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"Efficient firms edge out less efficient in first half"
Our Banking Bureau
MUMBAI, January 13: An extensive survey of the 1997-98 first-half results of 1619 companies by Industrial Credit and Investment Corporation of India (ICICI) has confirmed the trend of higher growth in net profits compared to lower growth in sales. The results reflected intense competition and the resultant edging out of the less efficient companies by the more efficient.An earlier quick survey conducted by ICICI covering the first half results of 393 companies had revealed more or less a similar trend, said a study by ICICI. "This reflects a large decline in the growth of costs including interest costs and an absolute fall in corporate tax provisions," said an ICICI statement on the study. Soaps and detergents led the list of industries where net profits grew at a higher rate in the first half of 1997-98 compared to the same period in 1996-97. Other industry segments that are leading in the trend are cotton and blended yarn, drilling services, non-electrical machinery, food and beverages, financial
services, software, electrical machinery, pesticides, glass & glass products, wires and cables, sugar and the diversified group of companies. In these industries corporate sector has made considerable adjustments in lowering costs, says the analysis. Major companies in this group are also examples of successful corporate restructuring. Certain industries like soaps and detergents, paints & varnishes, power generation and distribution, nitrogenous fertilisers and consumer electronics have shown higher growth in both sales and profits and continue to enjoy strong growth in demand.Some other industries like cosmetics & toiletries, petrochemicals and computer hardware suffered deterioration in net profits growth while showing higher growth in sales. This reflects, according to the analysis, intensification of competitive pressures, both domestic and foreign, in the midst of high demand, affecting profit. For all the other industries, growth in both sales and profits deteriorated, as a result of the combined
effect of high competition and slowing down of demand. The industries in this category include man-made fibres, paper & paper products, iron & steel, cement, commercial vehicles, dyestuffs, hotels & restaurants, auto-ancillaries, two & three wheelers and tyres and tubes. These industries had built-up excess capacities and in the event of a general slowdown in the economy were affected by a demand slump. They also faced increased competition from cheaper imports, especially those originating in the East Asian countries, stated the analysis.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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