Corporate revenue growth may decline to around 15% in Q2: Crisil

Weighed down by a fall in consumer confidence, high inflation and rising interest rates, corporate India is expected to report a significant moderation in revenue growth and lower EBITDA margins in July-September 2011 (Q2 FY12).
   
Based on an analysis of the aggregate financial performance of select companies across 21 industries (excluding banks and oil companies), Crisil expects most companies to post a year-on-year (YOY) revenue growth of around 15 per cent, down from 19 per cent in the preceding quarter and 22 per cent in July-September 2010, it said.
   
This will be primarily due to decline in consumer confidence, on account of stubbornly high inflation and rising interest rates, and slowdown in investment growth.
   
''Sales volumes in consumption-linked and interest rate sensitive sectors such as automobiles, real estate, textiles, and retail have been significantly impacted," says said Prasad Koparkar, head - industry and customised research, Crisil Research.

Koparkar says, "In infrastructure-linked sectors such as cement, capital goods, and construction as well, order book / volume growth has declined. We anticipate this slowdown to manifest in significantly muted topline growth during Q2 FY12,''
   
Although companies have hiked prices, slower volume growth, along with high input costs and rising wages, would put pressure on margins. Crisil expects a 100 basis points (BPS) reduction in EBITDA margins in Q2 FY12 from 19.5 per cent during April-June 2011.
   
Further, with increase in interest rates, net margins are expected to fall even more sharply. During Q2 FY12, the research firm anticipates real estate players to report a 5 per cent YOY decline in revenues and a sharp reduction in EBITDA margins.
   
Automakers, textiles and steel manufacturers are expected to post a sharp decline in margins on the back of slower offtake and high raw material costs. For cement and construction players too, EBITDA margins are likely to remain under pressure owing to slowdown in pace of project execution as well as rising input costs.
   
IT services providers are expected to report buoyant revenue growth of around 17 per cent on the back of strong pipeline. However, EBITDA margins are likely to decline by around 200 BPS due to rising salary costs.  
   
In the pharmaceutical sector, revenues of large players are likely to grow by 15-17 per cent YOY in Q2 FY12, led by strong performances of players operating in the US market, as these companies have gained healthy market share in recently
launched products.
   
Revenues of the pharmaceutical mid-sized players are expected to grow at a slightly higher rate of 16-18 per cent YOY (on a lower base) owing to rising exports to regulated markets and strong growth in the domestic market. EBITDA margins of large players are expected to be around 23-25 per cent, while those of mid-sized players are expected to hover around 18-20 per cent.
   
The sales of power generation companies are likely to rise by 12-14 per cent YOY, driven by higher generation enabled by robust capacity additions. However, plant load factors (PLFs) are expected to come under pressure owing to a decline in coal availability, as Coal India Ltd has not been able to ramp up production as required.
   
Moreover, lower offtake by state distribution utilities due to their strained financials would also impact PLFs of power generation companies, the study said.