High input, interest costs hitting profitability of cos: RBI

Mumbai, Jan 16 (PTI) Rising input costs and higherinterest rates impacted the profitability of India Inc duringthe first half of the current fiscal, according to a ReserveBank analysis.

"... Despite robust revenue growth, companies inaggregate could not generate higher profit margins (duringApril-September, 2010-11), primarily on account of higherinput prices and a rise in interest outflow," the RBI saidwhile analysing the performance of the private corporatesector.

The report, which was based on a review of the financialresults of 2,576 listed companies, said that sales growth --which remained flat in April-September, 2009 -- was robust inthe first half of the current fiscal, mainly on the back of apick-up in demand.

Sales growth, it added, was more prominent for companiesin the manufacturing sector compared to those in the servicessector.

"However, profit growth in both the sectors was hitduring the first half of 2010-11", the analysis said.

It further said the performance of companies engaged inmanufacturing activities dominated the overall performance.

Their sales and net profits grew by 24.8 per cent and 12.2 percent, respectively, during the six-month period vis-a-vis thecorresponding period of the previous year.

Companies engaged in IT services performed well,registering 15.9 per cent growth in sales duringApril-September, 2011, compared to the same period lastfiscal, but their net profits grew by only 5.9 per cent due tohigher interest and tax payments.