Article of the month

No respite for India Inc

Revenue and EBITDA drop in Q3, EBITDA margin stays muted

January 2020


Industry outlook

Results preview (October-December 2019)

Revenue declines for the second quarter in a row


CRISIL Research expects revenue of coporate India – excluding banking, financial services and insurance (BFSI), and oil companies – to have declined 2-3% on-year in the third quarter (Q3) of fiscal 2020, mainly due to muted private consumption and a decline in revenue of industrial- and construction-linked sectors.


This marks the second successive quarter of degrowth, coming after a 3-4% decline in the three months ended September 30, 2019


The assessment is based on an analysis of 300 companies, comprising ~60% of the National Stock Exchange’s market cap (excluding BFSI and oil companies).


The decline in revenue is largely on account of falling revenue of consumer-linked sectors, which are estimated to have contracted 1-2% on-year. In fact, revenue of automobile companies is estimated to have posted a sharp slide of 9-10% on-year. This could be attributed to muted purchase of passenger vehicles (PVs) and two-wheelers, lower freight demand aggravated by the new axle norms, weak product mix and weak finance availability for commercial vehicles (CVs). In a rub-off, auto component manufacturers’ revenue is estimated to have decreased 13-15% on-year amid production cuts.


Also, while the cement sector’s revenue is estimated to have risen ~4% on-year, the revenue of construction-linked sectors is estimated to have declined ~6% on-year in Q3 fiscal 2020. This was on account of 18-19% on-year fall in steel products, mainly led by declining realisation.


The situation was downbeat for industrial commodities such as petrochemicals as well, which is estimated to have declined 17-19% on-year on account of lower realisation. Further, the 3-4% on-year decline in revenue of power companies was because of a slowdown in power demand across regions.