India Inc Q3 earnings growth may slip to 6-quarter low of 7 per cent, says Crisil

India Inc's revenue growth is likely to slip to a 6-quarter low of 7 per cent on a year-on-year basis for the December quarter due to slower expansion in investment, export-oriented sectors and soft commodity prices, rating agency Crisil Research said on Thursday.

This tepid show will be due to weak performance of investment-linked sectors and stable currency exchange rates (y-o-y) impacting topline growth of export-oriented sectors and also weak global commodity prices, Crisil said in its Q3 FY15 results outlook report in Mumbai.

Revenue growth was around 9 per cent in the previous quarter ended September 30, 2014 and 13 per cent in the October-December 2013 period.

"On the profitability front though, we foresee a marginal uptick in EBITDA (earnings before interest, taxes, depreciation, and amortization) margins," the research firm said.

IT service providers are expected to report 10-11 per cent revenue growth Y-o-Y (in dollar terms) in Q3, similar to numbers in each of the preceding 6 quarters. However, due to lack of currency tailwinds, rupee revenue growth will be far lower than in 2013-14, Crisil said in its report.

"Investment-driven sectors will drag down growth. The volume growth for top 15 cement companies, accounting for 55 per cent of industry volumes, will decelerate to 5 per cent in Q3 from 9 per cent in the first half of the year.

Capital goods manufacturers, continuing to grapple with weak order inflows, are likely to report a 9 per cent y-o-y decline in revenues. While construction companies will report a slight uptick in topline growth, growth will still lag aggregate corporate India revenue growth," Crisil Research Senior Director Prasad Koparkar said.

Cotton yarn spinners will be hurt by weak export demand from China and lower yarn prices, but readymade garment exporters will continue to do well due to healthy growth in volumes, the report said.

According to the report, the rapid slide in global commodity prices will dent topline growth of steel, petrochemical, manmade fibres, and chemical producers.

Among consumption-oriented sectors, auto revenues are forecast to grow 7 per cent, propelled by higher domestic sales of medium & heavy commercial vehicles. Other sectors likely to report above average topline growth include FMCG, telecom, and pharmaceuticals.

On the other hand, despite softer crude oil prices, profitability gains could be limited for companies with raw materials linked to the crude chain due to losses booked on inventory previously procured, the global financial services firm added in its report.