MUMBAI: India Inc’s revenue growth is likely to soar to a two-year high of about eight per cent in the quarter ended June 2016 as lower raw material prices and improvement in domestic consumption demand are expected to drive margins. The first sign of topline growth shifting to a higher trajectory was seen in the March quarter, when it surged to 6.5 per cent as compared to one or three per cent seen in each of the preceding five quarters.
“The revenue growth remains significantly lower than the long-term average of 12-15 per cent. However, in real terms — or adjusted for inflation — the picture looks brighter because the topline growth is likely to be higher than the average for the last four years. From an emerging market perspective, this means domestic companies are growing way faster than peers in China, South Korea, Taiwan and South Africa,” said rating agency Crisil Research. The earnings before interest, tax, depreciation and amortisation (EBIDTA) is likely to inch higher by 13 per cent, well above the 2.5 per cent growth seen in the corresponding quarter last year.
“Urban domestic plays and some export-oriented sectors are expected to drive topline growth this time. We expect IT services industry to report a 15 per cent revenue growth on the back of volume growth and the five per cent depreciation in the rupee against the dollar. Brexit headwinds though will cast some shadow on future growth of the sector. In pharmaceuticals, new launches from a strong product pipeline will propel 15 per cent growth,” said Prasad Koparkar, senior director, Crisil Research.
Among consumption-oriented sectors, Mr Kopar-kar said organised retailers, consumer durables and two-wheeler makers are likely to do well, fuelled by strong demand in urban areas.
But for FMCGs, he said the growth is likely to be tepid, dragged by insipid demand in hinterland from where half of revenue comes. However, the rating agency said that for India Inc to sustain this higher earnings trajectory, three domestic tailwinds are necessary as global factors are unlikely to be supportive. According to it, a normal and well distributed monsoon, a gradual revival in investment sentiment and ever increasing job creation would be necessary for Indian Inc to maintain their winning momentum.
Among investment-linked sectors, cement producers are likely to report 6-7 per cent growth in volume, indicating some benefits from pick up in government aided construction activity. But revenue growth would be just 1-2 per cent as prices are down in most regions except in north and central India. Reflecting the pick-up in project execution, construction companies will too witness a moderate 7-8 per cent revenue growth, better than the five per cent seen last fiscal.
