Mumbai: Introduction of the GST has hurt revenue growth and led to a major contraction in profit margins for India Inc, which was just coming out of the demonetisation reverses, a report said on Tuesday.
The growth in aggregate revenues of 448 companies slowed down to 5.3 per cent over the preceding January-March period as against the 8.3 per cent growth witnessed for the quarter-ago period and 10.6 per cent in the year-ago period, said the report by domestic ratings agency Icra. It was a much pronounced impact on the bottomlines, with the margins contracting by as much as 1.80 per cent to 15.7 per cent on a year-on-year basis, one of the slowest in many years, the report said.
"Lower primary sales ahead of the GST roll-out and discounts offered by companies to clear pre-GST inventory, played a key role in depleting earnings, especially in sectors like automobiles, consumer durables and Fast Moving Consumer Goods," it said. The impact in performance has happened when corporate India "had started showings signs of recovery from the demonetisation move," Icra said.
This was largely because consumption-oriented sectors witnessed a de-stocking ahead of the implementation of the GST from July 1, it said. Apart from the GST, recovery in raw material prices, especially metals and rubber also led to contraction in earnings across few sectors, while sector-specific dynamics like increasing competitive pressure in telecom and regulatory hurdles in pharmaceuticals played a spoil sport, it said.