Revenue growth in Q4 FY hits six quarter low led by weak consumer sentiments: ICRA

Financial results released by 642 companies in the corporate sector show revenue growth in fourth quarter (January to March) of 2018-19 hit a six-quarter low at 10 per cent, investment information and credit rating agency ICRA said on Thursday.

The key reason for decline in revenue growth was weak consumer sentiments and softening of commodity prices. The revenue growth in consumer-linked sectors in ICRA's sample was only 3.8 per cent in Q4 FY19 year-on-year, down from 27.9 per cent in Q3 FY19.

Comparatively, the revenue growth in commodity-linked sectors was at 12.4 per cent in Q4 FY19 year-on-year, down from 51.4 per cent in Q3 FY19.

"The weakness in the consumer-linked sectors was visible across most consumer-oriented sectors such as passenger vehicles, two-wheelers, consumer durables and FMCG since second half of FY19," said ICRA's Vice President for Corporate Sector Ratings Shamsher Dewan.

"The decline in consumer sentiments was visible in both urban and rural segments," he said adding the commentary on rural growth from auto original equipment manufacturers and fast moving consumer goods (FMCG) companies indicate a slowdown in growth which can be attributed to a muted rabi harvest.

The EBITDA margin of ICRA's sample declined by 44 bps year-on-year and 23 bps on a quarter-on-quarter basis to 16.6 per cent.

However, several sectors such as airlines, cement, consumer food and consumer durables reported a sequential improvement in margins because of price hikes initiated by companies in select sectors, lower cost of imports (benefits of improvement in rupee vis-a-vis dollars in Q4 compared to Q3) and softening in commodity prices.

"Although commodity prices were higher on a year-on-year basis for both FY19 and Q4 FY19, there was a softening in prices of key commodities such as oil, steel and aluminium on a sequential basis which supported an improvement in the EBITDA margins on a quarter-on-quarter," said Dewan.