Pressure Points

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Pradip Kumar Dey: Dec 05 2009, 20:59 IST

Though the Indian economy is recovering slowly, the consolidated profit performance of corporate India is not in a good shape. The last three-year period spanning from 2006-2007 to 2008-09 was a difficult phase in the Indian economy. All the key industries of the economy namely construction, cement, steel, automobiles, textiles and tyres witnessed negative growth in their consolidated bottomline during 2008-09. Though the topline growth was positive during the period, 2008-09 and the second quarter of 2009-10 was tough for corporates of the country.

The sub-prime crisis in the US engulfed the biggies of Wall-Street leading to a severe liquidity crisis across the world. Most of the industries are facing the brunt of liquidity crunch with delayed expansion, overseas acquisition, higher interest costs, lower sales and profitability. Export dependent industries like textiles, gems and jewellery have been severely hit. Construction, cement, steel and automobiles have shown a dismal performance during 2008-09 and the second quarter of 2009-10.

Says Kishore P ostwal, CMD, CNI Research, “In July-September 2008, commodity prices were ruling very high and most companies were sitting on comfortable inventories. In October 2008, the global market crashed and commodity prices fell vertically. This impacted the bottomline for two quarters—October-December ‘08 and January-March ’09. The market stabilised during the March quarter and fresh inventories were built up in that quarter at lower prices. As a result the April-June’09 quarter was better than expected even though the economy did not recover. This had some impact in the July-September ’09 quarter.

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