BackCrisil Research sees muted revenue, earnings growth in September quarter
Crisil expects revenues of firms to grow by a mere 1.6% for the quarter that would improve in the second half of the fiscal year
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Mumbai: Corporate earnings in the three months ended September will remain tepid, making it the fifth consecutive quarter with single-digit growth, according to Crisil Research.
Crisil expects revenues of firms to grow by a mere 1.6% for the quarter that would improve in the second half of the fiscal year on the back of increased government spending and mild uptick in consumption.
Growth in ebidta, or earnings before interest, taxes, depreciation, and amortization, a key indicator of company’s profitability, is expected to be just 2%.
Crisil Research, a division a rating agency Crisil Ltd, said its analysis is based on 600 companies, excluding financial sector companies and oil and gas firms, which account for 70% of the market capitalisation of the National Stock Exchange.
However, revenue and earnings growth for the year to March next year is likely to remain in single digits and well below consensus estimates, the researcher said in a note on Wednesday.
It pointed that fragile consumption demand, especially in the rural areas, weakness in investment-linked sectors, and the meltdown in global commodity prices will more-than-offset the healthy topline growth expected in the export-oriented sectors.
“Export-linked sectors will be the only bright spot in terms of topline," said Prasad Koparkar, senior director, Crisil Research.
According to Koparkar, though merchandise exports have been declining for several months now, listed exporters, primarily in the information technology and pharmaceuticals space, are expected to grow at around 13% in the September quarter, helped partly by the 7% depreciation in the rupee.
“Domestic consumption-driven sectors with high dependence on rural consumption will be impacted by tardy growth in rural income, below-normal monsoon and poor pricing power," added Korparkar.
Margins seem to be the only respite, aided by declining raw material costs. Ebidta margin is expected to be up a marginal 5-10 basis points (bps) to 17.5% in the second quarter. One basis point is one-hundredth of a percentage point.
“Companies in the FMCG (fast-moving consumer goods) , automobiles, airline, tyre, and power generation sectors are likely to see an expansion because of lower raw material costs," said Ajay Srinivasan, director at Crisil Research.
According to Srinivasan, despite support from a weaker rupee, however, the research house expects Ebidta margin of IT services and pharmaceutical companies to decline by 70 bps and 130 bps, respectively, because pressure on their realisations has intensified.
On the other hand, a surge in data revenue and control over marketing costs will boost the Ebidta margin of telecom companies by close to 250 bps, said Srinivasan.
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