New Delhi: The latest data has shown that the Indian corporate world’s stock-to-sales ratio is yet to fall to the relatively healthy levels that had existed before the pandemic.
“At 65.4%, inventory to sales ratio among companies in quarter four of the 2023-2024 financial year was even higher than the year-ago level of 64%; the year-on-year rise in the ratio was even steeper for the previous two quarters of the last fiscal,” reported the Financial Express.
The news report underlined that the high levels of the ratio “signals the persisting weakness of the consumption demand.” It referred to a recent survey of the Reserve Bank of India to hold up that while the sales-to-stock ratio peaked at 113.8% in Q1 of the FY2021 which was the height of the Covid-19 pandemic, it remained largely “range-bound between 49% to 55% from FY08 to FY19”.
“The ratio remained above 60% for nine quarters in a row till Q4 last fiscal, indicating that many companies in critical sectors may have to go slow on production and new investment projects, to ease inventories with dealers”, the report highlighted.
This August, the RBI, in its monthly bulletin, published an article which said that high capacity utilisation, healthy corporate balance sheets and sustained credit demand were reflective of a “conducive environment for private corporates to undertake investments going forward”.
The RBI’s data showed that the total number of companies surveyed during the survey went up from 145 in March 2020 to 803 in March 2024. But the news report has underlined that “during the early years of the survey, the number of companies surveyed were even higher – it stood at 1,386 during the quarter ended September 2008, for instance”.
Quoting a number of experts, the report said that the high inventory-to-sales ratio, “coupled with particularly subdued new order bookings in recent quarters, discounts the optimism that a 44-quarter aggregate high capacity utilisation level of 76.8 per cent posted by companies in Q4FT24 would soon herald a robust investment cycle.”
