Several Indian companies have been raising concerns about escalating input costs, the result of a volatility in global commodity prices triggered by intensifying geopolitical tensions and other uncertainties. Quarterly results for the January-March period show input cost pressures re-emerged as a pain point for India Inc. at the fiscal year’s close.
Mint’s analysis of 179 BSE-listed companies that have announced fourth-quarter results so far reveal a challenging trend: after a brief respite in the December quarter, raw material expenses as a share of net sales resumed their upward trajectory.
The analysis excludes the banking, financial services, and insurance (BFSI) companies, brokerages, and information technology (IT) services firms, which do not typically record raw material expenses.
Raw material expenses as a share of net sales climbed to 53.5% in the March quarter of 2024-25 from 51.9% in the preceding three months. While still below the 55-56% peaks witnessed during the first half of the fiscal year, this figure significantly exceeds the 51.1% recorded in the corresponding quarter of the preceding fiscal year.
On a year-on-year basis, raw material prices for this sample of companies surged by 5% in the March quarter while overall net sales remained stagnant, indicating that companies struggled to pass the increased input costs to consumers amid slower demand.
The climb was equally evident when measuring raw material expenses in terms of total corporate expenditure. This 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—confirming a persistent upward trend in the input cost burden.
Sectors that bore the brunt
A sector-wise analysis shows that most commodity-intensive industries bore the brunt of these cost pressures.
Oil and gas, automobile and ancillaries, and metals and mining sectors experienced the severest impact, with raw material expenses in terms of net sales jumping by 250-360 basis points between the March quarters of the last two fiscal years, reflecting these sectors’ vulnerability to global commodity price fluctuations.
The construction and real estate sector also faced significant headwinds, with input costs rising by over 100 basis points year-on-year in the fourth quarter.
The impact wasn’t uniform across all industries. Companies in the textiles, pharmaceuticals and healthcare, and capital goods sectors likely benefited during the fourth quarter, with raw material expenses as a share of sales declining as compared with the corresponding year-earlier period.
The fast-moving consumer goods (FMCG) sector, despite a 5% year-on-year surge in raw material prices, found some relief. Fourteen FMCG companies that have reported their fourth-quarter results so far managed to maintain a relatively stable ratio of raw material expenses to net sales, likely by passing on these costs to consumers.
This is the sixth part of a series of data stories on the ongoing Q4 earnings season. Read the first, second, third, fourth and fifth parts.
