India Inc likely to have clocked slower revenue growth of 5-7% in July-September period: Crisil

The rating agency Crisil in its latest report has said that India Inc is likely to have clocked a slower revenue growth of 5-7% on-year for the three months ended September, marking the slowest pace in the past 16 quarters, because of stagnant performance in the construction vertical, which accounts for a fifth of India Inc's revenue, besides a decline in the industrial commodities vertical and subdued growth in investment-linked sectors. The report is based on its analysis of 435 companies that account for almost half of the listed market capitalisation. These companies posted 8.3% growth in the April-June quarter.

The cement sector’s revenue growth also slipped 2-3% on a high base of the corresponding quarter last year and lower realisations due to weak prices. Additionally, sluggish government spending after elections slowed construction activity, which, along with above-normal monsoon, limited cement volume growth. The monsoon also impacted the petrochemicals sector, which reported flat on-year revenue growth in the second quarter. The agriculture sector, including fertilisers (2% of the sample set's revenue), saw a 20-22% drop in revenue due to fall in raw material prices.

On a positive note, the exports segment (around 22% of the sample set) grew around 5%. In this space, the pharmaceutical sector maintained its momentum with 11% revenue growth, driven by strong demand in regulated markets and easing of pricing pressure in the US. IT services (around 70% of the segment's revenue) experienced a more modest growth of 3-4%, as clients in the banking and financial services sectors in North America and Europe deferred non-essential projects.

Consumer discretionary, staple products and services (around 36% of the sample set's revenue) recorded 15% revenue growth. In the consumer discretionary products sector, two-wheeler players saw 15-16% revenue growth, driven by higher volumes due to rural recovery and price rise. The textiles sector saw volume-driven growth, with stable prices. In the consumer discretionary services vertical, telecom services’ revenue rose 12-13%, fuelled by tariff hikes across technologies, premium charges for 5G services and subscriber migration to plans with higher average revenue per user.

The ‘others’ vertical (2% of the sample set), clocked 4% on-year growth. Aluminium (80% of revenue contribution in this category) posted on-year growth of 3-4%, driven by higher global aluminium prices due to lower production in China. India Inc’s profitability is estimated to have improved 70-90 basis points (bps) on-year during the quarter. The overall earnings before interest, tax, depreciation, and amortisation (Ebitda) for around 435 companies grew around 10% on-year.