Corporations were cautious about their capacity expansion and capital investment plans due to uncertainties in demand conditions in the aftermath of the pandemic, elevated input costs, increased accumulation of inventories and receivables, as well as global developments including supply bottlenecks, and this resulted in lower fixed capital formation during 2021-22, according to data released by the Reserve Bank of India (RBI) on the financial performance of non-government, non-financial (NGNF) public limited companies during 2021-22. The RBI data was based on the audited annual accounts of 6,973 companies.
During this period, at the aggregate level, public limited NGNF companies preferred short-term borrowings over long-term financing for their funding requirements which improved their leverage; the debt-to-equity ratio moderated to 36.7% during 2021-22 from 41.3% in the previous year.
Robust sales growth during the year supported higher operating profits for major sectors but the ratios of operating profit and gross profit to sales moderated marginally largely due to higher growth in manufacturing expenses (51.7%) vis-à-vis sales growth.
GNF public limited companies recorded a turnaround during 2021-22 as economic activities recovered with the waning of the COVID-19 pandemic; it expanded by 36.4% in contrast to a contraction of 2.1% in the preceding year.
All major sectors namely manufacturing, mining, electricity, construction and services, recoded high sales growth during 2021-22.
On the back of a buoyant revival, operating expenses increased across major sectors and across PUC size classes during 2021-22, the RBI said.
Operating profits of NGNF public limited companies increased by 29.0% in 2021-22 over and above a rise of 15.6% in the previous year.
Interest coverage ratio, which is the ratio of earnings before interest and taxes (EBIT) to interest expenses and is a measure of debt servicing capacity of a company, increased to 4.1% during 2021- 22 (from 3.0% in the previous year) on the back of lower interest expenses and higher gross profits, the RBI said.
