India Inc Q2 earnings: Revenue grows 6%, says Crisil report; notes slower growth in IT, steel

India Inc’s revenue grew by up to 6 per cent in the July-September quarter, according to a report released on Thursday by an arm of domestic rating agency Crisil, as it analysed the performance of 600 companies for the quarter.“Corporate revenue is expected to have grown a modest 5-6 per cent on-year in the July-September quarter, following underwhelming performance of the power, coal, information technology (IT) services and steel sectors,” the report said, as cited by PTI.Revenue growth during the July-September period was one percentage point higher than in the previous quarter. However, from a profitability perspective, companies struggled to fully pass on higher input costs in sectors such as automobiles, pharmaceuticals and aluminium.The operating profit margin is likely to have fallen by 0.50-1 per cent year-on-year in the second quarter.The report added that continuing geopolitical uncertainties weighed on the IT services sector, where project deferrals limited revenue growth to just 1 per cent. In the steel sector, revenue is likely to have increased a moderate 4 per cent despite a 9 per cent rise in volume, as lower steel prices restricted gains.The power sector’s revenue likely rose only 1 per cent, affected by a surge in hydro generation—driven by a monsoon that was 108 per cent of the long-period average—and a 10 per cent increase in renewable energy generation, which reduced coal-based power demand. Consequently, the coal sector’s revenue growth remained flat.“The rationalisation of goods and services tax rates created anticipation of new stock with lower prices, causing a temporary disruption in segments such as passenger vehicles and fast-moving consumer goods (FMCG). As a result, retailers and distributors delayed FMCG purchases, while high inventory levels and sluggish retail sales affected demand for passenger vehicles in Q2,” said Crisil Intelligence’s director Pushan Sharma, as quoted by PTI.Sharma added that the rural economy received a boost from a good monsoon and improved farmer sentiment following higher minimum support prices for kharif crops, which supported sales of tractors and two-wheelers. Tractor makers’ revenue likely surged 36 per cent, while two-wheeler revenue is expected to have grown 9 per cent, led by a 6 per cent rise in volume.

Among other sectors, the cement sector likely rebounded with 8 per cent revenue growth, driven by a 6-7 per cent rise in volume and pre-festival demand. The pharmaceutical sector is expected to have grown 8 per cent, supported by export demand and a stable domestic market.Telecom services revenue likely increased 7 per cent due to higher realisations from costlier subscription plans, though subscriber growth remained flat.

On profitability, Crisil said the automobile sector’s margins likely contracted by 1.50-2 per cent due to rising aluminium prices, which were up 11 per cent. Aluminium sector margins also moderated by 1-1.5 per cent owing to lower export realisations. In pharmaceuticals, margins are expected to have contracted 1.5-2 per cent because of pricing pressure and competition in export markets.However, the cement, steel and telecom services sectors are likely to have seen an expansion in profit margins during the quarter, the report added, as cited by PTI.