MUMBAI, OCTOBER 9: Revenues of companies in key sectors such as automobiles, IT services, power, steel products, telecom services, pharmaceuticals and FMCG are expected to grow 7 per cent in the July-September 2016 quarter, compared with a marginal 2 per cent in the year ago period, according to credit rating agency Crisil.
In a report on “Corporate Profitability: Review and Outlook”, Crisil said this will be the second-best show in six quarters. The report excludes banking, financial services and insurance (BFSI) and oil companies.
The fillip comes from low-base effect (revenue growth in the corresponding quarter last fiscal was stagnant), improvement in urban and rural consumption, and low commodity prices.
During the April-June quarter (Q1FY17), India Inc. reported 5 per cent year-on-year revenue growth, compared with stable revenue in the Q1 of FY16. Crisil estimates a 50 bps increase in operating margin (operating profit/ net sales) in the July-September quarter at 19.8 per cent, from 19.3 per cent in the year ago quarter.
During the second quarter, automobile, steel products, telecom services and FMCG (fast moving consumer goods) firms are expected to record better operating margin compared with last year. On the other hand, firms in the IT services, power and pharmaceuticals are likely to witness a contraction in operating margin.
360 firms analysed
Crisil said its analysis of corporate profitability is based on 360 companies (excluding financials and oil companies) that account for about 46 per cent of the market capitalisation of the National Stock Exchange.
The past 12 months have seen companies from the automobile, IT services, pharmaceuticals, power, and telecom services sectors outperform in terms of revenue growth, said the report.
Prasad Koparkar, Senior Director, Crisil Research, said: “In the second quarter, we expect sectors focused on urban and rural consumption such as automobiles and retail, along with pharmaceuticals and IT services, to record double-digit revenue growth.”
Crisil sees automobile companies reporting 13 per cent growth riding on new launches and healthy rural demand following a good monsoon. Retail is expected to grow 12 per cent on the back of improvement in disposable incomes and India’s economic outlook, while pharmaceuticals, driven by new launches in the US, is likely to see 13 per cent growth.
IT services sector is expected to grow 10 per cent, slower than in the past, aided by volume and rupee depreciation. Consumer discretionary sectors such as airlines, cars and two-wheelers and retail are expected to grow faster than industry because of improved volumes.
Retail revenues
The rating agency said cars and two-wheelers are expected to grow 16-18 per cent and 13-15 per cent, respectively, due to new model launches and improved demand, including rural. Boosted by same-store sales growth and store additions, revenues of retailers are expected to increase 12 per cent during the festival season. The aggregate revenue of airlines is seen up 7-9 per cent on strong growth in domestic passenger traffic.