While the stock markets are rising once again in November, corporate growth has only declined over the past eight quarters.
The top line growth rate of the manufacturing sector fell to an eight-quarter low at 14.40 per cent during the quarter ended September 2005 over quarter ended September 2004. Only in the quarter ended June 2003 was the sales growth rate below the current level at 12.01 per cent.
A Business Standard Research Bureau study, based on 1,227 companies in the manufacturing sector, excluding oil, gas and oil marketing companies, suggests that the deceleration in growth began in the quarter ended June 2005.
That quarter, the manufacturing sector reported a top line growth rate of 17.32 per cent over June 2004 quarter. This was, however, after posting a top line growth rate of over 20 per cent in six consecutive quarters between December 2003 and March 2005.
The decline in the growth rate is across sectors and companies. Of the 93 sectors, 30 posted a sales growth over 20 per cent in September 2005 quarter against 43 in September 2004 quarter. On the other hand, the number of sectors where sales growth increased, but below 20 per cent, has risen from 43 in September 2004 to 59 in September 2005.
The decline in sales growth would have been more alarming if there were many sectors posting a decline in sales. Thankfully, there are only four sectors, which have declined in sales during September 2005 quarter from seven in September 2004 quarter.
Sectors that have suffered severe setback in the top line growth are textile man-made fibres, hot and cold rolled steel, dyes and intermediates, textile silk, paper, steel strips, integrated steel, tea, carbon black, aluminium, petrochemicals, cement and auto ancillaries.
The top line of 16 man-made fibres manufacturing companies studied declined by 0.61 per cent in the quarter ended September 2005 from a growth of 12.50 per cent in June 2005 quarter and 23.64 per cent in March 2005 quarter.
Cold-rolled steel firms have showed a top line growth of a mere 0.54 per cent compared with over 30 per cent in all four preceding quarters in a row.
The top line growth rate fell substantially in the tractors segment from 25 per cent in quarter ended March 2005 to 12.46 per cent during the quarter under review. In pumps and compressor, sales declined from over a 25 per cent each in March 2005 and June 2005 quarter to 12.51 per cent in September 2005.
The top line growth rate fell to 14.31 per cent for engineering companies from 21.36 per cent in June 2005 quarter and 24.85 per cent in March 2005 quarter.
While commodity sectors went out of steam, capital goods, consumer goods, fast moving consumer goods, automobiles, sugar and many other sectors showed an encouraging trend by posting top line growth of over 20 per cent each. Personal care companies showed double digit growth after three consecutive quarters of a single digit growth.