Companies to see dip in revenue growth, low margins in January-March quarter: Crisil report

Mumbai: India Inc’s revenue growth will slow down to 9 percent in the January to March period on base effects, while the profit margins will shrink to a 12-quarter low of 18.6 percent, a report said on Monday. The pre-tax profit margins will contract by up to 0.70 percent, but the pace of contraction is now reducing, the research wing of rating agency Crisil said in a report. The revenue growth for the fourth quarter of the just concluded fiscal year, 2017-18, will be “slightly slow” at 9 percent as compared to last year, where waning impact of the demonetisation had helped the consumption sector deliver a faster growth. The 9 percent revenue growth will be driven by consumption sector itself, excluding telecom which is witnessing the aggressive play by Reliance Jio, it said. “Second half of fiscal 2018 will end at a double digit mark, mainly led by consumption and commodity linked sectors,” its senior director Prasad Koparkar said. [caption id=“attachment_4219123” align=“alignleft” width=“380”] Companies to see dip in revenue growth, low margins in January-March quarter: Crisil report. Reuters image.[/caption] He said while margin pressure continues with higher commodity prices, operating leverage benefits would help cushion the impact to some extent. The study focuses on research of 400 companies across multiple sectors, excluding banking, finance, insurance and oil companies. Starting this week, companies will be reporting their financial performance for the March quarter. The pre-tax margin will contract for the fourth straight quarter by 0.50-0.70 percent to 18.6 percent, which will be the lowest in 12 quarters, it said. However, the pace of contraction will slow down from the 1-2.5 percent witnessed in earlier quarters. Higher commodity and raw material prices will hurt the power, steel and consumer companies, while the appreciation in the rupee is bound to dent the exporters including those in information technology and pharma sectors. The report said the profitability of the telecom sector will “drop alarmingly”, by 4.50 percent on competitive pressures despite higher data traffic. “The competitive intensity in telecom industry further intensified since January 2018 after the new entrant started passing on the benefits of cut in interconnect usage charges to customers through lower tariffs,” it said.