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Equations of stability

 

Key messages

 

Growth to moderate to 3-5% in fiscal 2024 due to looming macro-economic headwinds in key overseas geographies

  • Domestic demand to remain steady; correction in realisations to moderate revenue growth
  • Global macro-economic headwinds to impact exports, which account for ~42% of sectoral revenue
  • Long term growth drivers comprising of supplier diversification strategy by global players (China+1 and Europe+1) remain intact

Operating profitability to further contract to 9-10% after seeing a ~350-basis point (bps) decline in fiscal 2023

  • Moderating capacity utilization owing to demand headwinds in key export geographies followed by downward pressure on realisations due to Chinese dumping to result in gross margin contraction; inflationary pressure on fixed costs to also have bearing on operating margins
  • Any significant movement in crude prices will bear watching 

Capital expenditure (capex) step-up seen in fiscal 2024

  • Capex of ~Rs 11,500 crore estimated in fiscal 2024; ~Rs 10,500 crore was spent in fiscal 2023
  • Focus also on value-added downstream projects

Credit outlook to remain Stable

  • Strengthening business risk profiles over time have enhanced ability of players to withstand volatility in end-user segments/input prices
  • Steady accrual and prudent funding of capex will keep debt protections metrics healthy