India Inc revenues estimated to have risen by 8-10% in Q2 of FY24

Revenue of Indian corporates is estimated to have grown 8-10 per cent in the September quarter (Q2FY24), as revenue growth picked up after four-quarter moderation, marking the first such improvement in the pace of growth after four quarters. The improvement in revenue growth would have been stronger had it not been for a decline in agri-linked sectors such as fertilisers, industrial commodities such as chlor-alkalis, petrochemicals and commodity chemicals and aluminium, as emerged from a study of more than 300 companies (excluding financial services and oil and gas sectors). Of the 47 sectors that CRISIL MI&A Research tracks, nine sectors, accounting for more than 70 per cent of overall revenue, saw a pick-up in on-year growth.
Aniket Dani, Director- Research, CRISIL Market Intelligence and Analytics views the growth in revenue as largely skewed towards consumer discretionary products and services, where automobiles and the retail sector led the pack, and construction-linked sectors, where companies accrued benefits from an early deployment of capital expenditure by the roads and railways ministries.
The automobiles sector likely grew 12-14 per cent, driven by three sub-segments — commercial vehicles, passenger vehicles and two-wheelers. The growth was steered by a 20-25 per cent pick-up in passenger vehicles due to healthy demand sentiment, supported by new model launches, supply-chain improvement and more variety in product portfolio. The demand situation also gave elbow room for automakers to take multiple price hikes. Tractors remained sluggish, though, following an erratic monsoon, decline in rabi crop profitability and higher channel inventory was witnessed.
Within the consumer discretionary products segment, retail kept its momentum, growing 16-18 per cent. Led by a 19-21 per cent growth in media and entertainment and around 20 per cent in the hospitality segment, comprising airline services and hotels, the consumer discretionary services vertical grew 13-15 per cent.
The construction-linked segment was supported by the cement, steel products, roads and highways, and construction sectors. Cement companies likely recorded a 13-15 per cent growth backed by a 12-14 per cent volume growth over the year-ago quarter’s low base and lower impact of rains on construction activities, due to El Nino. Steady domestic demand contributed to the 8-10 per cent growth in revenue of steel products. Volume expanded a significant 17-19 per cent during the quarter, as against just above 10 per cent in the first quarter, following higher offtake of long steel products for infrastructure projects.
However, soft global growth impacted the revenue of the aluminium industry, which contracted 12-14 per cent as global prices fell marginally and reflected in the premiums of major export destinations. Prices of commodity chemicals saw downward pressure owing to
China’s slow recovery and widespread destocking, resulting in a likely 10-12 per cent fall in revenue. Lower realisations amid muted demand also impacted revenue of cotton and synthetic textiles.
Subsequently, overall earnings before interest, tax, depreciation and amortisation (Ebitda) margin for 350 companies is estimated at 20-22 per cent during the first half of this fiscal, up from around 18 per cent a year ago. The reason, according to Sehul Bhatt, Associate Director- Research, CRISIL Market Intelligence and Analytics, is that corporate India is expected to continue to benefit from rising input costs this fiscal, which will offer further impetus to volume growth.
Barring the construction sector, the top eight industries recorded an expansion in operating profitability on-year. The telecom industry managed to clock a 150-200 bps improvement in profitability due to stable costs and higher realisations from tariff revisions and migration of customers to upgraded technologies.
Going forward, revenue growth is likely to get a further augmentation because of the festive season-led demand for consumer discretionary products and services. Two factors though can swing corporate performance in the second half — the monsoon leaning towards inadequacy, which could impact the crucial rural demand and export demand, which continues to remain on the tenterhooks. Against this backdrop, favourable input costs may provide corporate India the much-needed respite.