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“While growth in investment-linked sectors is expected to continue to decelerate at a fast pace, consumption-led sectors too are experiencing moderation in growth. This is reflected in the slowdown in private fi..

25 Mar 2013

MUMBAI (Commodity Online): India's revenue growth excluding banks and oil & gas companies will decelerate to 6-7 per cent in January-March 2013 (Q4 FY13) from 17.5 per cent in Q4 FY12 on the back of waning demand, expects CRISIL Research in its research note.

“While growth in investment-linked sectors is expected to continue to decelerate at a fast pace, consumption-led sectors too are experiencing moderation in growth. This is reflected in the slowdown in private final consumption expenditure (PFCE) growth – to 4.6 per cent in Q3 FY13 from 9.2 per cent in Q3 FY12 – resulting in slower growth in sectors such as automobiles, hotels, retail and readymade garments (RMG).” the firm said in a note.

“Manufacturing and investment-linked sectors are anticipated to grow at a tepid pace of 4-5 per centin Q4 FY13. Such sluggish growth was last witnessed over three years ago in Q1 FY10, driven by the dramatic slowdown in the global economy after the credit crisis in the US. But this time, domestic issues such as administrative delays, high cost of capital and persistent inflation are largely responsible for slowing demand growth.” pointed out Mukesh Agarwal, President, CRISIL Research.

CRISIL Research’s analysis of 28 key sectors (excluding banks, oil and gas companies) indicates that capital goods, construction, commercial vehicles, tyres, auto components and steel are expected to witness either a revenue decline or low single-digit growth in Q4 FY13 on a y-o-y basis, due to the weak demand environment.

“Unlike manufacturing, service sectors are expected to witness relatively better revenue growth of 12-13 per cent in Q4 FY13. Corporate India’s revenue growth would have been even lower in the absence of support from these sectors. IT services is expected to continue to benefit from rupee depreciation, whereas the media & entertainment sector will see healthy growth driven by increasing digitisation. Telecom services will grow at a steady 6-8 per cent with improving average revenue per user (ARPU).” Prasad Koparkar, Senior Director, CRISIL Research added.

The persisting weak demand scenario will put further pressure on already low margins. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins are projected to decline by 30-50 basis points (bps) on a y-o-y basis in Q4 FY13.

Over the near term, revival in consumer and investor sentiment on the back of implementation of announced reforms, a normal monsoon and continued moderation in interest rates are critical for demand revival and improvement in corporate profitability.


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