Companies’ revenue growth slowed to lowest in over 16 quarters; these are 3 key concerns

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February 06, 2020 4:06 PM

Weak consumer sentiment, the slowdown in the infrastructure sector, and benign commodity prices have negatively impacted the performance of companies in Q3FY20, a rating agency said in a report.

rupee, dollarThe Q2FY20 GDP growth was recorded at a mere 4.5 per cent.

Weak consumer sentiment, the slowdown in the infrastructure sector, and benign commodity prices have negatively impacted the performance of companies in Q3FY20, a rating agency said in a report. The growth in revenue in revenue dipped to the lowest in over sixteen quarters, ICRA said. The commodity-linked sectors, revenues from which contracted by 4 per cent on-year basis, were impacted the most, it added. The analysis of quarterly earnings by the rating agency of listed companies showed that the aggregate revenues contracted by 0.1 per cent on-year basis. The interest coverage was impacted by the double whammy of rising interest costs in a weakening profit environment, ICRA added. “During Q3 FY2020, the profitability of India Inc. improved to some extent on a Y-o-Y as well as sequential basis, supported by cost-control initiatives undertaken by companies in the challenging demand environment, coupled with commodity tailwinds”, it added. However, weak demand, high discounting, tepid realizations in commodity sectors, and negative operating leverage continued to weigh down, it added.

“Despite the seasonally strong festive period, automobiles sales contracted by double-digits, while FMCG volumes failed to offer impetus. Additionally, tepid realisations driven by benign commodity prices, coupled with subdued volumes in light of the macroeconomic slowdown, resulted in revenue contraction for all major commodity sectors, including oil & gas entities, metals & mining and iron & steel”, Shamsher Dewan, Vice President, Corporate Sector Ratings, ICRA said.

It comes amid the ongoing slowdown in the economy on account of a variety of factors. The Q2FY20 GDP growth was recorded at a mere 4.5 per cent. The first advance estimates for the GDP project the growth at just 5 per cent. The government announced a slew of measures in the past few months to boost growth and even budget 2020 contained various measures in this regard.

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