India Inc’s Q1 revenue growth to touch 6-quarter low says CRISIL
According to the ratings agency, revenue growth in the April-June quarter is forecast to drop to around 14% from 17.5% a year ago, given the slowdown in economic activity and gross fixed investments
Mumbai: With 15 out of 26 sectors facing severe margin pressure due to higher interest cost and slowing sales in the current quarter, ratings agency CRISIL said it expects revenue growth of leading corporates to report their weakest quarterly numbers in the past six quarters, reports PTI.
"While policy logjam and higher cost of capital have severely dented the investment cycle, persistent inflation, economic uncertainty and high retail lending rates are weighing on consumer sentiment, thereby affecting consumption growth. We believe demand growth will continue to remain weak going forward, as interest rates are likely to remain high for longer than anticipated. The deceleration in fixed capital investments growth may lead to further slowing of consumption demand,” said Mukesh Agarwal, president, CRISIL Research.
Revenue growth in the April-June quarter is forecast to drop to around 14% from 17.5% a year ago, given the slowdown in economic activity and gross fixed investments. "Accordingly, earnings before interest, taxes, depreciation and amortisation (EBIDTA) margins are projected to decline by 100-150 basis points (bps) or 1-1.5 percentage points on a y-o-y to 19-20%, but remain flat compared sequential (Q4 of FY12)," CRISIL said in a report.
Although, overall EBITDA margins are expected to remain flat for Q1 FY13 on a q-o-q basis, 15 of the 26 sectors will continue to face margin pressure. “For sectors like commercial vehicles, cement, construction and real estate, EBITDA margins are forecast to contract by 100-200 bps q-o-q, due to slower demand growth and high input costs,” said Prasad Koparkar, senior director, industry and customised research.
The revenue growth in first quarter (Q1) of FY13 is expected to be much weaker due to a sharp deceleration in airlines, auto components, commercial vehicles, hotels, metals, organised retail, real estate and textiles, the ratings agency said.
The report is based on the analysis of aggregate financial performance of 247 large companies across 26 key sectors, excluding banks and oil & gas companies and constitute around 65% of the BSE 500 Index.
On the other hand, export-oriented sectors like IT services and pharma are expected to report strong q-o-q margin expansion aided by a 7.4% q-o-q fall in the rupee, the agency said, adding the telecom sector is expected to see a modest expansion in margins on account of lower competition coupled with cost control measures adopted by the companies.
The ratings agency also said reflecting weak demand due to the ongoing slowdown, y-o-y revenue growth in Q4 of FY12, moderated slightly to 17.2 from 17.7% in the same quarter previous year, while EBIDTA margins fell 270 bps y-o-y, which however was higher by 35 bps q-o-q, largely due to strong seasonal performance by commercial vehicles, construction, power, cement and sugar sectors.
Accordingly, net margins rose by 90 bps q-o-q, supported by the decline in depreciation charges.
Depreciation charges as a percentage of revenues fell to its lowest level in the last 10 years while growth in fixed asset creation was at its lowest in the last five years, reflecting the sharp deceleration in the investment cycle, said the agency.
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