Mumbai: Weakness in consumer spending and softening commodity prices have led India Inc to deliver a six-quarter low revenue growth of 10.7 per cent for January-March period, a report said Monday.
From profitability perspective, operating margins also narrowed 0.78 per cent to 16.8 per cent during the period, but were up 0.93 per cent on lower commodity prices and price hikes, rating agency Icra said in the report.
The agency analysed the results of 304 listed entities while arriving at the aggregate.
It said for the consumer companies, the revenue growth declined to 2.3 per cent for March quarter, 2018-19, down from 9.8 per cent in the preceding quarter, while the same for companies in the commodity-linked sectors was 12.4 per cent as compared to 31 per cent.
The weakness in the consumer-linked sectors was visible in the decline in wholesale dispatches of passenger vehicles and two-wheelers and sequential decline in same store sales growth of quick service restaurants, retail chains and FMCG companies, its Vice President Shamsher Dewan said.
He added both urban and rural segments witnessed a decline in consumer sentiment as reported by auto and fast moving consumer goods (FMCG) companies.
The commentary on rural growth from auto OEMs and FMCG companies too indicates a slowdown in growth which can be attributed to a muted rabi harvest, the note said.
"Although commodity prices were higher on a Y-o-Y basis for both FY2019 and Q4 FY2019, there was a softening in prices of key commodities such as oil, steel and aluminium on a sequential basis which supported an improvement in the EBITDA margins on a Q-o-Q basis," reported Dewan.
The interest coverage ratio adjusted for sectors with low debt levels (IT, FMCG and Pharmaceuticals) witnessed a decline to 3.8x from 4.7x in Q4 FY 2018. This was because the growth in absolute EBITDA (5.7 per cent on a Y-o-Y basis) was significantly lower than the increase in interest costs (26.6 per cent on a Y-o-Y basis). The sharp increase in interest cost was because of higher interest rates and increase in debt levels, including working capital.
In terms of sector specific trends, consumer-linked sectors except FMCG and Consumer Food reported weak results. Within the automobile sector, the Passenger Vehicle segment registered a decline of 2.0 per cent in domestic sales in Q4 FY2019 on a Y-o-Y basis because of high base and weak customer sentiments, partly contributed by rising ownership costs (Fuel, EMIs and Insurance). The two-wheeler wholesale dispatches declined 9.0 per cent in Q4 FY2019 because of weak consumer sentiments and high inventory levels. Although FMCG companies reported healthy volume growth, management commentary from the sector indicate a deceleration in growth, especially in the rural segment.
Among other sectors, IT companies reported healthy revenue growth of 7.8 per cent (in $ terms; for six large IT companies) supported by continued traction in digital offerings and improving momentum in BFSI. The EBIT margins remained subdued Q-o-Q due to rupee appreciation, investments in digital and front-ended investments in certain large deals.
The domestic steel consumption witnessed a 6.5 per cent growth in Q4 FY2019. However, the hot rolled coil prices declined 3.3 per cent on a Y-o-Y basis in
Q4 FY2019.