Crisil forecasts weak corporate earnings in June quarter : The Tribune India

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Crisil forecasts weak corporate earnings in June quarter

NEW DELHI: India Inc stares at another forgettable quarter of financial results, according to Crisil Research as investment-linked sectors, weak commodity prices and rural slack will curb performance.



Tribune News Service

New Delhi, July 7

India Inc stares at another forgettable quarter of financial results, according to Crisil Research as investment-linked sectors, weak commodity prices and rural slack will curb performance.

Crisil Research expects India Inc results for the quarter ended June 2015, to disappoint as soft commodity prices, weak growth in investment-linked sectors and subdued rural demand restrict earnings.

Crisil’s analysis of 600 companies (excluding financials and oil & gas), which account for 70% of overall market capitalisation, shows only a mild 3% uptick in revenue growth. Sequentially, this will be 230 basis points (bps) more than the 0.7% seen in the quarter ended March 31, 2015.

The report said continued weak performance of investment-linked sectors and companies impacted by low global commodity prices will curb even the moderate growth anticipated in export-oriented and consumer-driven sectors.

Revenue growth for petrochemicals, steel, sugar and man-made fibre sectors will be the most impacted because of low commodity prices. Cement makers are also likely to see yet another weak quarter with volumes for large players remaining flat.

Construction companies should see a mild 2-4% revenue growth after being flat in the preceding three quarters.

Last fiscal had started well with India Inc registering double-digit topline growth in the first quarter ended June 30, 2014. However, there was a near-stalling since then because of which, revenue growth for the whole of the last fiscal came in at just 6.4%.

Prasad Koparkar, senior director, Crisil Research, said: “Export-oriented sectors and some domestic consumption-driven sectors (such as retail, FMCG, and media) will be the topline outperformers with the former being partly aided by the recent weakness in rupee. But here, too, there are headwinds — stuttering merchandise exports growth and weakness in rural demand, respectively. Going forward, revenue growth will be influenced by the progress of monsoon in July and August and pick-up in the pace of public investments and project execution. Developments in China and the European Union will impact the fortunes of companies that have significant revenues accruing from overseas subsidiaries, apart from exports.”

The fragile state of rural consumption is reflected in volume and topline growth of companies heavily dependent on hinterland such as FMCG, tractors, and motorcycles.

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