Corporate revenue growth to slump to 6-7% in Q4: CRISIL

Hit by waning demand, Indian Inc’s revenue growth will decline to mere 6-7% rise in revenue in January-March 2013 from 17.5% posted in the fourth quarter of FY12, according to CRISIL Research.

CRISIL Research in a statement said, growth in investment-linked sectors is expected to continue decelerating at a fast pace. The consumption-led sectors too are experiencing moderation in growth. The analysis excludes banks and oil & gas companies.

The operating margins are expected to dip by 30-50 basis points. Out of 31 sectors 13 are expected to report shrinkage in margins, research wing of rating agency said.

The trend of deceleration is reflected in the slowdown in private final consumption expenditure (PFCE) growth – to 4.6% in Q3 FY13 from 9.2% in Q3 FY12 – resulting in slower growth in sectors such as automobiles, hotels, retail and readymade garments (RMG).

Mukesh Agarwal, President, CRISIL Research, said, “Manufacturing and investment-linked sectors are anticipated to grow at a tepid pace of 4-5% in Q4 FY13.

Such sluggish growth was last witnessed over three years ago in Q1 FY10, driven by the dramatic slowdown in the global economy after the credit crisis in the US. But this time, domestic issues such as administrative delays, high cost of capital and persistent inflation are largely responsible for slowing demand growth.”

Analysis of 28 key sectors indicates that capital goods, construction, commercial vehicles, tyres, auto components and steel are expected to witness either a revenue decline or low single-digit growth in Q4 FY13 due to the weak demand environment, it added.

A margin improvement in power, tyres and cotton yarn would be driven by drop in coal, rubber and cotton prices respectively. Airlines and cement sectors to reap benefits from higher realizations.

The execution of lower margin orders due to higher competition will put downward pressure on profitability in capital goods and construction sectors, it added.