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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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