Corporate India is poised for significant revenue growth due to a relatively strong domestic demand response to the events in West Asia since late February, as analyzed by an arm of domestic rating agency Crisil examining 400 firms across 47 sectors, excluding banking, financial services, and oil and gas.
”Over the past two years, revenue growth was primarily driven by volume. However, this time, pricing has emerged as the key factor, contributing more significantly to revenue gains than volume in sectors such as aluminium, steel, cement, airlines, fertilisers, and gems and jewellery,” remarked Sehul Bhatt, director of Crisil Intelligence.
Although growth rates have varied, they have been sufficient to sustain overall figures, Bhatt noted.
The automotive sector stands out as a key driver of growth, with the report indicating that automobiles, white goods, telecom services, power generation, and certain areas of healthcare continued to benefit from robust domestic demand.
Automobiles and white goods have seen advantages from the rationalization of goods and services tax (GST) rates, while power benefited from peak demand and telecom from premiumization and data monetization, it highlighted.
The revenue from the auto sector alone is anticipated to rise by up to 24% due to GST-related demand momentum, strong sales of passenger vehicles and two-wheelers, commercial vehicle demand, export growth, and selective price hikes, the report stated.
Power generation has remained largely shielded from external disruptions and is expected to achieve 8-10% revenue growth, driven by an estimated 8% rise in peak power demand. The telecom sector will likely see growth of 10-11% boosted by premiumization, data monetization, transitions to postpaid plans, and subscriber upgrades.
In sectors such as metals, cement, chemicals, tyres, fertilisers, gems and jewellery, and various consumer goods, improvements in realizations played a significant role in revenue growth.
Aluminium producers have benefited from supply disruptions and higher global prices, while steel and cement manufacturers have gained from improved realizations.
The IT sector is expected to record a 5% revenue increase, aided by favorable currency movements, even as enterprises remain cautious regarding their spending choices.
The quarter is anticipated to reflect subdued profitability, with operating profit margins likely contracting by up to 1 percentage point, according to the report.
”Margin pressure has been most evident in sectors where inventory cushions have gradually diminished. As replacement costs increased, companies began to absorb rising expenses related to industrial diesel, commercial liquefied petroleum gas, freight, packaging, and feedstock,” explained Pushan Sharma, another director at the entity.
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