India Inc's Staff Costs Rise - Chart Of The Day 13 June 2016 - Equitymaster

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India Inc's Staff Costs Rise
Jun 13, 2016

I have recently come across a statistic that suggests Indian employees should be happier than a decade ago.

As per an article in Economic Times, in the last decade, the overall salary bill at BSE 500. companies has grown at a compounded annual growth rate (CAGR) of 18%. This compares to 14% CAGR in revenue and operating profit each.

The growth has been uneven. IT, Pharma, auto and oil and gas come across as the most generous where growth in staff costs exceeds revenues and operating profits. However, rise in staff costs lags revenue growth for sectors like FMCG, capital goods and banks.

On the surface, this seems to suggest that Indians may be happy employees, and that India Inc might be a disgruntled lot.

One must note that barring finance, banks and construction sector, operating profit per rupee spent on employee has come down in the last 10 years.

What this implies is that as companies look to make the most of the earnings recovery, trimming staff costs or bringing in more efficiency and productivity could be the key strategies for India Inc.

This could also imply more penetration of automation and robotics... and hence could lead to decline in middle class jobs. As my colleague Tanushree Banerjee wrote in a recent edition of The 5 Minute WrapUp, this is a serious issue as in the absence of job security and eventually jobs, not just savings and investments but consumption patterns and household debt levels could go for a toss.

While we can do little to influence broader trends, we will do our best to see the positive side for investors and make the most of it. Our recent Hidden Treasure recommendation is about one such company that has made the most of improving technology and robotics. Since, the recommendation, the stock is up 21% and we believe there is more upside left.

Data Source: ETIG Database

This Chart Of The Day was published in The 5 Minute WrapUp - Because Your Stocks, Savings, and Survival are at Stake

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