These companies constitute 49 per cent of the market capitalisation on the Bombay Stock Exchange as well as 57 per cent of the net sales of the corporate sector in 1997-98.

The overall performance of these companies has been brought down by the iron & steel and commercial vehicles segments and to a lesser extent by the cement & cement products and paper & paper product segments. These four segments have been hit by slack demand conditions.

Excluding these segments, the growth in net profits has been 21.5 per cent. The net profit margin of the aggregate sample improved marginally to 6 per cent during the first quarter of 1998-99 from 5.8 per cent during the corresponding period of the previous year. The rise is mostly contributed to a fall in the expenses-to-sales ratio to 78.5 per cent from 79 per cent.

The net profitmargin has improved for the majority of companies by 51 per cent as about 49 per cent of the sample showed a reduction in costs. Further cost reduction was seen in 19 out of the 22 industries, which witnessed high growth in net profits, while 13 out of 19 industries, which had low growth in net profits, witnessed an increase in the cost ratio.

A size-wise analysis indicates that medium-sized companies have shown a remarkable 38.1 per cent growth in profits. The analysis by industry shows that competition and demand conditions have affected a number of industries. However, the services sector covering software, construction, telecom and drilling did extremely well and so did computers, petrochemicals, non-electricals machinery, cotton-woven fabrics, nitrogenous fertilisers, electrical machinery, petroleum & petroleum products, consumer electronics, drugs & pharmaceuticals, pesticides, manmade fibres, other food products, paints & varnishes and diversified companies. The small companies performed poorlyregistering a fall in growth in net profits (-19.5 per cent) due to lower growth in sales and high growth in expenses.

The large companies' net growth (12.6 per cent) has been lower than the average. Adjusting for extreme cases of profit change (both positive and negative) in all size groups, the overall performance improved in all cases except medium companies. It has also been noticed that the profit performance is independent of size and more dependent on the nature of the industry. In the study, companies with sales of over Rs 125 crore have been classified as large, companies with sales between Rs 25 crore and Rs 125 crore as medium and companies with less than Rs 25 crore as small. The performance of private corporate sector, comprising a sub-sample of 96 companies, was almost similar to the aggregate sample in terms of growth in net sales. But on account of a higher growth in interest depreciation, relative to the total sample, the private corporate sector witnessed a lower growth in net profits. Theindustries whose net profits have been high despite a low growth in sales are tea, aluminium & aluminium products and other textiles. The industries which have witnessed a low to negative growth in net profits despite high growth in sales were banking & finance, soaps & detergents, power generation, dyestuffs, vegetables oils & vanaspati and sugar.

The industries which have witnessed a low to negative growth in net profits and net sales and were affected by slack demand as well as competition are cement & cement products, plastic products, hotels & restaurants, glass & ceramics, shipping, tyre & tubes, other chemicals, cotton & blended yarn, cosmetics & toiletries, auto-ancillaries, commercial vehicles, paper & paper products and iron & steel.