The companies which are not from the banking or finance sectors saw a sharper fall during the quarter.
As India’s GDP clocked a record contraction in the first quarter of the current fiscal, businesses and companies took a severe hit too. In order to minimize the losses on the bottom line, the corporations had to resort to cost rationalization across different expense heads during the quarter, said a report by Care Ratings. The income of nearly 2,500 companies fell by 25.7 per cent in Q1, according to CMIE data. Another database by Ace Equity also suggested that the aggregate net sales of the sample of 1,666 companies shrank by 25.3 per cent while the net profits contracted by almost 60 per cent on-year.
The companies which are not from the banking or finance sectors saw a sharper fall during the quarter. Net sales of these companies fell by 34.5 per cent while the net profits had a freefall by 82.2 per cent on-year. The companies had been grappling with issues of subdued topline growth even before the coronavirus pandemic kicked in. Further, the pandemic significantly worsened the situation due to lockdowns and business restrictions.
Though the recovery started to become visible after the lockdown ended in June, the rising caseload and local lockdowns hindered the economic revival. As global trade activities were muted during April-June, the production activities of the companies were also hampered by lower raw materials imports. In contrast, there were certain industries categorised as “essentials” like banking & finance and pharmaceuticals, which performed well.
The performance of the banking sector has been a bright spot among the various industries. PSU banks, which have been grappling with the NPA overhang until FY19, recorded a growth of 20.8 per cent in net sales and 32.1 per cent in net profits. Private sector banks too have performed exceedingly well in both the parameters. On the other hand, agriculture-based commodities like sugar and fertilizers, work-from-home services like information technology, software & telecommunication services, etc showed weak performance. SEBI had earlier provided a relief to the companies and extended the deadline for filing the quarterly results for Q1-FY21 till September 15.