Revenue outlook (April-June 2018)
Double-digit growth expected riding on consumption sectors and commodity prices
CRISIL Research expects corporate revenue growth, excluding that of banking, financial services, insurance, and oil companies, for the quarter to June 30, 2018, to print ~13% on-year. This would mark the third consecutive quarter of double-digit growth.
Sustained, broad-based recovery across consumption-linked sectors, coupled with higher commodity prices, is helping India Inc grow faster.
Consumption-linked sectors, with the exception of telecom services, are expected to grow in the mid-to-high teens for the fourth consecutive quarter. This will be driven by improving macros, a pickup in consumer sentiment, and growing rural demand, besides government support to farmers and expectations of a third year of normal monsoon. Inflation, though rising, is not going off the handle, aiding consumer sentiment.
Commodity-linked sectors, such as steel products and petrochemicals, are expected to continue growing as prices surge. Cement will continue to witness high volume-driven growth, led by a significant increase in capacity for a large player and high demand from the affordable-housing segment.
Export-linked sectors are also showing signs of improvement on a low base. We expect both information technology (IT) services and pharmaceuticals to clock double-digit growth. Though pricing and regulatory pressures from the US have increased, new product launches and improving domestic demand (primarily benefiting mid-sized and small formulation players, such as FDC and Pfizer) are expected to help limit the damage. The 4% rupee depreciation has also aided double digit export growth.
The competitive intensity in the telecom industry has intensified since January 2018 as the cut in interconnect usage charges started getting passed on to customers through lower tariffs and post-paid plans.
Agricultural commodity-linked sectors such as sugar and cotton yarn are unlikely to log any expansion in revenue, given softer commodity prices.