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The pace of Indian companies’ revenue expansion could fall in the fourth quarter to a three-year low as growth moderation in consumption-led sectors adds to the woes in manufacturing, according to CRISIL. Revenue growth of companies, excluding banks and oil firms, could shrink to six-seven percent in the quarter ended March 31, from 17.5 percent in the year-ago period.
Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins are projected to decline by 30-50 basis points during the quarter from last year.
While growth in investment-linked sectors is expected to continue to decelerate at a fast pace, consumption-led sectors, too, are experiencing moderation in growth, CRISIL said today in a note.
Manufacturing and investment-linked sectors are anticipated to grow at a tepid pace of four-five per cent in January-March, the slowest since April-June 2010, said Mukesh Agarwal, president of Crisil Research.
“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,” said Agarwal in a note.
Private final consumption expenditure growth slowed down to 4.6 per cent in the October-December period of the current financial year from 9.2 per cent in the corresponding period last year. This has resulted in slower growth in sectors such as automobiles, hotels, retail and readymade garments, CRISIL said.
Prasad Koparkar, senior director of Crisil, said the service sectors were expected to witness relatively better revenue growth of 12-13 per cent in the fourth quarter unlike manufacturing.
“Corporate India’s revenue growth would have been even lower in the absence of support from these sectors,” said Koparkar. “IT (information technology) services is expected to continue to benefit from rupee depreciation, whereas the media and entertainment sector will see healthy growth driven by increasing digitisation,” Koparkar said.
Telecom services will grow at a steady six-eight per cent with improving average revenue per user (Arpu), he added.
The persisting weak demand scenario will put further pressure on the already low margins, the rating agency said. “Over the near term, revival in consumer and investor sentiment on the back of implementation of announced reforms, a normal monsoon and continued moderation in interest rates are critical for demand revival and improvement in corporate profitability,” it said.
