companies, they can tell us only the state of formal manufacturing activity. An analysis of the latest data shows that nominal sales of manufacturing firms grew by 7.3% in the March 2023 quarter, slower than the 14.8% and 28.6% growth in December 2022 and September 2022 quarters respectively. However, the latest number is 1.2 percentage points higher than the growth reflected by the manufacturing component of the Gross Value Added, which covers both formal and informal manufacturing activities, over the same period. To be sure, these nominal numbers when converted to real terms are not comparable since the deflator used for such conversion varies – nominal numbers from Prowess will be deflated using the Consumer Price Index, and the nominal manufacturing component using the GVA deflator.