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Crisil sees India Inc Q4 revenue growth nosediving to 6-7%

Last Updated: Monday, March 25, 2013 - 19:54

Mumbai: The revenue growth rate of India Inc is expected to slow down to 6-7 percent in the fourth quarter of the current fiscal from 17.5 percent a year ago due to a sharp decline in demand, Crisil Research said Monday.

"We believe India Inc's revenue growth (excluding banks and oil & gas companies) will decelerate to 6-7 percent in the January-March quarter from 17.5 percent a year ago on the back of waning demand," Crisil Research said in its quarterly update of industry performance.

The report is based on the analysis of 28 key sectors (excluding banks, and oil & gas companies) and indicates that capital goods, construction, commercial vehicles, tyres, auto components and steel are expected to witness either a revenue decline or low single-digit growth in Q4 on a y-o-y basis, due to the weak demand environment.

Crisil said the growth in investment-linked sectors is expected to continue to decelerate at a fast pace, while consumption-led sectors, too, are experiencing moderation in growth.

This is reflected in the slowdown in private final consumption expenditure growth of 4.6 percent in Q3 from 9.2 percent a year ago resulting in slower growth in sectors such as automobiles, hotels, retail and readymade garments.

"Manufacturing and investment-linked sectors are anticipated to grow at a tepid pace of 4-5 percent in Q4. Such sluggish growth was last witnessed over three years ago in Q1 of FY10, driven by the dramatic slowdown in the global economy after the sub-prime crisis began in the US.

"But this time, domestic issues such as administrative delays, high cost of capital and persistent inflation are largely responsible for the slow demand growth," Crisil Research president Mukesh Agarwal said in the report.

However, senior director Prasad Koparkar said: "Unlike manufacturing, service sectors are expected to witness relatively better revenue growth of 12-13 percent in Q4. Revenue growth would have been even lower in the absence of support from these sectors."

IT services are expected to continue to benefit from the falling rupee, whereas the media and entertainment sector will see healthy growth driven by increasing digitisation. Telecom services will grow at a steady 6-8 percent with improving average revenue per user, Koparkar said.

The persisting weak demand scenario will put further pressure on already low margins. Accordingly, Ebitda (earnings before interest, taxes, depreciation and amortisation) margins are projected to decline 30-50 bps on a y-o-y basis in Q4.

Over the near-term, revival in consumer and investor sentiment on back of implementation of announced reforms, normal monsoon and continued moderation in interest rates are critical for demand revival and improvement in corporate profitability, Crisil report concluded.


First Published: Monday, March 25, 2013 - 19:54
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