Several Indian companies have been raising concerns about the cost of escalating inputs, as a result of volatility in global commodity prices triggered by heightened geopolitical tensions and other uncertainties. Quarterly results from January to March show that input cost pressures reappeared as a pain point for Indian companies at the end of the year.
MINT's analysis of 179 BSE listed companies has announced trends in fourth-quarter results so far: raw material spending as a share of net sales has resumed its upward trajectory after a brief respite in the December quarter.
The analysis does not include banking, financial services and insurance (BFSI) companies, brokerage and information technology (IT) services companies that typically do not record raw material expenses.
In net sales for the March 2024-25 quarter, raw material expenses rose to 53.5% from 51.9% in the first three months. While still below the peak of 55-56% witnessed in the first half of the fiscal year, the figure significantly surpassed the corresponding quarterly record of the previous fiscal year.
On a year-on-year basis, the raw material prices for this company sample soared 5% in the March quarter, while overall net sales remained stagnant, suggesting that the company is working to increase input costs to consumers in a slower demand.
Climbing is also obvious when measuring raw material expenses in terms of measuring company total expenditure. The share rose to 60.1% in the March quarter from 58.2% in the December quarter and 57.4% in the March quarter of the previous year, indicating a continued upward trend in the cost burden of inputs.
The first department to bear the brunt
Industry analysis shows that most commodity-intensive industries are at the forefront of these cost pressures.
The oil and gas, automotive and auxiliary tools, and metals and mining sectors have had the worst impact, with net sales rising by 250-360 basis points between the March quarters of the past two fiscal years, reflecting the ease with which these sectors are prone to global commodity price fluctuations.
The construction and real estate sectors are also facing huge headwinds, with investment costs rising more than 100 year-on-year in the fourth quarter.
In all industries, the impact is not uniform. Companies in the textiles, pharmaceuticals and healthcare and capital goods sectors may benefit in the fourth quarter, while raw material expenses as a share of sales with corresponding year increasing.
Although raw material prices have increased by 5% year-on-year, the fast-growing consumer goods (FMCG) sector has eased some relief. So far, 14 FMCG companies that have reported their fourth-quarter results have managed to maintain a relatively stable ratio of raw material expenses to net sales, which may be by passing those costs to consumers.
This is the sixth part of a series of data stories in the ongoing fourth-quarter earnings season. read The first,,,,, second,,,,, third,,,,, fourth and fifth part.
