India Inc Revenues Set to Grow at Two-Year High in Q1 Despite West Asia Tensions: Report

India Inc's revenues are expected to grow at a two-year high of up to 11.5% in the June quarter, despite the prevailing tensions in West Asia, which have had a wide-ranging impact, starting with supply chain disruptions and stoking domestic inflation, a report said on Thursday.

Corporate India will be able to show the handsome revenue growth because domestic demand has held up "reasonably well" in response to the events in West Asia since late February, an arm of domestic rating agency Crisil said after an analysis of 400 companies from 47 sectors, excluding banking, financial services, and oil and gas.

"For much of the past two years, revenue growth was powered largely by volume. But this time around, pricing was the primary driver, contributing more to revenue growth than volume in sectors such as aluminium, steel, cement, airlines, fertilisers and gems and jewellery," Sehul Bhatt, director of Crisil Intelligence, said.

While growth has not been uniform, it has been broad-based enough to prop the aggregate number, Bhatt added.

The auto sector is one of the strongest contributors to the growth, the report said, adding that automobiles, white goods, telecom services, power generation and parts of healthcare continued to draw support from healthy domestic demand.

Automobiles and white goods benefited from rationalisation of goods and services tax (GST) rates, while power benefited from peak demand and telecom from premiumisation and data monetisation, it noted.

The auto sector's revenue alone is likely to have increased by up to 24% on GST-led demand momentum, healthy passenger vehicle and two-wheeler sales, commercial vehicle demand, export growth and selective price increases, it said.

Power generation remained relatively insulated from external disruptions and is expected to have clocked 8-10% revenue growth on the back of an estimated 8% increase in peak power demand, while premiumisation, data monetisation, migration to postpaid plans and subscriber upgrades will lead to a 10-11% growth for the telecom sector, it said.

In metals, cement, chemicals, tyres, fertilisers, gems and jewellery, and sections of the consumer basket, better realisations accounted for a larger share of revenue growth.

Aluminium producers benefited from supply disruptions and firmer global prices, while steel and cement companies gained from better realisations.

The IT sector is likely to post a 5% growth in revenues, driven by favourable currency movements, as enterprises remain cautious in their spending decisions.

The quarter will see subduedness in profitability, and the operating profit margins are likely to contract by up to 1 percentage point, the report said.

"Margin pressure was most pronounced in sectors where pe-escalation inventory cushions gradually depleted. As replacement costs rose, companies started absorbing higher expenses on industrial diesel, commercial liquefied petroleum gas, freight, packaging and feedstock," Pushan Sharma, also a director at the entity, said.