‘India Inc’s quarterly revenue growth to reach 2-year high’

The first sign of topline growth shifting to a higher trajectory was seen in March quarter, when it surged 6.5 per cent from a drab 1-3 per cent seen in each of the five preceding quarters, the rating agency said in the report.

“To be sure, revenue growth remains significantly lower than long-term average of 12-15 per cent. However, in real terms or adjusted for inflation the picture looks brighter because topline growth is likely to be higher than the average for the last 4 years,” it said.

The report also said there could also be some surprises in accounting treatment because companies with a net worth of over Rs 500 crore would be migrating to Indian Accounting Standards from the June 2016 quarter.

The analysis is based on 600 companies (excluding financials and oil & gas) that account for about 70 per cent of the market capitalisation of the NSE, it said. From an emerging market perspective, this means domestic companies are growing way faster than peers in China, South Korea, Taiwan and South Africa, it added.

“Urban domestic plays and some export oriented sectors are expected to drive topline growth this time. We expect IT services industry to report 15 per cent revenue growth on the back of volume growth and the 5 per cent depreciation in the rupee against the dollar,” it said.

In pharmaceuticals, new launches from a strong product pipeline will propel 15 per cent growth, it said, adding that among consumption-oriented sectors, organised retailers, consumer durables and two-wheeler makers are likely to do well, fuelled by strong demand in urban areas.

But for FMCGs, growth is likely to be tepid dragged by insipid demand in hinterland, from where half of the revenue comes. Among investment-linked sectors, cement producers are likely to report 6-7 per cent growth in volume, indicating some benefits from progress in government aided construction activity, the report said.

Reflecting the pick up in project execution, construction companies will also witness a moderate 7-8 per cent revenue growth, better than the 5 per cent seen last fiscal. For capital goods makers, lack of broad-based capex recovery continues to hurt with revenues likely to decline by 5 per cent, the report added.