NEW DELHI: REELING under the impact of continued weakness in consumer sentiments and the general slowdown in the economy, India Inc. delivered an expectedly weak performance during the second quarter of the ongoing financial year.
According to rating agency ICRA, Q2 FY2020 financial results of 609 companies in the Indian corporate sector (excluding financial sector entities) showed a Y-o-Y and sequential contraction in revenues for the first time in almost four years, with aggregate revenues contracting by 0.9 per cent on a Y-o-Y basis.
The profitability of India Inc. during the quarter also fell due to subdued demand, high discounting, tepid realizations in commodity sectors, and negative operating leverage.
ICRA estimates that the profit before tax (PBT) margins contracted by 210 bps Y-o-Y and by 140 bps sequentially to 6.5 per cent, the lowest in more than five years. Similarly, the EBITDA margin contracted by 32 bps on a Y-o-Y basis, and by 100 bps sequentially to 16.7 per cent.
An ICRA analysis said that a major impact on revenues came from commodity-linked sectors, revenues from which contracted by 5 per cent on Y-o-Y as well as sequential basis. Consumer-oriented sectors and the infrastructure segment were also down during the quarter.
“Several consumer-linked sectors exhibited continued weakness, with automobile sales contracting by double digits, while FMCG volumes also sequentially slowed down on the back of slowing urban demand and subdued rural demand sentiment,” said Subrata Ray, Senior Group VP- Corporate Sector Ratings, ICRA.
On the measures announced by the government to counter the slowdown, Ray said that the impact of the same would get reflected after a lag. With half of FY2020 already gone, any significant recovery in performance will be very tough, he added.
Segment-wise, automobiles, FMCG and the cement sectors continued to report Y-o-Y and sequential weakening.
On the other hand, sectors such as information technology, gems and jewellery, airlines, pharmaceuticals and telecom reported growth in revenue and helped arrest the extent of contraction.