Indian corporates' decline in profitability may have bottomed out: Crisil

MUMBAI: Indian corporates' decline in profitability may have bottomed out, says Crisil research. According to the report, EBITDA(Earnings before interest, taxes, depreciation and amortization) margins may improve by 20-40 basis points in the September quarter.

"With commodity prices softening and weak rupee continuing to support realisations of export-oriented sectors over the next couple of quarters, EBITDA margins are expected to rebound after falling continuously y-o-y for the last nine quarters," the report said.

Revenue growth is likely to grow sustainably at 15% as cost pressures ease out.

Decline in commodity prices is likely to benefit sectors like cement, power, tyres and textiles. A weak but stable rupee will boost the margins of services exporters like IT and pharmaceutical sectors.

"Improvement in corporate profitability will be led by sectors such as IT services, pharmaceuticals, coal, airlines, tyres and sugar, which are expected to witness more than 150 bps y-o-y expansion in EBIDTA margins. Furthermore, for sectors like telecom and petrochemicals, the extent of margin decline y-o-y will be slower compared to the last few quarters due to easing cost pressures," said Prasad Koparkar, Senior Director, CRISIL Research.

But sectors that would still see some pressure on their EBITDA margins due to over capacity and pricing pressures emanating from there are hotels and paper industry. Slowdown in investments could impact the margins in capital goods and construction.