While rising raw material prices boosted sales, it also squeezed margins with rising input costs. Raw material costs soared 40.1% year-on-year, electricity and fuel costs rose another 47%, and purchasing goods became 30% more expensive. At the same time, payroll growth was relatively modest at only 13.3%. Total operating costs for non-financial corporations rose 30.4% year-on-year in the fourth quarter of FY22.

Consequently, the operating profit margin is down from the highest levels, but remains high by historical standards. The margin fell to 16.5% in the March 2022 quarter from 19.7% in the March 2021 quarter. However, this remains above the long-term average of 15% that prevailed before the Covid-19 outbreak .

Net profit margins also topped the historic level of around 6% to around 7% in the Covid era. “If we exclude the June 2020 quarter, the average net profit margin multiplied by Covid was even high at around 8.5%. The quarter ended March 2022 saw net profit margins close at 8.1%. This is well below the 9.5% net margin achieved in March 2021,” says CMIE.

The CMIE report is based on estimates of financial statements published by 3,288 listed companies for the March 2022 quarter to May 30, 2022. The total sample size was approximately 4,700 companies, with the 3,288 listed companies representing 90 % of total sales as per previous quarter data.