India Inc’s revenue likely grew a modest 4-6% on-year in the April-June quarter of this fiscal, slowing from ~7% growth in the previous two quarters, due to 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.

Earnings before interest, tax, depreciation and amortisation (Ebitda) likely rose ~4% on-year. However, Ebitda margin likely fell 10-30 basis points (bps), weighed down by IT services, automobile, fast-moving consumer goods (FMCG) and pharmaceuticals.

Our analysis of these 600+ companies, which account for more than half of the market capitalisation of the National Stock Exchange, indicates as much.

Says Pushan Sharma, Director, Crisil Intelligence, “The early onset of monsoon and lingering geopolitical uncertainties are expected to have materially impacted some sectors in April-June. To wit, the rains-induced cooler summer culled demand for electricity. Consequently, the power sector’s revenue is seen declining 8% on-year. The lower demand also pushed down spot prices of electricity, and led to a 2-3% lower demand for coal. 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.”

The steel sector’s revenue is expected to have grown a moderate 1-3% on-year, due to planned maintenance shutdowns at major steel mills and a 2-4% on-year decline in prices.

The auto sector’s revenue is foreseen rising 4% on-year owing to higher retail sales, partially offset by high inventory. An increase in prices stemming from changes in product mix and higher export realisations likely helped revenue grow.

Despite no significant increase in the Union Budget allocation for the construction sector, its revenue is expected to climb up 6% on-year as engineering, procurement and construction (EPC) companies benefited from a low base effect caused by disruptions from general elections in the first quarter of last fiscal.

Five sectors - pharmaceuticals, telecom services, organised retail, aluminium and airline - likely drove revenue growth.

Revenue for pharmaceuticals is seen up 9-11% on-year, higher than corporate India’s revenue growth for the past 10 quarters, driven by strong export demand and a stable domestic market.

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 likely rose 15-17%, led by the value fashion and food and grocery segments.

The aluminium sector’s revenue is seen up ~23%, owing 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.

Airline revenue is expected to rise 15% on-year, driven by an increase of 10-12% in volume owing to expanded supply on account of reduced aircraft groundings and addition of new aircraft.

Revenue expansion in the steel, cement and FMCG sectors was likely driven by volume growth of 7-9%, 3-4% and 4-5%, compared with an expected growth in realisation of (2-4%), 1-2% and 1-2%, respectively. 

In the cement sector, a low base, the pre-monsoon construction spree and healthy domestic demand pushed volume higher, despite the shutdown of a few mills. 

A pick-up in rural demand supported the FMCG sector's volume growth and drove revenue growth of 17% on-year in the tractor sector. Moderating food inflation, a favourable monsoon and a good harvest season for rabi crops contributed to the rebound in rural demand.

Says Elizabeth Master, Associate Director, Crisil Intelligence, “The top 10 sectors, which collectively account for over 70% of India Inc’s revenue, likely showed a mixed trend in the Ebitda margin. While the margin rose for the power, cement, steel, telecom services, construction and aluminium sectors, it likely declined for IT services, automobile, FMCG and pharmaceuticals. The cement sector’s margin is expected to rise 350 bps on higher on-year revenue and cost savings. In IT services, margin likely fell ~100 bps on-year, owing to a slump in demand and project deferrals due to US-driven tariff uncertainties and the absence of currency gains.”

The FMCG sector's margin likely declined ~100 bps on-year, due to a combination of a high base, increased costs of commodities (e.g., edible oil) and higher marketing expenses.

In pharmaceuticals, the margin is seen down 50-100 bps on-year owing to pricing pressure on existing products.

In contrast, margin in the steel sector is seen up 90-120 bps on-year as input cost, pertaining to iron ore and coking coal, turned favourable.

Telecom services margin likely surged 290-320 bps on-year due to lower operating expenses. 

The aluminium sector’s margin is expected to have risen 250-300 bps due to a decline in intermediate cost (fell 18% on-year for alumina) and improved linkages for domestic smelters, which reduced their cost of electricity.