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India Inc stares at yet another forgettable quarter: CRISIL Research |
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NEW DELHI: CRISIL Research, India's largest independent and integrated research house, expects India Inc results for the quarter ended June 30 to disappoint, as soft commodity prices, weak growth in investment-linked sectors, and subdued rural demand restrict earnings.
A CRISIL analysis of 600 companies (excluding financials and oil & gas), which account for 70 per cent of overall market capitalisation, shows only a mild 3 per cent uptick in revenue growth. Sequentially, this will be 230 basis points (bps) more than the 0.7 per cent seen in the quarter ended March 31.
The rating agency is of the view that continued weak performance of investment-linked sectors, and companies impacted by low global commodity prices, will curb even the moderate growth anticipated in export-oriented and consumer-driven sectors.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins are seen dipping 70 bps on a year-on-year basis, CRISIL says.
Revenue growth for petrochemicals, steel, sugar and man-made fibre sectors will be the most impacted because of low commodity prices. Cement makers are also likely to see yet another weak quarter with volumes for large players remaining flattish.
Construction companies should see a mild 2-4 per cent revenue growth after being flat in the three preceding quarters. Last fiscal had started well with India Inc registering double-digit topline growth in the first quarter ended June 30, 2014.
However, there was a near-stalling since then because of which revenue growth for the whole of last fiscal came in at just 6.4 per cent.
"Export-oriented sectors and some domestic consumption-driven sectors (such as retail, FMCG, and media) will be the topline outperformers with the former being partly aided by the recent weakness in rupee. But here, too, there are headwinds - stuttering merchandise exports growth and weakness in rural demand, respectively," said Prasad Koparkar, Senior Director, CRISIL Research.
"Going forward, revenue growth will be influenced by the progress of monsoon in July and August, and pick up in the pace of public investments and project execution. Developments in China and the European Union will impact the fortunes of companies that have significant revenues accruing from overseas subsidiaries, apart from exports," he added.
The fragile state of rural consumption is reflected in volume and topline growth of companies such as FMCG, tractors, and motorcycles heavily dependent on the hinterland.
The FMCG sector reported just over 7 per cent topline growth in the fourth quarter ended March 31, 2015. CRISIL does not foresee growth outpacing in the quarter ended June 30, 2015. Likewise, tractor manufacturers are expected to witness a 20 per cent decline in sales volumes.
Source : economictimes.indiatimes.com
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