Input inflation and a sharp rise in employee expenses notwithstanding, India Inc turned in a strong performance in FY22. While the low base of FY21 did help prop up the numbers, companies clearly responded to the demand from clients and customers.
Employee costs jumped 12.7%, the biggest increase in eight years. Much of this was driven by hiring in the IT, BFSI and healthcare spaces. At the same time, the interest bill fell by about 3.6% on the back of a reduction of 7.6% in FY21. This was not surprising because corporate India has been de-leveraging over the past several years and interest rates too have been at multi-year lows. With production not having been ramped up to full capacity until later in the year, working capital requirements, too, were lower. Some companies also accessed the overseas markets where interest rates were softer.
Revenues, for a universe of 3,367 companies, went up by 29% to Rs 107.05 trillion but this came on the back of a contraction of 2.4% in FY21. Net sales were boosted by the toplines of metals and oil companies, though a fair share of companies in other sectors, reported double digit sales growth. Operating profit margins for the universe came off only slightly by 40 basis points to 19.5%, indicating that companies had pricing power and were able to pass on much of the additional costs to their customers.
Consequently, operating profits hit Rs 20.85 trillion, a jump of 26%. In FY21 too, operating profits had gone up because companies had started passing on some of the increases in input costs. Moreover, they resorted to cost-cutting, paring the wage bill through a combination of layoffs and pay-cuts.
The GVA or gross value added (sum of wages and Ebitda) for the universe went up 21.3% in FY22, the biggest increase in about a decade. The increase came on the back of a near 20% increase in FY21. A good part of this could be attributed to inflation. To be sure, the performance was not uniform across companies and the larger ones, that dominate the sample, have done much better. Most firms with a turnover of Rs 250 crore and less fared badly.