India Inc's revenue likely to grown 5-6% on-year in July-September quarter: Crisil Intelligence

Crisil Intelligence, an arm of domestic rating agency Crisil, in its latest report, has said that India Inc.'s revenue is likely to have grown modestly by 5-6% year-over-year in the July-September quarter, following an underwhelming performance by the power, coal, information technology (IT) services, and steel sectors. However, the operating profit margins compressed by up to 0.60% during the July-September period as compared to a year ago. The agency, which analysed the performance of 600 companies, said companies in the sectors posting slower growth account for a third of the overall revenue. It added that sequentially, the revenue growth during the July-September period will be one percentage point higher than the preceding June quarter.

From a profitability perspective, it stated that companies struggled to fully pass on incremental costs in the automobile, pharmaceuticals, and aluminium sectors, and the operating profit margin likely fell by 0.50-1% in Q2. Continuing geopolitical uncertainties weighed on the IT services sector, with project deferrals likely limiting revenue growth to 1%, while in the steel sector, revenue is expected to have grown a moderate 4% on-year despite having a volume growth of 9% due to a decline in steel prices.

The power sector's revenue likely grew a mere 1%, affected by a surge in hydro-generation because of monsoon being 108% of the long-period average and a 10% rise in renewable energy generation, which led to reduced demand for coal generation. As a result, the coal sector's revenue growth was likely flat. It said the cement sector likely rebounded with 8% revenue growth following a 6-7% on-year increase in volume over a low base and pre-festival demand, and added that the pharmaceutical sector is expected to have grown 8% on export demand and stable domestic market conditions. It said telecom services revenue likely grew 7% in Q2 because of higher realisations on account of costlier subscription plans, even as subscriber growth was flat.

Elaborating on its profitability compression expectations, it said the automobile sector's margins are expected to have contracted 1.50-2% on-year owing to the continual rise in aluminium prices, which grew by 11%. Margins for the aluminium sector likely moderated 1-1.5% on lower export realisations on account of lower regional premiums. In the pharmaceutical sector, margins are expected to have contracted 1.5-2% owing to pricing pressure on existing products, which faced higher competition in export markets compared with newly launched products. It noted cement, steel and telecom services sectors are likely to have expanded profit margins during the quarter.