Crisil Research expects corporate India to report a significant moderation in revenue growth and lower EBITDA margins for the second quarter of financial year 2011-12. According to the research agency, this would be due to decline in consumer confidence, stubbornly high inflation, rising interest rates and slowdown in investment growth.
Based on an analysis of the aggregate financial performance of select companies across 21 industries (excluding banks and oil companies), Crisil Research expects year-on-year (y-o-y) revenue growth of around 15%, as compared to 19% in the preceding quarter and 22% in Q2, last financial year.
“Sales volumes in consumption-linked and interest rate sensitive sectors such as automobiles, real estate, textiles, and retail have been significantly impacted. 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,” feels Prasad Koparkar, head - industry and customised research, Crisil Research.
Although companies have hiked prices, slower volume growth, along with high input costs and rising wages are expected to put pressure on margins. Crisil expects a 100 basis points (bps) reduction in EBITDA margins in Q2 FY12 from 19.5% during April-June 2011. Further, with increase in interest rates, the company expects net margins to fall even more sharply.
Automakers, textiles and steel manufacturers are expected to see 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 predicted to remain under pressure owing to slowdown in pace of project execution as well as rising input costs. Lastly, IT services providers are expected to report buoyant revenue growth of around 17% on the back of strong pipeline. However, EBITDA margins are likely to decline by around 200 bps due to rising salary costs, as per Crisil.
