Corporate earnings may grow only 2% in Dec quarter: Crisil

Says growth is expected to improve by 1.8% to 5.8% against 4% in the first half of the current fiscal

Corporate earnings growth is expected to fall around 2% for the December quarter owing to a plunge in commodity prices coupled with weaker investment demand, according to Crisil Research.

"Crisil Research expects corporate (excluding BFSI and oil and gas companies) revenue to grow a measly 2% in the three months ended December 31, 2015, driven by low-base effect amid crushed commodity prices, weak investment demand, flagging rural consumption," it said in a statement.

Corporate earnings witnessed a growth rate of 5% in the corresponding quarter last fiscal.

Excluding sectors with topline linked to commodity cycle such as steel, petrochemicals and man-made fibres, the revenue growth is likely to improve, it said.
 

The research firm further said the earnings before interest, depreciation, taxes and amortisation (Ebidta) growth is expected to improve by just 1.8% (180 basis points) to 5.8% against 4% in the first half of the current fiscal, propelled by improvement in gross margin.

"With growth rates still trending below estimates, we believe the consensus earnings estimates for both this fiscal and next will have to be pared further," it added.

Crisil analysis is based on 600 companies (excluding financials and oil and gas) that account for 70% of the market capitalisation of the NSE.

"Sectors more focused on urban consumers such as automobiles, media, retail, and telecom are projected to post healthy double-digit topline growth.

"Mid-sized pharmaceutical companies are also expected to do well due to strong growth in exports to the US. But in general, India Inc is grappling with poor demand sentiment. With lower input costs and intense competition, pricing has also been impacted," Crisil Research Senior Director Prasad Koparkar said.

Besides, the Chennai floods will also impact the December quarter numbers of consumer discretionary sectors as well as IT services, auto components and engineering, he added.

It expects capital goods manufacturers to see a growth of nearly 2%.

On the brighter side, power generation companies will see a healthy growth of 7-8% led by commissioning of several projects in the last few months coupled with a gradual improvement in offtake.