Revenues of Indian companies, excluding those engaged in banking and oil, are expected to grow marginally at 5-6 per cent in the first quarter of this fiscal, Crisil Research said.
Operating margins, however, are likely to remain stable in Q1, 2013-14 at 18.5 per cent. "India Inc's revenues excluding banks and oil & gas companies are likely to grow at 5-6 per cent (y-o-y) in the April-June 2013 (Q1, FY'14). While this is only a marginal improvement, at least the sharp drop witnessed over the last five quarters is expected to be curtailed," Crisil said.
EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins, which have also bottomed out, are estimated to remain stable at 18.5 per cent (y-o-y) in Q1 FY'14, according to the Crisil report.
Revenue growth will be muted at 5-6 per cent in Q1 FY14, with half of the 28 key sectors (excluding banks, oil and gas companies) including steel, coal, fertilisers, shipping, airlines, hotels and sugar, estimated to either witness a low single-digit growth or decline in revenues on a y-o-y basis, due to pressure on volumes. The Indian companies are expected to announce Q1 results later this month.
According to Crisil, the revenue growth in FY14, however, is expected to be much higher at 10-11 per cent, driven by consumption led recovery in the economy, on the back of a normal monsoon and pre-election spending by the government.
"Revenue growth plummeted to 4.4 per cent in Q4 FY13 from 18 per cent in Q4 FY12. Going forward, revenue growth will be tepid, but not decelerate further. While volume growth will continue to remain under pressure, sectors like automobiles and FMCG are expected to benefit from a favourable change in product mix," Crisil Research President Mukesh Agarwal said.
The rupee depreciation will lend some support to export-oriented sectors. Even as the investment cycle will be weak, capital goods, construction, steel and cement are not expected to witness further downside with the anticipated increase in GDP growth, Agarwal said.
Operating margins have also bottomed out and are expected to remain rangebound from hereon. In Q1 FY14, margins are estimated to be stable y-o-y at 18-18.5 per cent. A drop in the prices of input commodities will result in margin expansion for power, tyres and FMCG while rupee depreciation will lend support to IT services and readymade garments, where realisations are under pressure, Crisil Research Senior
Director Prasad Koparkar said. However, margins of sectors such as sugar, cement and airlines, reeling under high input costs and slow demand, are estimated to decline sharply by 500-700 bps, Koparkar said.
Additionally, timely implementation of recently announced reforms and policies by the government could provide a boost to investments, thereby propelling revenue growth further. Commencement of big-ticket infrastructure projects cleared by the Cabinet Committee of Investment (CCI), improvement in fuel availability and resumption of mining operations would improve India Inc's prospects, going forward, it said.
