India Inc to take big hit on top line in Q4FY15

Indian companies are set to report lowest revenue growth in seven quarters for the three months to March 2014 says Crisil Research. In the last quarter of FY15, India Inc is likely to report 2.5% y-o-y growth in revenue on the back of softer commodity prices. The rapid slide in commodityprices will hurt top line growth of steel, petrochemicals and commodity chemical producers during the quarter.

The revenue growth of capital goods and constructioncompanies is likely to be impacted by low order backlog and slow project execution. The steel industry are likely to report 10-11% y-o-y decline in top line due to pressure on realisations and sales volumes of domestic and overseas operations of Tata Steel, the report state

Revenue growth for theautomobile sector is pegged at a tepid 6%. While sales of cars and medium & heavy commercialvehicles have picked up, muted growth in international businesses and two-wheelers will impact thetop line. Telecom and FMCGsectors are expected to register a revenue growth of 11% and 8-9%,respectively. Improving operating metrics with significant increase in datausage is set to drive the net sales of telecom companies while for the consumer goods, the expansion in top line will be driven by higher realisations. Strong capacity additions by Adani Power, Reliance Power and GMR Infra could lead to 4-6% y-o-y growth in in the net sales of the power sector, says Crisil.

While lower commodity prices will weigh on the topline growth, the operating metric of India Inc is seen benefiting from the same. Crisil Research expects 50-80 basis points y-o-y expansion in ebitda margin during the quarter led by sectors like FMCG, cement and telecom. “On the other hand, ebitda margins for steel, capital goods, fertiliser, IT services and pharmaceutical sectors will decline. Some of the large players in the housing sector will see a jump in ebitda margins due to one-time cost provisions made in Q4FY14,” according to the report. Both cementand telecom services could report upto 200 bps of growth in ebitda margin.

Ebitda margins of the automobiles sector is expected to increase by 84 bps. An increase in the margins of Tata Motors’ JLR division, the CV, two-wheelers and the cars & UVs segments are likely to be partly offset by decline in margins of tractormanufacturers during the quarter.

Even as IT services and pharma players are set to lead the revenue growth performance during the quarter, their ebitda margins may decline by about 100 bps as the benefits provided by a weak rupee fades. During the period, the average value of rupee against the dollar, weakened by a marginal 0.4%  q-o-q.