36 percent increase in interest expenses of companies

Ahmedabad: Rising interest expenses have become the biggest challenge for companies' earnings. Profits of Indian industry are falling due to sharp increase in interest expenses in the June quarter despite lower raw material and fuel prices. Excluding banks, finance and insurance and IT companies, the total interest expense of 271 listed companies in the April-June 2023 quarter has increased by 36.2 percent over the April-June quarter of last year. This is the highest increase in interest expense in the last three years.

In contrast, raw material and fuel costs for companies have come down sharply during the quarter. In these three months, the price of raw materials and fuel has increased by only 2.3 percent, while in the first quarter of FY2023 it increased by 56.1 percent. In comparison, the total net sales of these companies increased by only 5.9 percent in the first quarter, compared to 38.6 percent in the first quarter of 2023 and 7.8 percent in the fourth quarter.

The 271 companies in the sample survey paid a total of Rs. 21,183 crore has been spent, which was Rs. 15,552 crore and the previous quarter of 2022-23, January-March at Rs. 20,489 crores.

The operating profit of the companies increased by 4.3 percent in the first quarter of the current financial year to Rs. 1.27 lakh crore which in the year-ago quarter was Rs. 1.22 lakh crore. However, their net profit before tax fell by 6.4 per cent during the period to Rs. 71,555 crore, while the net profit after tax declined by 2.6 percent to Rs. 48,472 crores.

All 385 companies (including BFSI and IT) that declared results for the first quarter of 2024 reported a 42.5 percent growth in gross interest income and 12.7 percent growth in net sales (gross interest income in case of lenders) over April-June last year.

Banks and financial institutions topped the list with a 43.5 percent increase in their interest expenses but the increased expenses were largely offset by a 32.7 percent increase in their total interest income.