NEW DELHI: India Inc’s revenue growth is likely to halve in the fourth quarter, bringing down their operating margins due to slump in commodity prices, according to Crisil Research. Fall in input costs, however, will shore up profitability of end-user industries.
Crisil expects top line growth to print lower at 8-9 per cent from the average of 16.5 per cent in the previous three quarters. The plunge would be led by key commodities such as steel products, aluminium, natural gas and petrochemicals, which have softened significantly, impacting realisations.
“Sectors linked to commodities and infrastructure had been supporting revenue growth for the past few quarters. However, this trend has reversed in the fiscal fourth quarter. Steel, aluminium, natural gas and petrochemicals are expected to witness lower realisations year-on-year, and sectors like construction and capital goods are also likely to grow slower,” said Prasad Koparkar, senior director, Crisil Research.
The forecast is based on CRISIL Research’s analysis of 354 companies, which account for around 67 percent of the market capitalisation of the National Stock Exchange, excluding Banking, Financial Services and Insurance (BFSI) and oil sectors.
Additionally, automobiles, one of the key sectors driven by consumption spending, is still reeling under demand slowdown given the higher cost of ownership and new axle norms, among other factors.
The decline in revenue growth, though, would be cushioned by other consumer sectors. Export-linked sectors such as IT services and pharmaceuticals stand to gain from a weakening in the rupee on a year-on-year basis, though it has strengthened quarter-on-quarter. While retail has support from positive demand sentiment, airline services stand to benefit from a spurt in fares this quarter.
With lower topline growth, the corporate sector is staring at dampened profitability at the operating level as well. “Growth in operating profit is expected to halve at seven percent from 13 per cent average in the preceding three quarters,” the report said.