India Inc's Q2 revenue growth to moderate to 16-16.5%: Report

Mumbai: India Inc's revenue is estimated to grow 16-16.5 per cent year-on-year in the second quarter of the current fiscal, moderating from 17.4 per cent in the preceding quarter, a report said on Wednesday.

Profitability is estimated to be stable at the levels seen in the June quarter, the report by an arm of rating agency Crisil said.

Domestic demand remained supportive, with automobiles, power, metals and consumer staples emerging as the largest contributors to growth, it said.


Firmer commodity realisations and favourable currency translation effects also supported revenue expansion in select export-oriented sectors, Crisil Intelligence said in its quarterly analysis of corporate performance.

Aggregate Ebitda margin is expected to remain broadly stable sequentially at 18.2-18.6 per cent, though this masks divergent sectoral trends.

Commodity producers benefited from stronger realisations, while several downstream and consumer-facing sectors likely absorbed a part of higher input costs to protect demand and sustain volume growth.

Rural-linked segments of the automobile industry showed signs of losing momentum in the second quarter, with two-wheeler revenue growth may have slowed sharply to around 12 per cent from over 36 per cent in the previous quarter, according to a report.

Tractor revenue growth also likely moderated by around 2 per cent during the quarter, indicating uneven demand conditions within the broader automobile sector. The moderation came even as automobiles remained among the largest contributors to overall corporate revenue growth.

Passenger vehicle revenue is estimated to have risen around 24 per cent in the second quarter, supported by an expected 20 per cent growth in volumes, premiumisation and a better product mix.

The segment also benefited from demand momentum following the rationalisation of GST rates, although this tailwind appears to have largely played out by the end of the quarter, Crisil said.

Commercial vehicle revenue is estimated to have grown around 21 per cent, aided by freight activity, replacement demand and an estimated 18 per cent increase in volumes.

Manufacturers, however, appear to have limited price increases despite higher costs, prioritising participation in the ongoing volume upcycle, it said.

Within automobiles, passenger vehicle Ebitda margin is likely to have contracted around 2.90 per cent despite strong revenue growth, while automotive component margins fell around 1 per cent and two-wheeler margins around 1.50 per cent.

The pressure reflects manufacturers absorbing a larger share of input-cost inflation to retain volume momentum, Crisil said.

Commodity producers, meanwhile, recorded some of the strongest margin gains. Aluminium margins are estimated to have expanded around 1,540 basis points, while blast-furnace steel producers saw margins expand around 260 basis points.

Domestic flat-steel prices were around 17 per cent higher YoY, although steel revenue growth remained largely price-led, with realisations estimated to have increased 10 per cent while volumes grew only around 2 per cent.

Power generation revenue is estimated to have advanced around 23 per cent while cement revenue growth was more moderate at around 9 per cent, with average cement prices estimated to have declined 6 per cent despite volume growth of around 6 per cent.

In consumer-driven sectors, FMCG revenue is estimated to have grown 10.5 per cent, with companies raising prices and trimming pack sizes in response to higher edible oil and other input costs. Margins are estimated to have declined around 100 basis points.

IT services revenue rose around 12 per cent in rupee terms, but currency depreciation likely provided material support and may have partly masked weaker underlying demand, with discretionary enterprise spending remaining cautious.

Airlines faced the sharpest profitability pressures. Passenger volumes are estimated to have declined 4 per cent even as fare realisations rose 18 per cent. Higher aviation turbine fuel costs and capacity constraints are estimated to have resulted in an Ebitda margin contraction of more than 1,200 basis points.