India Inc sales growth to crawl at 6-7% in Q4FY13: CRISIL

CRISIL Research, India's largest independent and integrated research house, believes that India Inc.'s revenue growth (excluding banks and oil & gas companies) will decelerate to 6-7 per cent in January-March 2013 (Q4 FY13) from 17.5 per cent in Q4 FY12 on the back of waning demand. While growth in investment-linked sectors is expected to continue to decelerate at a fast pace, consumption-led sectors too are experiencing moderation in growth. This is reflected in the slowdown in private final consumption expenditure (PFCE) growth – to 4.6 per cent in Q3 FY13 from 9.2 per cent in Q3 FY12 – resulting in slower growth in sectors such as automobiles, hotels, retail and readymade garments (RMG).

Revenue growth slides further to 9 per cent in Q3 FY13

Revenue growth decelerated to 9 per cent (y-o-y) in Q3FY13 from 19 per cent (y-o-y) in Q3FY12

• Sluggish investment cycle led to muted growth in sectors such as construction, cement, steel and capital goods
• Weak consumer sentiment impacted two-wheelers and hotels
• IT and pharma continued to benefit from rupee depreciation, albeit relatively low as compared to previous quarter

EBITDA margins, which indicated signs of bottoming out in Q2FY13, dipped 20 bps (y-o-y) in Q3FY13

• Higher realisations aided margin expansion in FMCG, airlines, sugar, and textiles
• De-growth or low volume growth due to weak demand pulled down margins for CVs, 2-wheelers & capital goods

Net margins declined ~50 bps (y-o-y) due to pressure on operating profitability and high interest costs

Sector wise contribution to EBITDA & net margins in Q3FY13

EBITDA margins declined by 20 bps y-o-y to 18.3 percent in Q3FY13; margins of over 50 percent sectors declined

• Higher realisations benefited margins of sectors like airlines, FMCG and sugar
• Dip in international coal prices led to margin expansion in power generation; on the other hand rising input costs dragged profits in petrochemicals and steel (mainly due to high iron ore prices)
• Auto and auto components faced margin pressure on the back of weak demand coupled with high interest rates
• Capital goods & construction sectors were adversely impacted due to weak execution & higher competition

High interest costs continued to exert pressure on net margins, which declined 60 bps y-o-y to 9.4 percent in Q3FY13

• Interest costs remained elevated, particularly for telecom, capital goods, infrastructure and metals

Disclaimer: CRISIL Research, a division of CRISIL Limited (CRISIL) has taken due care and caution in preparing this Report based on the information obtained by CRISIL from sources which it considers reliable (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. This Report is not a recommendation to invest / disinvest in any company covered in the Report. CRISIL especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of this Report. CRISIL Research operates independently of, and does not have access to information obtained by CRISIL’s Ratings Division / CRISIL Risk and Infrastructure Solutions Limited (CRIS), which may, in their regular operations, obtain information of a confidential nature. The views expressed in this Report are that of CRISIL Research and not of CRISIL’s Ratings Division / CRIS. No part of this Report may be published / reproduced in any form without CRISIL’s prior written approval.

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