India Inc's revenue grew 11.4% in Q4FY23, but geopolitical tensions remain

According to Icra, sequential recovery in the overall performance of India Inc is contingent upon how well the entities are able to cope with the headwinds going forward

India Inc witnessed an 11.4 per cent rise in its revenue in the quarter that ended on March 31 as compared to the same period in 2021-22 (FY22). According to ratings agency Icra, an analysis of 579 listed companies showed that this is primarily due to demand recovery and price hikes by companies across sectors.

As compared to the third quarter of FY23, the revenue growth was a lower 5.2 per cent. The main sectors that led to a rise in revenue were aviation, hotels, ports, and gems and jewellery.

However, India Inc's operating profit margin (OPM), which shows the ratio of operating profits to the revenue of a company, fell 1.26 per cent year-on-year (YoY) during the quarter. 

 

"Icra's analysis shows that despite some easing off of inflationary pressures, the operating profit margin (OPM) of India Inc contracted by 1.26 per cent on a YoY basis in Q4FY23 as the conversion costs remained elevated and forex rates were unfavourable on a YoY basis," said Kinjal Shah, vice president and co-group head of corporate ratings at Icra.

The OPM was, however, up 0.58 per cent sequentially due to softening of commodity prices and price hikes by companies undertaken during the quarter. Despite this, geopolitical uncertainties continue to pose a threat to the easing margins.

"The sequential margin expansion was most visible in select sectors such as iron and steel, cement, oil and gas, and consumer durables. While margin pressures are likely to ease further in the coming quarters, given the recent further softening of commodity prices, uncertainties remain due to the evolving geopolitical situations. Hence, despite some softening and stabilisation of commodity prices over the recent months, India Inc's ability to improve earnings will be dependent on headwinds such as evolving recessionary trends in the developed markets and the impact of fluctuations in foreign exchange on both import as well as export-oriented sectors," Shah added.

Icra added that the sequential recovery in the overall performance of India Inc is contingent upon how well the entities are able to cope with the headwinds going forward.

"General price increases undertaken by entities across sectors, coupled with stabilisation of input costs and easing of supply chain constraints such as semiconductor chip shortage, can pave the way for margin recovery in the coming quarters," it said.