Corporate Q1 revenue growth drops to 6 quarters low: CRISIL

CRISIL has come out with its report on Q1 results of financial year 2012-13. The aggregate corporate revenue growth has dropped to a 6 quarter low and net profit has fallen by 60% Y-o-Y.

- The continuing weak demand environment is resulting in tepid revenue growth of close to 14.3 per cent (y-o-y) excluding refining and marketing companies, with one-third of the sectors either degrowing or growing in single digits.
- Slowing economic growth, high cost of finance, execution delays in many infrastructure and construction projects have translated to lower revenue growth for the capital goods, construction, steel and logistics sectors. Further, high prices have led to pressure on volumes in the real estate sector. - Revenue growth for consumption-driven sectors like retail and two-wheelers has also slowed down on account of weak consumer sentiment. - Export-oriented sectors like IT and pharmaceuticals, have recorded strong revenue growth, led by rupee depreciation. - EBIDTA margins (excluding refining and marketing companies) continue to be under pressure, declining by close to 153 bps (y-o-y), but remain flat on q-o-q basis - Continued high input costs in a weak demand environment has led to significant pressure on margins for sectors like construction, auto components, commercial vehicles, steel and paper. - EBITDA margins for telecom companies declined by around 220 bps y-o-y, owing to a substantial increase in network operating costs (NOC) and sales and marketing expenses. - Currency depreciation led to higher margins for IT and pharmaceutical companies, while cooling rubber prices helped in increasing margins for tyre manufacturers. - Airline services also saw margin expansion due to rise in ticket prices; margins improved in the textiles sector due to fall in raw material cost. - Overall net profit degrew by 13.6 per cent (excluding refining and marketing companies) due to pressure on operating margins and an almost 42 per cent increase in interest costs - Net profit declined for 56 per cent of the 1,154 manufacturing companies considered with only 38 per cent of the companies witnessing net profit growth of more than 10 per cent. - The situation was only slightly better for Nifty and Nifty Junior companies with nearly one-third of them witnessing a degrowth in net profits. - Overall interest costs have increased by 42 per cent, excluding refining and marketing companies(yo-y) on account of continued high interest rates and higher working capital borrowings. Further, mark- to-market losses due to currency hedging, have resulted in a sharper decline in net profits. - PSU refining marketing companies reported losses of Rs 405 billion due to non-revision of diesel prices and high inventory losses on account of sharp decline in crude oil prices - The under-recoveries (loss on sale of regulated products - diesel, LPG and kerosene) for PSU refining and marketing companies rose to Rs 478 billion from Rs 440 billion (y-o-y). This increase is on account of the non-revision of prices of regulated fuels despite significantly high global product prices and the weak rupee. - PSU refining companies have seen a sharp shrinkage in gross refining margins with the GRMs contracting to negative $2.5/bbl from $3.7/bbl in the corresponding quarter of the previous year. Significant inventory losses on account of sharp decline in crude oil prices led to weak GRMs. Disclaimer: CRISIL Limited has taken due care and caution in preparing this Report. Information has been obtained by CRISIL from sources, which it
considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL Limited has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this Report. The Centre for Economic Research, CRISIL (CCER) operates independently of and does not have access to information obtained by CRISIL's Ratings Division, which may in its regular operations obtain information of a confidential nature that is not available to C-CER. No part of this Report may be published / reproduced in any form without CRISIL's prior written approval. To read the full report click on the attachment

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