Third quarter FY17 corporate earnings have started trickling in and Crisil Research expects demonetisation to lead consumption-led sectors like automobiles, telecom services and fast moving consumer goods to witness the slowest growth in two years.
Demonetisation is likely to wipe out the positives of a favourable monsoon and lower interest rates on third quarter corporate earnings, particularly for key consumption-led sectors like automobiles, telecom services, and fast moving consumer goods, according to a report by Crisil Research. In fact, Crisil expects these sectors to record the slowest growth in two years.
Overall corporate topline growth is seen declining to 4 percent year-on-year
during the third quarter because of demonetisation. In the preceding three quarters, revenue growth had reached average 6.3 percent from around 1.7 percent in four quarters prior to that.
However, the research house expects steel product companies to report a robust 25 percent growth in Q3, with government support and strong export growth contributing to an 18-percent jump in realisations.
Power, steel products and pharmaceuticals are expected to record better third quarter operating margin compared with last year. FMCG companies, though, are likely to witness a margin decline of 250-300 bps on account of rise in raw material costs and heavy investments in advertising and brand-building.
Given new product launches in the US and market exclusivity for few products, the revenue of large formulation firms put together is expected to grow 11 percent. Operating margins for these companies is estimated to expand 140-170 basis points helped by new product launches.
Information technology services companies, which have seen languishing sales growth over the last couple of quarters, might continue to see a slow rupee-revenue growth of 7 percent year-on-year in the third quarter.
The telecom services industry that will bear the brunt of a double-blow from the Reliance Jio launch and demonetisation might see gross revenues slipping 11 percent on-year.
(Disclosure: Reliance Jio is part of Reliance Industries which owns Network18 Media and moneycontrol.com)