'Corporates to see 25 % acceleration in profit growth in FY14'

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SummarySoftening input prices, appreciation of rupee are expected to boost profitability: CMIE

Corporate India is poised to see acceleration in profit growth to 25 per cent in 2013-14 from an expected 14.5 per cent in 2012-13, an economic think-tank said.

“Corporate India is expected to accelerate profit growth to 25 per cent in 2013-14 from an expected 14.5 per cent in 2012-13.

“Softening input prices, appreciation of rupee and consequent absence of forex losses are expected to boost profitability,” Center for Monitoring Indian Economy (CMIE) said in its monthly review here.

Corporate India's net profit margin is also expected to expand to 7.8 per cent in 2013-14 from an expected 6.8 per cent in 2012-13, it said.

International prices of crude oil are expected to fall by 2.9 per cent in 2013-14. This coupled with a 4.1 per cent appreciation in the Indian rupee is expected to bring down the cost of crude oil imports substantially, the report said.

The petroleum products sector is expected to be the major beneficiary of this. High landed cost of crude oil imports has led to its raw material expenses as a proportion of sales shot up to 91.7 per cent in 2012-13, which are expected to come down to 88.4 per cent in 2013-14, CMIE said.

CMIE further said the government has not been regular in announcement and disbursal of oil subsidies. This has pushed the petroleum products industry into losses in many a quarters and has also led to a sharp increase in its interest burden.

The partial deregulation of diesel prices announced earlier this month is expected to reduce the reliance of the petroleum products industry on subsidies and aid its bottomline, it added.

The net profit of the petroleum products industry are expected to climb up to 4.4 per cent of income in 2013-14 from an expected 2.2 per cent in 2012-13. The petroleum products industry accounts for 10-15 per cent of total corporate profits and hence its profit growth has a strong bearing on the overall profit performance of corporate India.

Industries engaged in manufacture of other crude oil derivatives such as chemicals, polymers, plastics and paints are also expected to reap the benefits of around 7 per cent fall

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