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

MUMBAI: The revenue growth rate of India Inc is expected to slow down to 6-7 per cent in the fourth quarter of the current fiscal from 17.5 per cent a year ago due to a sharp decline in demand, CrisilBSE -0.51 % Research said today. 

"We believe India Inc's revenue growth (excluding banks and oil & gas companies) will decelerate to 6-7 per cent in the January-March quarter from 17.5 per cent 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 per cent in Q3 from 9.2 per cent 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 per cent 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 per cent 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 per cent 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.