In FY13, every rupee of investment yielded only Rs 1.06 worth of revenue for India Inc, down from Rs 1.20 in March 2008 at the height of the economic boom. The bad news doesn’t end only at the steady decline in revenue yield for companies, led by mainly those in construction and infra, realty, metals and mining, telecom and the power sector. The infrastructure and real estate boom proved too costly for Indian companies.
The ability of companies to generate profits has also declined, with return on capital employed declining to 11.2 per cent in 2012-13 from around 18.5 per cent in 2007-08. The same is the story on other financial parameters. Operating margin declined by 430 basis points, while return on net worth nearly halved to 12 per cent in FY13, from 22.7 per cent in FY08.
The analysis is based on 621 companies that are part of either the BSE 500 index or BSE Midcap or BSE Smallcap. They cover 90 per cent of all non-banking, non-financial companies by market capitalisation. The assets include net worth and borrowings comprising deferred tax liabilities and other non-debt liabilities.
In the past five years, the combined revenues for the sample of companies nearly doubled to Rs 47.9 lakh crore at the end of FY13 from Rs 22.5 lakh crore in FY08, growing at a compounded annual rate (CAGR) of 16.3 per cent. Their assets during the period grew at a CAGR of 18.6 per cent and expanded by 2.3x to Rs 46.4 lakh crore at the end of FY13. The surge was largely funded through borrowings, with net debt (excluding cash & equivalent) growing at a CAGR of 35 per cent during the period and nearly quadrupling during the period.
with thanks : Business Standard : LINK : for detailed news.
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