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Corporate earnings, revenue growth to drop sharply: Crisil

“Based on an analysis of the aggregate financial performance of select companies across 21 industries (excluding banks and oil companies), Crisil Research expects year-on-year (y-o-y) revenue growth of around 15%, as compared to 19% in the preceding quarter and 22% in Q2 FY10-11,” the rating agency said

Mumbai: The earnings and revenue growth for the leading corporates will come down sharply by 7 percentage points to 15% in the September quarter due to decline in consumer confidence, high inflation and rising interest rates, and slowdown in investments, reports PTI quoting rating agency Crisil.

“The second quarter (July-September) of FY11-12 will be marked by significant moderation in revenue growth and continued pressure on margins. Consumer confidence has declined due to stubbornly high inflation, rising interest rates, as well as uncertainty over future income growth,” it said.

“Based on an analysis of the aggregate financial performance of select companies across 21 industries (excluding banks and oil companies), Crisil Research expects year-on-year (y-o-y) revenue growth of around 15%, as compared to 19% in the preceding quarter and 22% in Q2 FY10-11,” the agency added.

It noted that even though companies have hiked prices, slower volume growth, along with high input costs and rising wages, would put pressure on margins.

“Sales volumes in consumption-linked and interest rate sensitive sectors such as automobiles, real estate, textiles, and retail have been significantly impacted.”

In infrastructure-linked sectors such as cement, capital goods, and construction as well, order book/volume growth has declined. We anticipate this slowdown to manifest in significantly muted topline growth during Q2 FY11-12,” Crisil industry and customised research head Prasad Koparkar said.

Crisil also noted that auto, textiles and steel manufacturers are expected to see a sharp decline in margins on the back of slower offtake and high raw material costs.

It said the revenue growth for automakers will decline to 11% during Q2 FY11-12, much lower than the 36% growth reported in Q2 FY10-11.

“Rising raw material costs would offset any gains from an increase in realisations, leading to a 100 basis point (bps) y-o-y decline in the margins of players.”

“For construction, revenue growth is expected to slow down to around 11% y-o-y. EBITDA margins are projected to decline by around 100 bps to 9.6% y-o-y due to a steep increase in the prices of key inputs, mainly cement and steel,” it added.

However, IT services providers are expected to report buoyant revenue growth of around 17% on the back of strong pipeline, but EBITDA (earnings before interest, taxes, depreciation and amortisation) margins are likely to decline by around 200 bps due to rising salary costs, it added.

For the aviation industry, Crisil expected a healthy revenue growth, propelled by increased passenger traffic.

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India to become world’s 2nd largest steel producer by 2015

Chairing a meeting of the Parliamentary Consultative Committee, steel minister Beni Prasad Verma said annual demand for steel is likely to grow at an average of over 10% in the next five years as compared to 8% growth during 1991-92 and 2010-11

New Delhi: India is expected to become the world’s second largest producer of crude steel by 2015, riding on expansion plans of domestic players like SAIL and Rashtriya Ispat Nigam (RINL), reports PTI.

Chairing a meeting of the Parliamentary Consultative Committee, steel minister Beni Prasad Verma said annual demand for steel is likely to grow at an average of over 10% in the next five years as compared to 8% growth during 1991-92 and 2010-11.

India slipped one rank to become the fourth largest steel producer in 2010, with 68.3 million tonnes (MT) of output. It produced 63.5 MT steel in 2009.

China is the number one producer of steel, followed by Japan and the US at second and third places, respectively.

“India also maintained its lead position as the world’s largest producer of direct reduced iron (DRI) or sponge iron,” the official statement said, adding the per capita steel consumption during the last six years has risen from 38 kg in 2005-06 to 55 kg in 2010-11.

The steel sector contributes nearly 2% of the gross domestic product (GDP) and employs over 5 lakh people.

Expressing concerns over exports of iron ore, a fast depleting resource, Mr Verma said iron ore is a non-renewable natural resource and his ministry is of the view that it should be conserved for long-term utilisation of domestic steel industry.

“Our policy should, accordingly, aim at value addition of iron ore within the country instead of exporting iron ore,” he said. The National Steel Vision and strategy paper are being finalised for promoting steel sector, he said.

The minister also elaborated on expansion plans of PSUs like SAIL, RINL, etc.

“The major thrust of the modernisation and expansion plans is to adopt the best modern technology, which in addition to being cost effective should also be energy efficient and environment-friendly,” he said.

State-run SAIL has undertaken a massive expansion drive to increase its steel production capacity from current 14 MT to about 24 MT, with an investment of about Rs70,000 crore.

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