India Inc’s revenue growth may slip to 2.5% in Q4: Crisil

Revenue growth of Indian companies will slip to a seven-quarter low of 2.5 per cent in the three months ended March, Crisil Research projected on Thursday. Weak performance of investment-linked sectors and low global commodity prices will more than offset the moderate growth anticipated in the export-oriented sectors and consumer-driven sectors.

In the preceding quarter, revenue growth was a tepid 5.4 per cent. On the profitability front, though, there could be a marginal uptick in earnings before interest taxes depreciation and amortisation (Ebitda) margins due to lower input costs, the report said.

Prasad Koparkar, senior director of Crisil Research, said, “The year started on a promising note, with revenue growing 12.8 per cent in Q1. However, growth has decelerated in subsequent quarters with January-March likely to show the lowest growth. Steel, petrochemicals and manmade fibres manufacturers will be impacted by the rapid slide in global commodity prices.”

Sluggish growth in volumes (2 per cent year-on-year) will constrain revenue growth of cement companies, while capital goods manufacturers are likely to see a further 13 per cent year-on-year fall in revenues. In aggregate, revenue growth for corporate India is likely to end up at seven per cent in FY15, Koparkar said.

Domestic consumption and export-oriented businesses are likely to outperform, but here too sectors heavily dependent on rural consumption such as motorcycles, tractors and FMCG have been facing severe pressure on volumes as un-seasonal rains and slow growth in crop prices have dented farm income. This will impact topline growth for companies across sectors.

Seshagiri Rao, joint MD of JSW Steel, said, “Both revenue and margins are expected to be under pressure in March quarter, as many sectors are yet to witness revival.” According to Edelweiss Research, January-March period is expected to be another sluggish quarter with profit after tax expected to contract by 5 per cent from the year-ago period and revenues expected to contract four per cent from a year ago.

The last quarter of 2015 has seen a perfect storm resulting in a broadbased slowdown. The second consecutive quarter of rupee appreciation relative to the euro and other emerging markets is expected to dent earnings of export-oriented sectors like IT and pharma.