India Inc revenue growth likely moderated for the fourth straight time to 6-8 in the first quarter of this fiscal because of low realisations and high-base effect.

On a sequential basis, revenue growth may print 200 basis points (bps) lower, marking the first such decline in eight quarters.

However, operating profit margin is seen edging up to ~20% from 19.6% in the first quarter of last fiscal, and 19.3% in the fourth quarter, helped by easing commodity prices, especially crude oil.

Of the 47 sectors tracked by CRISIL MI&A Research, 14 likely saw a fall in revenue, while 15 may have logged slower sequential growth, an analysis of over 300 companies (excluding those in the financial services and oil & gas sectors) indicates.

Lower realisations and slowing global demand for metals and industrial commodities affected makers of aluminium, steel, ferro alloys and petrochemicals.

Revenue of aluminium manufacturers likely fell 14-16% owing to an 18-20% decline in international prices and a sedate growth in volumes. Steel products may have logged a 6-8% contraction in revenue, impacted by the high base of the previous fiscal and a drop in realisations, which offset volume growth.

The power sector is likely to see relatively slower 5% revenue growth.

Says Aniket Dani, Director, CRISIL MI&A Research, “Of the total on-year incremental revenue during the first quarter, nearly 60% would have been contributed by just three segments - investment-linked, export-linked, and consumer discretionary products and services. Within these, a majority of this rise is likely driven by the automobile and cement sectors. Export-linked sectors are seen bucking the decline largely on the back of healthy growth in IT services and pharmaceuticals.”

Automobiles sector likely grew 13-15%, driven by three sub-segments - commercial vehicles, passenger vehicles and two-wheelers. Realisations are expected to be high as multiple price hikes of the previous quarters came into play and volume grew.

Among others, the consumer discretionary products segment likely grew 13-15% on-year, driven by 10-12% growth in media and entertainment, and 15-17% and 11-13% improvement in retail and hospitality, respectively.

Pharmaceuticals seem on course for 12-14% on-year growth owing to strong domestic price growth, continued momentum in exports to regulated markets, and abating pricing pressure in the US.

IT services is seen clocking 16% growth on-year following cost optimisation, healthy digital solutions, cloud and automation capabilities, as well as a wide range of offerings.

But with major export markets showing signs of slowing, revenue of export-oriented discretionary products such as cotton and synthetic textiles and gems and jewellery likely was lacklustre.

Says Sehul Bhatt, Associate Director, CRISIL MI&A Research, “This fiscal should see Ebitda margin benefiting from continued correction in commodities, including crude oil, the price of which fell a third during the first quarter. Apart from seasonal weakness, domestic prices of steel products (flat and long steel down~15%) and metals such as iron ore and aluminium (down ~17%) have been easing because of subdued global demand and cheaper imports, which, too, supports profitability.”

Operating margin of airlines and automobiles has likely expanded ~400 bps, power companies by around 150 bps, and FMCG by 100 bps.

While higher revenue helped pharmaceuticals and IT services improve their margin, tariff hike dialled up the number for telecoms.

For the sugar sector, margin is seen up ~600 bps on the back of higher sugar and ethanol prices.

Corporates are likely to continue seeing their profitability improve this fiscal as commodity prices decline and volumes drive revenue growth.