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See low revenue growth of 9-10% for India Inc in Q2: Crisil

The News International Team

Just ahead of the earnings season, Crisil Research says India Inc’s revenue growth will most likely decelerate in the second quarter of FY15 on the back of slower growth in export-oriented sectors and continued weak performance of investment-linked sectors.

In a press release issued on Wednesday, Crisil Research says India Inc may report revenue growth of 9-10 percent year-on-year (YoY) in the September quarter, against 13 percent growth reported in the June quarter.

The second quarter earnings season will be kickstarted by Infosys  on Friday.

Rupee appreciation by around 3 percent in the September quarter may wipe out gains on the currency front, thus impacting export-oriented sectors, says Crisil. Export-oriented sectors had been performing extremely well in the past 5 quarters, reporting strong y-o-y growth due to a slight rebound in demand in key markets and currency tailwinds.

This forecast is based on an analysis of 600 companies (excluding financial services and oil companies), representing 71 percent of the overall market capitalisation of India Inc.

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“Despite healthy volume growth, we project revenue growth of IT service providers to decline to an 8-quarter low of 12 percent. Similarly, revenue growth of the pharmaceutical sector is also forecast to fall to 14 percent from 16.3 percent in the preceding quarter. In the textile space, cotton spinners are likely to report 9 percent revenue decline on the back of lower export demand from China,” says Mukesh Agarwal, President, Crisil Research.

It further expects investment-linked sectors such as construction and capital goods to continue to perform poorly on the back of poor pace of project execution.

However, it is not all gloom and doom. The automobile and steel sectors are expected to post 12-14 percent revenue growth, largely on the back of higher sales volumes and strong overseas performance of some companies; while FMCG companies are likely to grow by about 15 percent, propelled by increase in realisations and superior product mix.

The cement industry is forecast to buck the trend, with revenue growth touching 15-17 percent, driven largely by increase in realisations on a low base of last year, says Crisil Research.

On the profitability front, Crisil Research foresees a 50 basis points y-o-y jump in EBITDA margins. It expects steel and cement sectors to see 90 basis points and 180 bps improvement, respectively, on higher realisations. The IT services sector margins too is expected to improve by about 85 bps due to better employee utilisation, while surge in data revenues and cost control will drive a 110 bps expansion in EBITDA margins of telecom operators, says Crisil.

The automobile sector is expected to announce slightly grim margins, which are expected to contract by 30 y-o-y due to a decline in margins in two-wheelers and tractors. However, margins of commercial and passenger vehicle segments are likely to increase.

The much-in-news coal sector is likely to see a contraction in margins. “The diversion of coal from the e-auction route to the power sector, will translate to a contraction of 300-350 bps in the margins of the coal sector. Tighter operating norms coupled with lowered incentives are likely to hit the power sector’s margins by 120-150 bps,” says Prasad Koparkar, Senior Director, CRISIL Research.

Infosys stock price

On October 08, 2014, at 15:40 hrs Infosys was quoting at Rs 3650.20, down Rs 180.1, or 4.7 percent. The 52-week high of the share was Rs 3892.05 and the 52-week low was Rs 2894.00.


The company’s trailing 12-month (TTM) EPS was at Rs 185.71 per share as per the quarter ended June 2014. The stock’s price-to-earnings (P/E) ratio was 19.66. The latest book value of the company is Rs 733.03 per share. At current value, the price-to-book value of the company is 4.98.

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