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India Inc Q3 Revenue Growth Likely Slowed By 80-90 Bps To 4-6%; Profit Margins See A Modest Rise

Last Updated:January 21, 2025, 17:54 IST

On a sequential basis, India Inc’s revenue improves to 5.2 per cent compared with 2.4 per cent in the July-September quarter.

Profitability is seen up 40-50 bps, driven by export-linked sectors, with Ebitda likely rising about 8 per cent.

India Inc’s revenue growth for the October-December quarter of FY25 is estimated to have slowed by 80-90 basis points (bps) year-on-year to 4-6 per cent, according to the latest report by CRISIL Research. The decline is attributed to weaker performance in the construction and industrial commodities sectors, as well as subdued investment-linked segments. Despite this, profitability improved by 40-50 bps, driven by export-linked sectors such as IT services and pharmaceuticals.

“Revenue growth of India Inc likely declined 80-90 basis points (bps) on-year to 4-6 per cent in the three months ended December 2024 as the construction segment, which accounts for a fifth of overall revenues, dragged because of an extended monsoon and slower recovery in government spending after the general elections, while the industrial commodities and investment-linked segments had a subdued outing,” CRISIL said in the report released on Tuesday.

However, on a sequential basis, revenue improved to 5.2 per cent compared with 2.4 per cent in the July-September quarter, it added.

An analysis of over 400 companies that account for almost half of the listed market capitalisation, indicates as much, CRISIL said.

“Profitability is seen up 40-50 basis points (bps), driven by export-linked sectors, with earnings before interest, tax, depreciation and amortisation (Ebitda) likely rising about 8 per cent,” CRISIL said in the report.

Key Highlights

Revenue Performance: Construction, industrial commodities, and investment-linked sectors, which constitute 38% of the sample set, collectively saw a revenue dip of 1%. The construction sector was particularly impacted by extended monsoons and slower recovery in government spending post-elections, CRISIL said.

Profitability Growth: Profitability, measured by earnings before interest, taxes, depreciation, and amortisation (Ebitda), rose by approximately 8%. Export-linked sectors like IT services and pharmaceuticals, along with investment-linked sectors such as power, drove this growth.

Sequential Improvement: On a quarter-on-quarter basis, revenue growth improved to 5.2%, compared to 2.4% in the July-September period.

Pushan Sharma, director (research) at Crisil Intelligence, said, “Among the top 10 sectors that account for nearly 70 per cent of overall revenue, four likely saw Ebitda margin expansion, led by export-linked sectors such as IT services and pharmaceuticals, investment-linked sectors such as power, and construction. Steel, automobiles, telecom, FMCG, cement and auto components sectors may have logged margin contraction.”

Sectoral Highlights

Among construction-linked sectors, steel revenue fell 7-8% despite healthy demand as imports from China weighed down prices, while cement likely saw a muted 1-2% growth on a high base and lower realisations following consolidation, CRISIL said.

“Among industrial commodities, coal likely logged 1% growth as e-auction premiums fell despite higher demand for heating. Telecom services (17%), aluminium (22%) and automobile (7%) are expected to see industry-beating growth on tariff hikes, higher global prices and rural recovery, respectively. Among investment-linked sectors, power (~65% of the sector) likely grew 2-3% on strong demand as industrial activities resumed after monsoon,” according to the report.

Consumer discretionary, staple products and services (35% of the sample set’s revenue) likely logged 9-10% on-year revenue growth, led by ~17% jump in telecom services revenue following sharp tariff hikes and increased data consumption stemming from rising penetration in the rural areas.

The automobile sector’s revenue likely grew ~7% due to a rise in the volume of cars sold, supported by healthy festive demand and higher realisations due to a change in the product mix and increasing share of exports. Retail sector growth continued, supported by festive sales.

In fast-moving consumer goods (FMCG), the staples segment is expected to log 6-8% revenue growth driven by price hikes amid muted demand. While demand recovery in hinterland is expected to sustain, the urban side is expected to remain subdued next quarter as well.

Elizabeth Master, Associate Director-Research, highlighted the export-linked segments’ performance, stating, “The exports-linked segments (~22% of our sample set) likely saw revenue rise ~5%, with IT services clocking only 3-4% growth on deferral of projects. Pharmaceuticals may have grown 12% on sustained strength in exports to regulated markets and growth in the domestic market.”

Agriculture (around 2% of our sample set) likely clocked 6% growth on higher consumption of fertilisers, good monsoon and expanded rabi acreage.

Profitability Trends:

– IT services saw Ebitda margins rise by 70-80 bps in Q3 due to higher employee utilisation and lower attrition.

– Pharmaceuticals experienced a 140-150 bps margin expansion due to lower input costs.

– Power generation companies recorded a substantial 450-460 bps margin improvement from reduced coal prices.

– Margins for sectors like steel and cement contracted due to higher raw material costs and lower realisations.

News business India Inc Q3 Revenue Growth Likely Slowed By 80-90 Bps To 4-6%; Profit Margins See A Modest Rise



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