The country’s public sector undertakings posted a muted revenue growth of 5.20% in FY17. However, helped by lower input costs, higher other income, and cost control, a clutch of 36 PSUs (excluding banks and financials) posted a net profit growth of 30.62% during the year. The other income posted by these firms was higher by 15.37% in FY17 compared to a year before, while better cost control was seen with total expenditure rising by just 2.73%. The situation has not changed for the PSUs over the years. In FY16 also, their performance was aided by a steep fall in raw material costs and rigorous reining in of employee costs, with revenue growth remaining under pressure. In fact, in FY15, there was contraction in gross sales.
For BHEL, revenues in Q4FY17 declined by 3% after three consecutive quarters of growth. The entire turnaround thesis on BHEL rests on operating leverage due to topline growth. Margins improved significantly due to lower raw material costs (55% of sales) by the management does not believe it to be sustainable.
Similarly, Coal India’s Ebitda during January-March period was 35% below estimates. Realisations failed to witness any meaningful recovery whereas costs continued to mount. E-auction prices remain stagnant reflecting oversupply.