High inflation, low consumption dent PCDI margin

High inflation, low consumption dent PCDI margin

New Delhi: With consumption dwindling due to spiraling prices of commodities and high interest rates, the revenue growth graph of personal consumption driven companies, or PCDIs, have taken a hit in the last two fiscal years, says a Keynote Research Report.

Among the PCDIs that have suffered the most, the FMCG firms, food products sector, automobile industry, consumer durables, newspaper publishing, multiplex operators, retail and jewellery manufacturers top the list.

Also See Net Sales Growth (Graphic)

According to the report, the sales growth of PCDIs has dropped from 23.5% in FY07 to 9.1% in FY08. However, on a positive note, up to Q2 FY09, the sales growth regained some momentum rising to 14.9%.

The report is based on an analysis of the financial performance of 54 companies from FY06 to FY08 and up to Q2 FY09.

The Earnings Before Interest, Taxes , Depreciation and Amortization, or Ebitda, growth of these companies too has tapered off from 17.3% to 4.1% in the last two fiscal years, but up to Q2 FY09 it reported a growth rate of 6.8%, the report said. The PAT, or Profit After Tax, growth also slowed down from 19.2% to 8.6% and further to 4.7% up to Q2 FY09, the study said.

High inflation has affected consumer lifestyle and forced consumers to reduce their spending; and buy cheaper products.

FMCG and food products companies have remained steady performers over the same period whereas the automobile sector has been hit badly in the FY08 and up to Q2 FY09, the sector recorded a growth of 7.6% in terms of sales, the report said.

Even the sales growth of consumer durables, newspapers, jewellery and retail companies have either slowed down or turned negative. Signaling an ounce of optimism, the food products, automobiles, jewelry and retail sectors have reported a margin expansion in the first two quarters of FY09 as compared to their growth in FY08.

As the consumer and food products companies fulfill daily necessities, their profitability is least affected in comparison to other sectors.

According to the study, only these two sectors have outperformed the Bombay Stock Exchange index in the last two years in comparison to other sectors and up to Q2 FY09, the multiplex operators, retail companies have been able to accelerate their growth.