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Domestic Trends

The government has also State government for 2024-25 growth multiplier, better underperformance. The construction materials sectors
been pushing investments at is expected to further push FURTHER SUPPORTING rate of return on capital Corporate improvement in external experienced a decline in net
the State level. As per CII’s the state level capex. Centre, THE INVESTMENT employed and greater demand may have been sales compared to the same
analysis of select 17 states , to help states in their MOMENTUM potential for asset reflected in the net sales in quarter in the previous year.
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the aggregate capital resource allocation had monetisation. the first quarter. The
expenditure of the states announced Rs 1.3 lakh crore • Prioritize capital consumer durables sector Additionally, sectors including
expanded by a healthy 23.8 to States in 2023-24 as well expenditure towards Performance saw robust growth, driven by auto & components, FMCG,
per cent to Rs 6.54 lakh crore (which amounts to 19.9 per projects which improve an unusually early onset of Healthcare and IT reported
in 2023-24 from Rs 5.28 lakh cent of the total capex by Going forward, the efficiency in the economy summer and extreme higher PAT margin during the
crore in 2022-23. The top five states in 2023-24). The states government's continued push and reduce cost of doing On the sectoral front, several heatwaves, which spurred first quarter of the current year,
capital spending states in have been aiming to utilise for capital expenditure, at business. industries such as agri, auto & higher demand for cooling indicating improved profitability
2023-24 were Uttar Pradesh, these funds for incurring both central and state levels, components, capital goods, products from households. in these areas. Encouragingly, in
Maharashtra, Madhya Pradesh, expenditure in diverse as well as policy measures • Create a full-fledged consumer durables and The automotive sector also the FMCG companies, the raw
Gujarat and Karnataka. sectors, including health, including ease of doing Ministry of Investment T he Indian corporates have On the expenditure front, textiles achieved double-digits delivered a strong material prices have largely
education, irrigation, water business reforms, which could become the sustained a robust companies managed to curtail net sales growth. Notably, the performance, bolstered by stabilized and tailwinds from
The allocation of Rs 1.5 lakh supply, power, roads, bridges introduction of PLI scheme, single point of contact for performance in the first their costs significantly, with textile sector exhibited signs substantial sales of passenger lower input prices are also
among others, have created a
crore under the 50-year and railways. conducive environment for facilitating the quarter of the current fiscal, expenditure growth slowing of recovery in Q1FY25, after vehicles. In contrast, the pointing towards a more
interest free loans to the opportunities for as early indicators suggest. to 2.0 per cent in Q1FY25, several quarters of logistics, metals & mining, and volume led growth.
industry to undertake investment in India as well down from 3.8 per cent in
investments and will help as opportunities for Indian the previous quarter and 14.3
Capital Expenditure by States has been on a Rise crowd-in private investment investors to invest abroad. TOPLINE MODERATES, per cent in Q1FY24. This
(Rs lakh crore) 6.54 at a higher level, along with WHILE PROFIT
stimulating demand in other • Encourage private sector MARGINS REACH A notable reduction in spending
5.28 participation in was primarily due to a
4.52 sectors through its multiplier infrastructure by reviving THREE-QUARTER HIGH moderation in employee cost,
3.48 3.46 impact on growth. which grew by just 5.2 per
To further boost investments, PPPs in infrastructure. The cent and a 0.2 per cent
CII has made the following newly set up Infrastructure As per CII’s analysis of ~670 contraction in the cost of
suggestions: Finance Secretariat (IFS) in Aided by both lower interest is making enough profits to
the Ministry of Finance non-financial companies from services & raw materials
• Improve project selection (MoF), should be used to Ace Equity, excluding during the first quarter. expenses and stable profit meet its interest liabilities.
FY20 FY21 FY22 FY23 FY24 criteria by prioritising address the bottlenecks for petroleum products, early Meanwhile, profit margins rates, companies have
capex projects with higher trends suggest a moderation surged to 10.2 per cent in demonstrated a notable In Q1FY25, the ICR at 7.7
Source: Comptroller and Auditor General of India (CAG) reviving PPPs in
infrastructure. in net sales to 4.2 per cent in Q1FY25, higher than the 9.8 enhancement in their interest was higher than 7.3 in the
Q1FY25 as against substitute per cent margin in Q4FY24 as coverage ratio (ICR). The ICR, previous quarter and 7.4 in
the by a growth of 5.9 per well as 9.7 per cent in the calculated as a ratio of profit the corresponding quarter
cent in the previous quarter. comparable quarter last year. before interest and tax (PBIT) last year. This improvement is
This growth was also much Lower growth in expenditure and the interest cost, particularly encouraging given
lower as compared to the and interest costs have indicates the debt servicing the context of prevailing
11.9 per cent net sales contributed positively to capability of a company as it higher interest rates in the
growth recorded in Q1FY24. profit margins. shows whether the company country.

Quarterly Performance of Non-Financial Interest Coverage Ratio (ICR)
(excluding petroleum products) Companies
14.0 11.0 9.5
12.0 10.5 9.0
10.0 10.2 8.5
10.0
8.0 8.0
9.5 7.5 7.7
6.0
4.2 9.0 7.0
4.0
2.0 8.5 6.5
6.0
0.0 8.0 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25
Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25
Net Sales (y-o-y%) PAT Margin (%) (rhs) Note: Based on analysis of ~670 non-financial companies (excluding petroleum products)
Source: Ace Equity
Note: Based on analysis of ~670 non-financial companies (excluding petroleum products)
Source: Ace Equity
The 17 select states comprised of approx. 87 per cent of India’s GDP in 2021-22. Data for all states was not available for 2022-23 and 2023-24
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20 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 21
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
AUGUST 2024 AUGUST 2024