Business Today 3rd June 2018 | Page 3

FROM THE EDITOR http :// www . businesstoday . in

Still Some Worries

T

HOUGH the country ’ s GDP growth remained firmly over 6 per cent – no mean achievement – in the past three years , times were not particularly good for corporate India , barring a handful of sectors . The twin shocks of demonetisation and rollout of GST showed up in anaemic revenue growth . In the past three years , the 8,948 companies – listed and unlisted – that form the universe of the ACE equity corporate database used for this study , showed that revenue grew at a CAGR of 3.9 per cent . Of the three years , 2016 was the worst year , with annual revenues for the group as a whole actually declining by 0.5 per cent . When research head Niti Kiran made a shortlist of companies ( after excluding banks , finance and trading companies ), only 647 companies made the list . Even in these group of 647 companies , not all showed revenue or profit growth every year . The biggest companies – the oil companies – in fact , showed better profit growth , but had revenue declines because of lower crude oil prices .

We had tweaked the methodology marginally this year for our study – starting with the entire universe of companies , listed and unlisted in the database with results available for all the years , and then dividing it into four groups according to size in order to see who were the fastest growing companies in each of the three groups . We did this because we wanted to ensure that the base effect did not skew the list .

A close look at the results of the study reveals interesting details . Except for a few companies , most showed that even where revenues were growing robustly , operational profits were coming down . Costs were going up , but because of tepid demand , it could not be passed on in entirety to customers .

Have we put the last two year ’ s shocks firmly behind ? Economists I spoke to said that while the worst seemed to be over , there were still some worries . On the macro front , the GDP growth was recovering and 7 per cent plus for the next few years was expected , while inflation remained under control . The IIP numbers showed decent recovery , though the latest numbers show a slowing of growth . The PMI in manufacturing and services is also showing a recovery .

But export is still to grow at pre-2008 levels , the trade deficit and current account deficit is going up , and there are worries on other fronts .

Corporate sentiment is also mixed . While the hard bidding for companies like Electrosteel , Essar Steel , and Binani Cement shows an interest in picking up good assets , not enough fresh capacity creation was taking place . Job growth is also expected to remain tepid .

Things might be getting better slowly , but we are by no means out of the woods completely . prosenjit . datta @ intoday . com @ ProsaicView

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Vol . 27 , No . 11 , for the fortnight May 21-June 3 , 2018 . Released on May 21 , 2018 .

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