CRISIL Research, India's largest independent and integrated research house, expects India Inc. to report a revenue growth of 9-10% year-on-year (y-o-y) in the September 2014 quarter, lower than 13% growth reported in the June quarter, due to slower growth in export-oriented sectors and the continued weak performance of investment-linked sectors. This forecast is based on an analysis of 600 companies (excluding financial services and oil companies), representing 71% of the overall market capitalisation of India Inc.
Export-oriented sectors have been performing extremely well in the past 5 quarters, reporting strong y-o-y growth due to a slight rebound in demand in key markets and currency tailwinds. However, in the September 2014 quarter, the rupee appreciated by 3% against the USD on a y-o-y basis; so no gains will be reported on the currency front.
Mukesh Agarwal, president, CRISIL Research, said, ''Despite healthy volume growth, we project revenue growth of IT service providers to decline to an 8-quarter low of 12%. Similarly, revenue growth of the pharmaceutical sector is also forecast to fall to 14% from 16.3% in the preceding quarter. In the textile space, cotton spinners are likely to report 9% revenue decline on the back of lower export demand from China.''
On the other hand, the automobile and steel sectors are expected to post 12-14% revenue growth, largely on the back of higher sales volumes as well as the strong performance of overseas operations of some companies. FMCG companies are likely to grow by about 15%, propelled by an increase in realisations and superior product mix. Investment-linked sectors such as construction and capital goods will continue to perform poorly, as the pace of project execution continues to be tardy. The cement industry, however, is forecast to buck the trend, with revenue growth touching 15-17%, driven largely by increase in realisations on a low base of last year.
On the profitability front, CRISIL Research foresees a 50 basis points y-o-y jump in EBITDA margins in Q2 FY15. Prasad Koparkar, senior director, CRISIL Research said, ''The steel and cement sectors will see a 90 bps and 180 bps improvement, respectively, owing to higher realisations. The IT services sector margins will improve by about 85 bps due to better employee utilisation, while the surge in data revenues and cost control will drive a 110 bps expansion in EBITDA margins of telecom operators. On the other hand, the automobile sector’s margins are expected to contract by 30 y-o-y as an increase in the margins of commercial and passenger vehicle segments is likely to be offset by a decline in margins in two-wheelers and tractors. The diversion of coal from the e-auction route to the power sector, will translate to a contraction of 300-350 bps in the margins of the coal sector. Tighter operating norms coupled with lowered incentives are likely to hit the power sector’s margins by 120-150 bps.''
