India Inc likely to report 3% fall in profits in Q2FY23: Crisil's research wing

13 Oct 2022 Evaluate

Rating agency Crisil's research wing in its latest report has said that India Inc is likely to report a three per cent year-on-year fall in profits for the July-September period (Q2FY23). This fall in profitability will be the fourth straight quarter of the decline in profits for the listed companies. Profitability is seen declining 300 basis points (bps) due to elevated commodity prices.

The report, based on research of 300 companies from 47 sectors, said that rising revenue momentum is not translating into profit margin proportionately. The revenues are expected to rise by 15 per cent during the quarter when compared to the year-ago period, attributing it to moderate price hikes and steadily rising volumes. It can be noted that starting earlier this week, major companies have been reporting their earnings for the July-September period. On a sequential basis, that is when compared with the performance in Q1, the corporate revenue has declined by 3 per cent.

The report said nearly half of the 47 sectors have outpaced overall revenue growth during the quarter, with key sectors within consumer discretionary services logging maximum year-on-year growth. The underperforming sectors include construction-linked, consumer staples and industrial commodities verticals. Consumer discretionary services, which accounted for 8 per cent of overall revenue, are estimated to have grown 35 per cent year-on-year, largely due to revenue more than doubling in sectors, such as airline services on account of a rise in passenger traffic and high fares and hotels due to the increase in occupancy and room tariff.

It further said the IT services sector will report a 15-17 per cent rise in revenues, aided by the rapid adoption of digital platforms across the world. It said the construction-linked sectors, which accounted for 16 per cent of overall revenue, grew only 5 per cent on-year in the September quarter, adding that the largest contributor steel products likely to de-grew by 3 per cent after a continued run-up in revenue growth over the past eight quarters.

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