FMCG sector gets rural push amid India Inc’s slowing revenue: Crisil
Moderating food inflation, a favourable monsoon, and a good harvest season for rabi crops contributed to the rebound in rural demand, Crisil mentioned
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India Inc’s revenue likely grew a modest 4-6% on-year in the April-June quarter of this fiscal, compared to 7% growth in the previous two quarters, according to Crisil Intelligence report. The decline in growth is likely because of sluggish performance by the power, coal, information technology (IT) services and steel sectors, which collectively account for a third of the revenue of over 600 companies analysed, the rating intelligence platform said.
However, the report predicted 4% rise in Earnings before interest, tax, depreciation and amortisation (Ebitda) on-year. Ebitda margin is projected to fall 10-30 basis points (bps) due to IT services, automobile, fast-moving consumer goods (FMCG) and pharmaceuticals .
According to the report, the auto sector’s revenue is projected to rise 4% on-year, owing to higher retail sales, partially offset by high inventory. Besides, pharmaceuticals, telecom services, organised retail, aluminium and airline are likely to drive revenue growth during the quarter.
The rating agency firm said that the revenue for pharmaceuticals may witness a rise by 9-11% on-year, higher than corporate India’s revenue growth for the past 10 quarters, fuelled strong export demand and a stable domestic market. On the other hand, telecom services revenue is expected to grow 12% on-year, fuelled by higher realisations of 11% on account of costlier subscription plans. Organised retail revenue is expected to climb between 15% and 17%, led by the value fashion and food and grocery segments. The aluminium sector’s revenue is projected 23% growth due to higher domestic demand (particularly through transmission lines), higher domestic output after Bharat Aluminium Company’s expansion, more export opportunities from lower trade volatility between major economies, and an improvement in realisations due to a higher share of downstream products.
Further, airline revenue is expected to rise 15% on-year, driven by an increase of 10-12% in volume owing to reduced aircraft groundings and the addition of new aircraft.
Crisil has predicted that a pick-up in rural demand supported the FMCG sector's volume growth. Moderating food inflation, a favourable monsoon, and a good harvest season for rabi crops contributed to the rebound in rural demand, the report added.
"The early onset of monsoon and lingering geopolitical uncertainties are expected to have materially impacted some sectors in April-June. To wit, the rain-induced cooler summer culled demand for electricity. On the other hand, geopolitical uncertainties impacted the IT services sector, where revenue growth is seen flat on year due to project delays stemming from tariff worries, which led to a slowdown in activity," Pushan Sharma, Director, Crisil Intelligence said.
