• CRISIL Q4 FY17 Results Outlook
  • Revenue Growth
  • IT, Media & Telecom
  • Telecom Sector
  • Fourth Quarter
  • Press Release
April 11,2017 location Mumbai

Ex-telecom, operating margins to fall just 30 bps in Q4: CRISIL Research

Steady volume growth to cushion impact of a sharp rise in input prices

CRISIL Research, India’s largest independent and integrated research house, expects top line growth of companies in key sectors – excluding BFSI and oil – to come in at ~8.5% on-year for the fourth quarter of fiscal 2017.

The analysis – excluding banking, financial services and insurance (BFSI) and oil companies – took into account expected results of 390 companies, which account for ~58% of the market capitalisation of the National Stock Exchange listed companies.

This would mark a nine-quarter high, driven by improving volumes and a spurt in pent-up demand post demonetization. Rising commodity prices are also expected to aid growth.

Prasad Koparkar, Senior Director, CRISIL Research says: “Fiscal 2017 will end on a positive note after sluggish revenue growth the previous fiscal. The growth rate for the full year is likely to be about 230 basis points (bps) higher on-year at 6.8%. In fact, it could have been higher, but for the adverse impact of demonetization. However, with improving liquidity since then, and continued government spending on infrastructure, growth momentum is expected to have accelerated in the fourth quarter.”

Consumer-linked sectors such as automobiles, fast moving consumer goods, retail, and textiles, are expected to recover with better liquidity, while the construction and capital goods sectors are expected to report robust growth of 10% on the back of public investment in roads, power transmission, and urban infrastructure. Growth in the capital goods sector is expected to be led by BHEL on account of a low base last year. Ex-BHEL, growth in the capital goods sector is estimated to be tepid at ~2%. The metals industry, primarily steel and aluminium, is expected to grow ~35%, driven by higher realisations.

However, export-oriented sectors such as information technology and pharmaceuticals, which have hitherto been the engines of India Inc.’s growth, are expected to lose steam and grow the slowest (5-7%) in the last 12 quarters. This is mainly on account of pricing pressure and rupee appreciation.

On the profitability front, earnings before interest, tax, depreciation and amortisation (EBITDA) margin is expected to decline by 100-150 bps to 19.3%, though ex-telecom, the dip is only about 30 bps.

Rahul Prithiani, Director, CRISIL Research, said: “This resilience is despite the sharp rise in prices of key commodities such as crude oil, steel and aluminium, which were higher by 68%, 34% and 9%, respectively, in a year. This indicates that players have been able to largely pass on the cost increase to consumers on the back of steady volume growth.”

CRISIL Research believes that fiscal 2018 holds a conducive outlook, given favourable budgetary announcements, higher infrastructure investment (~6% higher budgeted outlay), softer interest rates, and rising consumption, particularly on the rural side, led by anticipation of a normal monsoon. However, any material uptick in private sector investment is still 12-18 months away


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    Prasad Koparkar
    Senior Director
    CRISIL Limited
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    Rahul Prithiani
    CRISIL Limited
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