India Inc's revenue is likely to have grown by up to 6 per cent in the September quarter, a report said on Thursday.
However, the operating profit margins compressed by up to 0.60 per cent during the July-September period as compared to a year ago, the report by an arm of domestic rating agency Crisil said.
"Corporate revenue is expected to have grown a modest 5-6 per cent on-year in the July-September quarter, following underwhelming performance of the power, coal, information technology (IT) services and steel sectors," it said.
The agency, which analysed performance of 600 companies, said companies in the sectors posting slower growth account for a third of the overall revenue.
It added that sequentially, the revenue growth during July-September period will be one percentage point higher than the preceding June quarter.
From a profitability perspective, it said companies struggled to fully pass on incremental costs in the automobile, pharmaceuticals and aluminium sectors, and the operating profit margin likely fell 0.50-1 per cent in Q2.
Continuing geopolitical uncertainties weighed on the IT services sector, with project deferrals likely limiting revenue growth to 1 per cent, while in the steel sector revenue is expected to have grown a moderate 4 per cent on-year despite having a volume growth of 9 per cent due to decline in steel prices.
The power sector's revenue likely grew a mere 1 per cent, affected by a surge in hydro-generation because of monsoon being 108 per cent of the long-period average and a 10 per cent rise in renewable energy generation, which led to reduced demand for coal generation.
As a result, the coal sector's revenue growth was likely flat, it said.
"The rationalisation of goods and services tax rates created anticipation of new stock with lower prices, causing a temporary disruption in segments such as passenger vehicles and fast-moving consumer goods (FMCG). As a result, retailers and distributors delayed FMCG purchases, while high inventory levels and sluggish retail sales affected demand for passenger vehicles in Q2," Crisil Intelligence's director Pushan Sharma said.
Sharma said the rural economy got a boost from a copious monsoon and farmer sentiment also improved after the government announcement of higher minimum support prices for kharif crops, which drove up sales of tractors and two-wheelers.
Revenue of tractor makers likely surged 36 per cent driven by a 31 per cent increase in volume, while two-wheeler revenue is expected to have grown 9 per cent led by a 6 per cent increase in volume, Sharma added.
The cement sector likely rebounded with 8 per cent revenue growth following a 6-7 per cent on-year increase in volume over a low base and pre-festival demand, it said, adding the pharmaceutical sector is expected to have grown 8 per cent on export demand and stable domestic market conditions.
Telecom services revenue likely grew 7 per cent in Q2 because of higher realisations on account of costlier subscription plans, even as subscriber growth was flat, it said.
Elaborating on its profitability compression expectations, the agency said the automobile sector's margins are expected to have contracted 1.50-2 per cent on-year owing to the continual rise in aluminium prices, which grew by 11 per cent.
Margins for the aluminium sector likely moderated 1-1.5 per cent on lower export realisations on account of lower regional premiums.
In the pharmaceutical sector, margins are expected to have contracted 1.5-2 per cent owing to pricing pressure on existing products, which faced higher competition in export markets compared with newly launched products.
Cement, steel and telecom services sectors are likely to have expanded profit margins during the quarter, the report said.
