With demand returning in markets, both rural and urban, the September quarter saw business sales pick up again. The biggest players continued to take market share from unorganized units. However, input inflation weighed on profits by controlling margins; some companies have increased their prices and reduced non-essential expenses to protect their margins. Management’s comments are reassuring, with most expecting demand to increase further in the coming months. At UltraTech, for example, management is confident of a strong recovery in demand of around 6-8% year-on-year in S2FY22, after the monsoons.
The quarter reflected a recovery in demand across all businesses, albeit on a moderate basis in T2FY21. Jubilant Foodworks revenue grew 39% year-on-year, while TVS Motor revenue grew 22% year-on-year, driven by a 16% increase in average selling price. Asian Paints saw own-source revenue growth in smart decorative products of 36% year-on-year, driven by a 34% increase in volumes while JSW Steel saw consolidated sales increase of 71% year-on-year annual, as steel prices remained high. .
Sales, up 35% year-on-year, for a sample of 202 companies (excluding banks and financials), were driven by good performance and price increases. It should be mentioned, however, that the sample is skewed by Reliance Industries whose sales grew 50% year-on-year. Not all companies have been able to pass on the increased input costs. At Havells, price increases did not match the sharp rise in commodity prices leading to lower gross margins. At Hindustan Unilever, gross margins contracted 140 basis points year-on-year while ebitda margins fell 45 basis points year-on-year. The raw materials-to-sales ratio rose 355 basis points in the three months ending September.