Corporate Revenue Seen Up 15% In Q2, Profitability Down 300 Bps: Crisil

A combination of factors such as moderate price hikes and steadily rising volumes is expected to lift corporate revenue 15% on-year to Rs 10.2 lakh crore in the second quarter of this fiscal, CRISIL has stated.

Profitability, however, is seen declining 300 basis points (bps) due to elevated commodity prices.

CRISIL's analysis of over 300 companies (excluding those in the financial services, and oil and gas sectors) indicates as much. On a sequential basis, corporate revenue likely declined 3%.

Of the total 47 sectors tracked by CRISIL Research, nearly half are estimated to have outpaced overall revenue growth during the quarter, with key sectors within consumer discretionary services logging maximum on-year growth. The underperformance of the remaining sectors compared with overall growth was largely broad-based across the construction-linked, consumer staples, and industrial commodities verticals.

Consumer discretionary services, which accounted for ~8% of overall revenue, are estimated to have grown 35% on-year, largely attributed to revenue more than doubling in sectors such as airline services (on account of rise in passenger traffic and high fares) and hotels (due to increase in occupancy and room tariff). Revenue of IT firms is estimated to have risen 15-17% on-year, aided by rapid adoption of digital platforms across segments and higher spending for modernisation to improve business resilience.

Similarly, consumer discretionary products, which accounted for almost 20% of overall revenue, logged 25% on-year growth, with maximum contribution coming from automobiles sectors due to healthy volume offtake, favourable product mix, and price hikes.

In contrast, the construction-linked vertical, which accounted for 16% of overall revenue, grew only 5% on-year. Steel products, the largest sector in the vertical, de-grew after a continued run-up in revenue growth over the past eight quarters, with a decline of 3% on-year, largely due to correction in flat steel prices to the extent of 15% on-year, and moderate volume growth amid duties levied on exports across finished-steel categories.

Says Hetal Gandhi, Director, CRISIL Research, "Given a relative tapering of growth in the second quarter compared with the first, overall revenue growth for the first half of this fiscal is estimated to be ~25% onyear. Almost 43% of this incremental growth is seen to be contributed by consumer discretionary products and services on a low base of last year as well as price hikes, while metals added another 10% to the incremental revenue."