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Leading corporates likely to report weakest Q1 numbers since past 6-quarters: CRISIL

27 Jun 2012 Evaluate

The revenue growth of leading companies is expected to be the weakest quarterly numbers since past 6-quarters, as per the credit rating agency - CRISIL. Higher interest cost and declining sales is likely to impact the revenue growth of 15 out of 26 sectors in the current quarter. The report is based on the analysis of collective financial performance of 247 large companies across 26 key sectors, apart from banks and oil & gas companies and makes up around 65% of the BSE 500 Index.

As per the report, revenue growth in the first quarter of 2012-13 is estimated to decline to about 14% from 17% recorded a year ago. EBIDTA (earnings before interest, taxes, depreciation and amortization) margins are forecasted to drop by 1-1.5 percentage points on year-on-year (y-o-y) basis, however, will remain flat on a quarter-on-quarter (q-o-q) basis.  The revenue growth in first quarter of 2012-13 is expected to be much weaker due to a sharp deceleration in airlines, auto components, commercial vehicles, hotels, metals, organized retail, real estate and textiles.

Sectors like commercial vehicles, cement, construction, and real estate are likely to see EBIDTA margins contract by 100-200 basis points on q-o-q basis, mainly on the back of high input cost and slow demand. On the other hand, export-oriented sectors like IT services and pharma are expected to witness strong growth due to rupee depreciation. Similarly, telecom sector is also likely to witness a modest expansion in margins on account of lower competition along with cost control measures adopted by the companies.

Poor investment scenario, policy paralysis and higher cost of capital along with rising inflation and lending rates and slowing FY12 fourth quarter economic growth have severely impacted the investment cycle and thereby the consumer sentiment. Further, as per CRISIL, ‘demand growth will continue to remain weak going forward, as interest rates are likely to remain high for longer than anticipated. The deceleration in fixed capital investments growth may lead to further slowing of consumption demand.’

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