India Inc. is expected to post revenue growth by 8-10% during Q2 of FY24, led by consumer discretionary products and services
- IBEF
- October 17, 2023
According to a CRISIL analysis, revenue growth for Indian corporates is anticipated to increase by 8-10% for the quarter ending in September 2023. This will be the first improvement in growth pace in four quarters.
According to the statement, revenue increased by 150-200 basis points (bps) sequentially as well. To get this result, CRISIL examined over 300 companies, excluding the financial services and oil and gas industries. Of the 47 sectors CRISIL MI&A Research tracks, nine, accounting for more than 70% of overall revenue, saw a pick-up in on-year growth.
The improvement in revenue growth would have been stronger had it not been for a decline in agri-linked sectors such as fertilisers, industrial commodities such as chlor-alkalis, petrochemicals and commodity chemicals, and aluminium, it said.
According to the report, there was probably a growth of 12-14% in the automobile sector, with three sub-segments contributing to this growth: commercial vehicles, passenger vehicles, and two-wheelers. A 20-25% increase in passenger vehicles drove the rise, which was further aided by the introduction of new models, improved supply chains, and a wider range of products.
The report further mentioned that retail maintained its momentum within the consumer discretionary products segment, growing 16-18%. This growth was driven by a 19-21% increase in media and entertainment and a 20% increase in the hospitality segment, which includes hotels and airline services. The consumer discretionary services vertical, on the other hand, most likely grew 13-15% year-over-year.
It further stated that the sectors of cement, steel products, roads and highways, and construction benefited the construction-linked segment. Because of El Nino, cement companies most likely saw a 13-15% increase in revenue, supported by a 12-14% increase in volume over the same quarter last year and less of an impact from rain on construction activities. The 8-10% increase in steel product revenue was fueled by steady domestic demand. Due to increased demand for long steel products for infrastructure projects, volume increased by a substantial 17-19% throughout the quarter as opposed to slightly over 10% in the first quarter.
While this was going on, product exports were still being negatively impacted by weak global demand. However, due to strong domestic price increases, abating pricing pressure in the US, and ongoing momentum in exports to regulated countries, necessities like pharmaceuticals appear to be on track to achieve an annual gain of 10-12%.
Furthermore, IT services also defied the general export trend, growing by 18-20% thanks to deals driven by a greater emphasis on cost reduction and consolidation. Nonetheless, during the second quarter, operating profitability most likely increased by a wise 200-300 basis points year-over-year. As a result, the total EBITDA margin for around 350 enterprises is projected to have increased from roughly 18% to 20-22% in the first half of the current fiscal year.
With the exception of the construction industry, the top eight industries had an increase in operating profitability year-over-year, according to CRISIL's analysis. With a 700-900 bps increase in EBITDA margin, the industries that benefited the most were cement, steel products, and aluminium.
The telecom sector was able to increase its profitability by 150-200 basis points as a result of stable costs, increased tariff revision realisations, and consumer migration to newer technologies. Additionally, the automobile industry clocked a 150-200 bps increase in margin due to lower commodity prices, while the pharmaceutical industry benefited from a moderation in the price of several key medicinal ingredients.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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