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Gross margins will compress more as inflation delays normal, says Sanjeev Prasad of Kotak Equities

Gross margins, difference between net sales and cost of goods sold, have been squeezed by an unprecedented increase in input costs across the board led by global crude oil.

New Delhi / March 28, 2022 / 12:51 PM IST

Gross margins for Indian companies will likely compress more in the first half of the coming financial year, Sanjeev Prasad, co-head of institutional equities at Kotak Institutional Equities, told CNBC-TV18 on March 28.

“I think the hope that was there that we will see some normalisation of margins and volumes in FY23, now that seems unlikely,” Prasad said.

Gross margins, the difference between net sales and cost of goods sold, have been squeezed by an unprecedented increase in input costs across the board led by global crude oil.

Global crude oil prices have rallied more than 50 percent in the past six months while several base material prices have surged after Russia’s invasion of Ukraine. In March alone, domestic steel companies have raised product prices twice and analysts expect further hikes.