Airlines, telecom, pharma,IT may see earnings pressure in FY19

Although the credit outlook for corporate sector expected to be stable, several sectors like airlines, telecom, real estate, pharmaceuticals, IT and sugar may witness earnings pressure in FY19, a report said.

"We see stable outlook on majority of the corporate sector," Icra said in its report 'Indian Corporate Sector, Credit Outlook for FY19' here.

However, going forward, rising commodity prices and rupee depreciation, coupled with rising inflation and interest rates could affect earnings and credit outlook of airlines, automobile, consumer durables, FMCG, chemicals, paints etc. going forward, Icra group head - corporate sector ratings Subrata Ray said.

So far, the Icra report pointed out that continuing the past two-year trend, corporate earnings improved on the back of benign commodity prices and improving consumption demand. This trend continued to an extent in FY18 as healthy volume growth helped offset the impact of rising commodity prices.

Automobiles, FMCG, consumer durables and retail, have witnessed a pick-up in demand aided by low demonetisation base and improved consumer demand on back of the benefits of seventh pay commission, rural recovery and GST rate cuts.

However, the sectors that could not benefit in FY18 and witnessed earnings contractions were telecom, pharmaceuticals, IT, airlines, tyres, and sugar industries, Icra said.

On infrastructure, Ray pointed out, "We believe that pick-up in the affordable housing segments and infrastructure, primarily road and irrigation projects, are likely to support demand growth going forward in core sectors like cement and steel."