India Inc saw a 39 per cent jump in top lines during April-June quarter but their operating margins declined 213 basis points to 17.7 per cent due to input cost inflation, a report said on Monday.
While companies passed on higher input costs in the form of commodity and energy cost, leading to revenue growth, the same led to margin compression, rating agency Icra said in a note based on the analysis of 620 listed companies, excluding financial sector entities.
Margin compression was attributed to the supply chain disruptions triggered by the war in Ukraine. The report expects margins to recover from the second half. The sample 620 companies reported an aggregate revenue growth of 39.1 per cent on-year in the June quarter, which was optically aided by the low base of the previous year impacted by the second wave of the pandemic. Another major reason for the massive growth is price hikes across several sectors, the agency said. But sequentially, the top line grew by 1.5 per cent and the trends varied across sectors.
According to Kinjal Shah,VP and co-group head at the agency, demand revival after the second wave of the pandemic led to the sharp rally in prices of most commodities especially metals to multi-year highs in FY22, exerting pressure on margins. The price pressure headwinds continued in the first quarter and impacted the margins. Consequently, operating profit margin declined by 213 basis points.