Raw material costs and interest expenses in the October-December (2011-12) quarter continued to appreciate

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over the preceding quarter, hurting the overall margins as several companies dealt with a depreciating rupee and inflation, leading to cost escalation.

Of the over 1,000-odd companies that have declared their results so far, some 285 companies saw their aggregate raw material costs surge to Rs 1,97,330.26 crore in the October-December quarter, up nearly 10 per cent compared with Rs 1,80,263.16 crore recorded in the previous quarter, according to data compiled by Capitaline.

Companies in the automobile, cement, fast moving consumer goods, steel and fertiliser industries bore the brunt of higher input costs during the quarter.

Anish Damania, head equity research at Emkay Global Financial Services, said, “We have seen overall EBITDA margins of companies decline in this quarter because of higher raw material expenses. Input costs, including coal and steel products used in automobiles and cement continued to remain high, partly due to inflation and depreciation of rupee against dollar and other currencies.”

In the automobile space, raw material cost for Maruti Suzuki India rose 6 per cent over the previous quarter to Rs 5,995 crore while that of Hero Motocorp increased 4.4 per cent to Rs 4,453 crore and Exide Industries saw rise of 25 per cent to Rs 886 crore.

Dipen Shah, head of fundamental research at Kotak Securities, said, “Companies like Maruti Suzuki mostly import auto components from Japan. With sharp volatility in rupee against the yen, Maruti’s input costs rose sharply during the quarter.” Several pharmaceutical companies also posted higher raw material costs. While Wyeth’s raw material expenses jumped 79 per cent to Rs 32 crore, Jubilant Life’s input cost rose 12 per cent to Rs 411 crore and Novartis’ total input cost rose 30 per cent to Rs 7 crore, respectively.

In the FMCG space, Hindustan Unilever, ITC and Zydus Wellness amongst others posted higher raw material expenses.

Higher cost of imported coal coupled with lower availability of this raw material in the domestic market resulted in higher input costs for steel and cement companies such as Jindal steel, Hindustan Zince and Shree Cement.

Besides, the higher raw material costs, companies also felt the heat of rising interest costs as higher domestic interest rates coupled with fluctuating currency weighed on them.

Total interest costs during the quarter was at Rs 1,07,128 crore, up 6 per cent over the July-September quarter which stood at Rs 1,00,801 crore.

“During the quarter, domestic interest rates continued to remain high and companies opting for higher rates have seen their interest costs rise.

Also, with rupee depreciating sharply against the dollar, companies with overseas loan also had seen higher interest outgo.

Going ahead, if the companies’ ratings are downgraded, there borrowing cost would increase and will have to source funds from other routes at higher rates. This will push up their interest costs,” said Damania of Emkay Global Finacials.

During the quarter, Bajaj Electricals interest outgo increased 18 per cent to Rs 15 crore, while that of Birla Corporations’ rose 37 per cent to Rs 16 crore. Kesoram Industries interest cost rose 11 per cent to Rs 102 crore, while Tube Investments interest outgo increased 12 per cent to Rs 292 crore.