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Last Updated : Jun 13, 2019 06:50 PM IST | Source:

Revenue growth hits six quarter low in Q4FY19: ICRA

Weak consumer sentiments and softening commodity prices had an adverse impact on the corporate sector’s revenue growth in Q4FY19

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The earnings released by 642 companies in the Indian corporate sector revealed that the revenue growth in the fourth quarter (January-March) of FY18-19 hit a six-quarter low at 10 percent, ICRA said in its research report.

Weak consumer sentiments and softening of commodity prices led to a fall in the revenue growth in the last quarter of FY19, ICRA stated.

Further, the revenue growth in consumer-linked sectors in ICRA’s sample was merely 3.8 percent in Q4FY19 on a YoY basis, down from 27.9 percent in Q3FY19.


In comparison, the revenue growth in commodity-linked sectors was at 12.4 percent in Q4FY19 on a YoY basis, down from 51.4 percent in Q3FY19.

Shamsher Dewan, Vice President - Corporate Sector Ratings, ICRA said, "The weakness in consumer-linked sectors was visible since H2FY19 across sectors such as passenger vehicles, two-wheelers, consumer durables and FMCG."

"The decline in consumer sentiment was visible in both urban and rural segments. The commentary on rural growth from Auto OEMs and FMCG companies indicate a slowdown in growth which can be attributed to a muted rabi harvest," he added.

The Ebitda margin of ICRA’s sample declined by 44 bps on a YoY basis and 23 bps on a QoQ basis to 16.6 percent.

However, several sectors such as airlines, cement, consumer food, and consumer durables reported sequential improvement in margins due to price hikes initiated by companies in select sectors, lower cost of imports and softening in commodity prices.

"Although commodity prices were higher on a YoY basis for both FY19 and Q4FY19, there was a softening in prices of key commodities such as oil, steel, and aluminium on a sequential basis which supported an improvement in the Ebitda margins on a QoQ basis," Dewan said.


ICRA expects demand in the automobile sector to remain subdued owing to weak consumer sentiments, rising ownership cost, muted rural demand and tight financing environment caused by liquidity constraints in the financial markets.

"Growth in the sector will stabilise from the second half of FY20 because of pre-buying related to the impending implementation of BS-VI norms from April 1, 2020, especially in the CV segment," Dewan said.

Despite the expectation of a slowdown in automobile sales, the auto component industry is expected to grow between 10-11 percent in FY20 supported by increased content per vehicle, owing to the transition to BS-VI and safety norms.

On the cement sector, demand growth of around 8 percent is expected in FY20. The growth is likely to be driven primarily by rural housing and affordable housing, and improved focus on infrastructure segments such as road, railway and irrigation projects.

The domestic steel demand is likely to moderate to 7.0 percent in FY20 from 7.5 percent in FY19 because of weakness in demand for flat products. Steel price had moderated from the first half of FY19 highs and near-term price hike is likely to be low given the subdued demand environment.

ICRA stated that moderation in steel prices and elevated coking coal prices is likely to put pressure on profitability indicators in the current financial year.

ICRA’s ‘Negative’ outlook for the residential real estate sector continues to reflect liquidity crunch on the back of slow sales and reduced availability of credit.

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First Published on Jun 13, 2019 06:50 pm
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