India Inc's Q1 revenue growth to hit a 2-yr high

India Inc is expected to see a two-year high growth rate of eight per cent in revenue during this financial year’s first quarter ended June 30, mainly driven by export-oriented units like information technology sector, ratings agency CRISIL said.

The first sign of top line growth shifting to a higher trajectory was seen in the March quarter, when it surged 6.5 per cent from a drab one to three per cent in each of the five preceding ones, the rating agency said.

“To be sure, revenue growth remains significantly lower than the long-term average of 12-15 per cent. However,  adjusted for inflation, the picture looks brighter because top line growth is likely to be higher than the average for the past four years,” it said.

STRONG URBAN DEMAND

• The first sign of top line growth shifting to a higher trajectory was seen in the March quarter
   
• From an emerging market perspective, domestic firms are growing  faster than peers in China, South Korea, Taiwan and South Africa, says report
   
• In pharmaceuticals, launches from a strong product pipeline would propel 15% growth
   
• Among consumption-oriented sectors, organised retailers, consumer durables and two-wheeler makers are likely to do well

The report also said there could also be some surprises in accounting treatment because companies with a net worth of Rs 500 crore would be migrating to Indian Accounting Standards from the June quarter.

“The analysis is based on 600 companies (excluding financials and oil & gas) that account for about 70 per cent of the market capitalisation of the National Stock Exchange,” it said.

From an emerging market perspective, this means domestic companies are growing way faster than peers in China, South Korea, Taiwan and South Africa, it adds.

“Urban domestic plays and some export-oriented sectors are expected to drive top line growth this time. We expect information technology services industry to report 15 per cent revenue growth on the back of volume growth and the five per cent depreciation in the rupee against the dollar,” it said.

In pharmaceuticals, new launches from a strong product pipeline will propel 15 per cent growth, it said, adding among consumption-oriented sectors, organised retailers, consumer durables and two-wheeler makers are likely to do well, fuelled by strong demand in urban areas.

But for fast-moving consumer goods, growth is likely to be tepid dragged by insipid demand in hinterland, from where half the revenue comes. Among investment-linked sectors, cement producers were likely to report six to seven per cent growth in volume, indicating some benefits from progress in government-aided construction activity, the report said.

Reflecting the pick-up in project execution, construction companies will also witness a moderate seven to eight per cent revenue growth, better than the five per cent seen last fiscal.

For capital goods makers, lack of broad-based capex recovery continues to hurt with revenues likely to decline by five per cent, it added.