Corporate profits touch all-time high in the September quarter: CRISIL

Corporate profits rose 15 percent to touch an all-time high in the September quarter as margins widened on softer input costs and better utilistaion levels, the research arm of leading rating agency CRISIL said on Monday.

From an absolute perspective, the earnings before interest, tax, depreciation and amortisation (Ebitda) touched an “all-time high” Rs 1.60 lakh crore in the September quarter, as against Rs 1.02 lakh crore in the preceding June quarter, it said.

It can be noted that the trend of companies' profits growing even as the economy contracts as a result of the pandemic has led some watchers to express concern claiming this is illustrative of widening inequalities.

CRISIL, which analysed a sample of 800 listed entities comprising 85 percent of NSE's market cap in sectors excluding banking and finance and oil and gas, said improving utilisation levels, along with better management of power, fuel and raw material cost by large companies contributed to the handsome profit growth.

Aggregate operating profit margins improved by over 1 percent despite a rise in raw material cost during the quarter, it said.

From an employee costs perspective, which is leading to the concerns, it said 370 manufacturing firms in its sample showed a contraction of 4 percent while the same for service sector reported a “moderate growth”.

The growth in profits came even as the revenues did not go up, the report said, pointing out that the topline was "stable" in Q2 as compared to the year-ago period after falling 29 percent in the April-June quarter.

The small enterprises have taken a brunt of the hit in revenue impact as compared to the large ones, it said.

"Large players saw muted revenue growth. However, small players, which are typically low on bargaining power and cash crunched remained in the red. The smaller the company, the more excruciating the pain," it said.

It pointed out that less than 20 percent of the smaller 400 companies logged revenue growth, as against nearly 35 percent of the top 100 companies that grew in the first half of the fiscal.