Icra vice-president for corporate sector ratings Shamsher Dewan said the margins got narrowed because of a rise in energy and raw material costs as well as the adverse impact of rupee fall.
India Inc witnessed a dip in both revenue growth as well as margins in the December quarter compared to the preceding three months, says a report. However, when compared to the same period a year-ago, revenue growth has come in at a handsome pace, but margins crimped, domestic ratings agency Icra said Monday. The analysis is based on the aggregate numbers reported by 648 listed companies, which shows a revenue growth of 17.3 percent in Q3 down from 19.4 percent in the preceding three months and 9.8 percent in the year-ago period.
The operating margins came in at 16.4 percent as against 16.6 percent in the quarter-ago period and the 17.1 percent in the year-ago period, the report said. Icra vice-president for corporate sector ratings Shamsher Dewan said the margins got narrowed because of a rise in energy and raw material costs as well as the adverse impact of rupee fall.
“Airlines, cement and building materials (tiles and glass) reported a decline in margins because of sharp increase in fuel prices, while automobile OEMs, consumer durables, paints and media (news print) also saw margin contraction because of rising input costs,” he added. He further said towards the latter half of the quarter, there was a decline in global crude prices and price hikes taken by some sectors which led to a sequential improvement in operating margins for sectors like airlines, tiles and ceramics, and cement.
The results by consumer focused companies also showed a mixed bag, he said, pointing out that the auto industry faced low volume growth, consumer durables and fast moving consumer goods clocked healthy volume growth. Rural demand continues to be stable with most companies suggesting that rural outpaced urban growth marginally, the agency said, adding most companies expect the rural growth momentum to remain stable, supported by expectations hike in minimum support prices and overall thrust on agri-economy ahead of the elections.
In the IT sector, digital offerings and strong momentum in the core industry of banking and financial services ensured a 8.3 percent revenue uptick in USD terms but operating margins remained flat despite the rupee fall on increase in sub-contracting costs and digital investments. With a pick-up in construction activity and new order inflows, steel and cement consumption was also healthy, clipping at 8.4 percent and 12.9 percent, respectively. Despite topline growth, from an operating profit margin basis, steel companies reported a 1.20 percentage point expansion while increase in pet coke prices and logistics cost led to a 0.30 percent decline for cement companies.