India Inc Q4 revenue growth likely halved to 10-12% YoY: Report
3 min read . Updated: 13 Apr 2023, 03:24 PM IST
Premium- Compared to Q3, revenue growth likely increased 4-6%, bolstered by resilient domestic demand for consumer staples and discretionary products.
New Delhi: Indian companies' revenue growth rate for the quarter ended March 2023 is projected to have halved to 10-12% year-on-year from 22.8% in the same period of the previous fiscal, according to Crisil’s Market Intelligence and Analytics. However, compared to Q3, revenue growth likely increased 4-6%, bolstered by resilient domestic demand for consumer staples and discretionary products.
Full fiscal revenue is estimated to have grown 19-21%, slower than the over 27% growth in the preceding fiscal. Operating margin is expected to have moderated around 300 basis points. Crisil, which analyzed 300 companies across 47 sectors, attributed the Q4 slowdown to headwinds in exports impacting volume growth, and a high-base effect.
Revenues in commodity and export-oriented sectors such as textiles, gems and jewelry, and IT-enabled services saw YoY declines. Steel product revenues, accounting for about 11% of the analyzed set, likely experienced a 7-9% drop in Q4 due to export duty imposition in May 2022 and weak global demand amid high input costs. Muted global demand is also expected to have caused a 17-19% revenue decline for the aluminum industry.
Similarly, muted global demand is expected to have driven a 17-19% fall in revenue for the aluminium industry, it said.
For cotton yarn and RMG, prevailing sluggishness in demand offset benefits from easing of cotton prices, while the gems & jewellery industry continued to struggle due to a fall in discretionary spending in the US — the largest consumer of cut and polished diamonds.
Acredit rating agency, hotels and airlines saw traction as continued growth in leisure tourism and resumption of business travel led to 98% and 67% growth, respectively, in revenues.
Telcos enjoyed 13% growth in revenues as the full impact of tariff hikes came into play. Staples such as pharmaceuticals and FMCG outperformed the industry’s growth. Construction-linked sectors such as cement and ceramics grew on the back of a strong construction season, which supported volume growth, coupled with a healthy rise in capex allocations by the central and state governments, translating into a strong order book for players.
Despite healthy revenue growth, operating margin contracted 150-200 bps during the March 2023 quarter. While raw material prices are seen to be cooling off from their multi-quarter highs, they remain high. The pass-on through realisations remains lower than required, thereby hurting margins.
Sequentially, operating profit margin is estimated to have improved a tad for the second consecutive quarter — from 19% in the December 2022 quarter to 19-20% during the March 2023 quarter. However, it has remained subdued since clocking a high of 25% in the first quarter of fiscal 2022.
Aluminium producers likely saw a 1,700-1,800 bps fall in margins due to lower realisations, but the fall was cushioned by lower production costs and easing coal supply. Blended realisations, and lower power and fuel costs ensured moderate margins for cement manufacturers on a sequential basis, while it expanded 280 bps on an on-year basis.
Steel products companies are estimated to have seen a 750-800 bps contraction in margins. Automobile manufacturers were better off and registered a 45-55 bps improvement in profitability due to lower commodity prices and increased capacity utilisations alongside price hikes.
‘’Prices of key energy-linked commodities such as crude oil and non-coking coal seem to have come off their earlier highs and will partially offset the impact of lower global demand,‘’ its associate director Sehul Bhatt said.
Corporates are likely to see their profitability improve this fiscal as commodity prices scale down and volumes drive revenue growth, it added.