India: CMIE: Profits of listed companies’ hit fresh record

  • Financial statements of listed companies for 4Q20 show that total income barely grew in nominal terms. A redeeming feature is that it did not decline, like it did in the preceding five consecutive quarters.
  • Total income of the corporate sector grew by a measly 0.37% y/y in 4Q20. Like in the preceding two quarters, it is the financial sector companies principally banks and broking companies that lead the growth.
  • Total income of financial services companies grew by 4.8% and that of banking services grew by 7.3%.
  • NBFCs, in particular housing finance companies saw their topline shrink. Securities broking, AMCs and other fee-based financial services continued to see good growth.
  • Business of the real economy – the non-financial companies – continues to face a shrinking market. Total income of non-finance companies shrunk by 1.03% in 4Q20.
  • This was the sixth consecutive quarter of a y/y shrinking of the topline of non-finance companies. Only half of these 6 are Covid-infected. Manufacturing companies have borne the greatest brunt of this shrinking market.
  • However, their lot saw the pace of shrinking markets recede. In 4Q20, manufacturing companies recorded the smallest y/y fall in total income. It fell by 0.4% while mining and utilities shrank 16% and 5.7%, respectively, and non-financial services companies saw their total income decline by 1.6%.
  • A shrinking business environment implies low demand for labour. Expenses on salaries and wages grew by 7.9% y/y in Dec 20. Inflation was 6.4%. This implies that employment may have grown by about 1.5%.
  • Much of this growth in employment could have been in the financial services sectors. Salaries and wages of these companies grew by a robust 22.2% with the banking sector recording a growth of 26.6%.
  • But, the non-finance companies saw the wage bill grow by only 3.4%. Given 6.4% inflation, this implies a shrinking of labour or real wages. Salaries and wages shrank in nominal terms y/y for two consecutive quarters in 2Q20 and 3Q20.
  • In 4Q20, there is a decline again, in real terms. Employment in the real economy has therefore shrunk during the lockdown.

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