India Inc Revenue Growth Likely Slowed To 6-8% In First Quarter

India Inc revenue growth likely moderated for the fourth straight time to six to eight per cent in the first quarter of this fiscal because of low realisations and high-base effect, the rating agency Crisil has said.

On a sequential basis, revenue growth may print 200 basis points (bps) lower, marking the first such decline in eight quarters.

However, operating profit margin is seen edging up to 20 per cent from 19.6 per cent in the first quarter of last fiscal, and 19.3 per cent in the fourth quarter, helped by easing commodity prices, especially crude oil.

Of the 47 sectors tracked by Crisil MI&A research, 14 likely saw a fall in revenue, while 15 may have logged slower sequential growth, an analysis of over 300 companies (excluding those in the financial services and oil and gas sectors) indicates.

Lower realisations and slowing global demand for metals and industrial commodities affected makers of aluminium, steel, ferroalloys and petrochemicals.

Revenue of aluminium manufacturers likely fell 14 to 16 per cent owing to an 18 to 20 per cent decline in international prices and a sedate growth in volumes. Steel products may have logged a six to eight per cent contraction in revenue, impacted by the high base of the previous fiscal and a drop in realisations, which offset volume growth.

The power sector is likely to see a relatively slower five per cent revenue growth.

Aniket Dani, Director, Crisil MI&A Research said, “Of the total on-year incremental revenue during the first quarter, nearly 60 per cent would have been contributed by just three segments - investment-linked, export-linked, and consumer discretionary products and services. Within these, a majority of this rise is likely driven by the automobile and cement sectors."

Dani added that export-linked sectors are seen bucking the decline largely on the back of healthy growth in IT services and pharmaceuticals.

The automobile sector is likely grew 13 to 15 per cent, driven by three sub-segments - commercial vehicles, passenger vehicles and two-wheelers. Realisations are expected to be high as multiple price hikes of the previous quarters came into play and volume grew, Crisil said.

Among others, the consumer discretionary products segment likely grew 13 to 15 per cent on-year, driven by 10 to 12 per cent growth in media and entertainment, and 15 to 17 per cent and 11 to 13 per cent improvement in retail and hospitality, respectively.

It also stated that pharmaceuticals seem on course for 12 to 14 per cent on-year growth owing to strong domestic price growth, continued momentum in exports to regulated markets, and abating pricing pressure in the US. IT services is seen as clocking 16 per cent growth on-year following cost optimisation, healthy digital solutions, cloud and automation capabilities, as well as a wide range of offerings.

But with major export markets showing signs of slowing, the revenue of export-oriented discretionary products such as cotton and synthetic textiles and gems and jewellery likely was lacklustre.

Meanwhile, corporates are likely to continue seeing their profitability improve this fiscal as commodity prices decline and volumes drive revenue growth.