Price rise digs a hole in India Incs pocket

Written by Pradip Kumar Dey | Mumbai, Mar 8 | Updated: Mar 9 2008, 06:04am hrs
Inflation appears to be a concern, not only for individuals, but also for India Inc. A study carried out by FE on a sample 921 major companies (sales above Rs 100 crore) reveals that their spends on raw materials increased 11.8% to touch Rs 6,30,756 crore in April-December 2007, from Rs 5,64,327 crore during the same period in 2006.

During the period, the total expenditure of the sample companies increased 13.1% to Rs 10,93,176 crore, from Rs 9,66,722 crore in the first nine months of FY07. The sales figure of the sample firms also increased 13.6% to Rs 12,72,967 crore during the nine months of FY08.

The average cost of raw materials now accounts for over 57% of the total expenditure of a company and therefore even a small increase could influence profits. However, the share raw materials decreased by 0.68 percentage points from 58.38% to 57.70% during the above period. Of the sample companies, 468 firms have witnessed a fall in raw material to total expenditure ratio, while 453 have shown a higher ratio in April-December 2007 compared to same period in 2006.

Significant increases in the ratio was observed in the case of GHCL, which saw the share of raw materials cost rise from 36.32% in the nine months of FY07 to 56.11% in FY08.

Panyam Cement (9.57% to 27.76 %) and KRBL ( 80.07% to 97.77%) were the other companies that saw a rising raw material cost. An opposite trend can be seen in the case of Bajaj Hindustan, which saw raw material costs be around 21.62% of total expenses from 57.13%.