With profitability improvement in the last fiscal year (FY18), credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that corporate outlook is expected to remain stable in the current fiscal year (FY19). However, it said that the improvement will be limited to the metals sector and added that a broader recovery may be after much longer period.
As per the report titled ‘Corporate Risk Radar FY19’, India Inc revenue is likely to grow at rate of 7%-9% and EBITDA may grow at 8%-11%, on the back of rising demand in consumption-led sectors such as automobiles and retail, low base effect and higher realisation in commodity-linked sectors. However, the report found that export-linked sectors such as pharmaceuticals and information technology are expected to face challenges in the year amid concerns of global trade headwinds.
Ind-Ra further said that EBITDA growth will be limited, owing to the factors like higher commodity prices, higher interest cost and depreciation in rupee. Besides, it said that EBITDA growth will also be limited by little capital expenditure until 2019-2020. It also expects the working capital cycle to further deteriorate, given the impact of the implementation of the Goods and Services Tax regime and an initial pick-up in economic activities. Sectors such as oil and gas, metals, and chemicals could witness elongation of working capital cycle with rising commodity prices. However, auto and auto ancillary sectors will continue to have a stable working capital cycle, amid strong demand.