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CRISL reports India Inc’s revenue growth at 16-quarter low of 5 – 7% for July-September

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World Cement,


India Inc is estimated to have clocked a slower revenue growth of 5 – 7% on-year for the three months ended September, marking the slowest pace in the past 16 quarters, because of stagnant performance in the construction vertical, which accounts for a fifth of India Inc's revenue, besides a decline in the industrial commodities vertical and subdued growth in investment-linked sectors.

This is based on an analysis of 435 companies that account for almost half of the listed market capitalisation. These companies posted 8.3% growth in the April-June quarter.

Pushan Sharma, Director- Research, CRISIL Market Intelligence and Analytics, says “Revenue of industrial commodities, investment and construction-linked sectors—collectively accounting for 38% of our sample set—grew only 1%, weighing down overall performance. The industrial commodities sector, such as coal, saw a 6 – 7% revenue decline due to lower coal offtake, coal-based power generation and e-auction premiums. In the investment sector, the power segment (70% revenue contribution), grew just 1% as above-normal monsoon reduced power demand. Among construction-linked sectors, steel revenue fell 2 – 3% due to price drop led by cheap Chinese imports.”

India Inc’s profitability is estimated to have improved 70-90 basis points (bps) on-year during the quarter. The overall earnings before interest, tax, depreciation, and amortisation (Ebitda) for 435 companies grew 10% on-year.

Says Elizabeth Master, Associate Director- Research, CRISIL Market Intelligence and Analytics, “Among the top 10 sectors, which account for 75% of revenue, eight saw Ebitda margin expansion, led by export-linked sectors such as IT services and pharmaceuticals, investment-linked sectors such as power, and consumer discretionary sectors such as automotive and telecom services. The two sectors that faced margin contraction were steel, due to higher iron ore prices, and cement, due to subdued pricing.

 

For IT companies, Ebitda margin expanded 110 – 130 bps due to higher employee utilisation and lower attrition rates. In pharma, topline growth and lower raw material costs led to margin expansion of 320 – 340 bps for formulation players. In the bulk drugs segment, recovery in exports and higher realisations led to 230-250 bps margin expansion. Among investment-linked sectors, a fall in coal e-auction premiums improved margin by 130 – 150 bps on-year for power generation companies. Among consumer discretionary sectors, telecom services’ margin expanded 120 – 140 bps due to lower licence fees, spectrum charges and network operating expenses, along with steady revenue growth. In the steel sector, while coking coal prices dipped on-year, iron ore prices rose on global cues, increased export demand and strong domestic demand, resulting in a margin contraction of 40 – 60 bps on-year. The cement industry's margin also contracted 110 – 130 bps due to subdued pricing and despite easing cost pressures.


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