Revenue of listed companies may rise an anaemic seven per cent, led by the consumption sector in the June quarter, but difficulties in the export-linked sectors and the GST introduction may cap the same, pulling down the margins by 1.2 per cent, says a report. Rating agency Crisil expects the aggregate topline of companies, excluding finance and oil players, to grow seven per cent in the June quarter over the same period last year.
However, margins are expected to contract by 1.20 per cent on the pre-tax level to 20.4 per cent, it said. "Consumption-driven sectors, including automobiles, airlines, FMCG and retail, but excluding telecom, are estimated to have grown at a healthy pace of 10-11 per cent," Prasad Koparkar, a senior director at Crisil Research said. The report mostly blames the introduction of Goods and Services Tax (GST) from July 1 for the poor revenue growth, saying revenue growth across sectors could have been higher but for the new tax regime, which led to a lot of companies going slow on sales. "There could be demand and supply disruptions in the short-term due to GST, though from a long-term perspective, the new regime will lead to efficiency gains and greater tax compliance," it said. Terming the likely spike in revenues as a "heartening" trend, Koparkar said the same sectors were affected by the note-ban and growth had fallen to 4-7 per cent levels in the second half of the last fiscal. However, it is the export-linked sectors like information technology which is a cause of worry, as growth is expected to come down to 3 per cent from the double-digit levels earlier, it said. The note blames strengthening in the rupee, coupled with a rise in protectionism and pricing pressures in the US for the expected dip in revenue growth for the IT sector. On the margins front, the report blames the rise in inputs costs and pricing pressure as the likely reasons for the contraction. "A rise in key commodity prices such as crude oil, steel, aluminium and cement is expected to have pared the profitability of end-user sectors such as automobiles, petrochemicals, housing and tyres by 1.30 per cent, 2.30 per cent, 3.30 per cent and 4.70 per cent, respectively," another Crisil director Rahul Prithiani said. He added that for the pharma sector, the margin contraction can be much higher at 5.50 per cent on pricing pressure and lack of exclusivity period for generic drugs, but IT companies will manage to hold on to the spreads on a rise in the share of high-margin digital services. The report sees an improvement in the outlook for earnings for the current fiscal year, as it expects rural demand to pick up on the back of favourable monsoons, farm loan waivers and higher MSP for crops. However, the all important revival in private investment activity is "still a few quarters away", it said.
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