India Inc. is projected to have experienced a revenue growth rate of just 5-7 per cent year-on-year (YoY) for the quarter ending September, marking the slowest growth in 16 quarters. This decline is attributed to a stagnant performance in the construction sector, which represents about 20 per cent of total revenue for Indian corporations, according to a CRISIL report released on Thursday.
Additionally, there has been a downturn in the industrial commodities sector and subdued growth in investment-linked industries.
This analysis is based on data from 435 companies, which together account for nearly half of the total market capitalisation of listed firms. In contrast, these companies achieved an 8.3 per cent growth in the previous quarter, from April to June, states the report.
Commenting on the findings, Pushan Sharma, Director-Research, CRISIL Market Intelligence and Analytics, said, “Revenue of industrial commodities, investment and construction-linked sectors—collectively accounting for ~38 per cent of our sample set—grew only 1 per cent, weighing down overall performance. The industrial commodities sector, such as coal, saw a 6-7 per cent revenue decline due to lower coal offtake, coal-based power generation and e-auction premiums.”
Sharma added, “In the investment sector, the power segment (~70 per cent revenue contribution) grew just 1 per cent as above-normal monsoon reduced power demand. Among construction-linked sectors, steel revenue fell 2-3 per cent due to price drop led by cheap Chinese imports.”
The cement sector’s revenue growth declined by 2-3 per cent due to a high comparative base from the previous year and weaker prices that affected realisations. Additionally, sluggish government spending post-elections hindered construction activity, while above-normal monsoon rainfall limited cement volume growth. The monsoon also negatively impacted the petrochemicals sector, which reported flat year-on-year revenue growth in the second quarter, reveals the report.
In the agriculture sector, including fertilisers, revenue dropped by 20-22 per cent due to falling raw material prices, contributing to the overall decline in the sample set’s performance.
On a more positive note, the exports segment, which accounts for approximately 22 per cent of the sample set, grew by about 5 per cent. Within this space, the pharmaceutical sector maintained strong momentum, achieving 11 per cent revenue growth driven by robust demand in regulated markets and a reduction in pricing pressure in the US. Meanwhile, the IT services sector, which constitutes roughly 70 per cent of this segment’s revenue, experienced more modest growth of 3-4 per cent. This was mainly due to clients in North America and Europe’s banking and financial services sectors postponing non-essential projects.
Consumer discretionary and staple products and services, representing around 36 per cent of the sample set’s revenue, saw a notable 15 per cent revenue growth. In the consumer discretionary products sector, two-wheeler manufacturers reported 15-16 per cent growth in revenue, fueled by increased volumes from rural recovery and price hikes. The textiles sector also benefited from volume-driven growth alongside stable prices. In the consumer discretionary services category, telecom revenue rose by 12-13 per cent, driven by tariff increases across technologies, premium charges for 5G services, and a shift of subscribers to higher average revenue plans.
The “others” category, which accounts for 2 per cent of the sample set, posted a 4 per cent year-on-year growth. Within this category, aluminium—which contributes 80 per cent of its revenue—experienced growth of 3-4 per cent, supported by higher global aluminium prices resulting from reduced production in China.
Overall, India Inc’s profitability is estimated to have improved by 70-90 basis points year-on-year during the quarter. The aggregate earnings before interest, tax, depreciation, and amortisation (EBITDA) for the 435 companies analysed grew by approximately 10 per cent compared to the previous year.
Elizabeth Master, Associate Director-Research, CRISIL Market Intelligence and Analytics, said, “Among the top 10 sectors, which account for ~75 per cent of revenue, eight saw EBITDA margin expansion, led by export-linked sectors such as IT services and pharmaceuticals, investment-linked sectors such as power, and consumer discretionary sectors such as automotive and telecom services. The two sectors that faced margin contraction were steel, due to higher iron ore prices, and cement, due to subdued pricing.”
For IT companies, EBITDA margins increased by 110-130 basis points, primarily driven by higher employee utilisation and reduced attrition rates. In the pharmaceutical sector, top-line growth coupled with lower raw material costs contributed to a margin expansion of 320-340 basis points for formulation players. The bulk drugs segment also saw margin improvements of 230-250 basis points, fueled by a recovery in exports and higher realisations.
In investment-linked sectors, a decline in coal e-auction premiums led to a margin increase of 130-150 basis points year-on-year for power generation companies. In the consumer discretionary space, telecom services benefited from a margin expansion of 120-140 basis points thanks to lower licensing fees, reduced spectrum charges, and decreased network operating expenses, all while maintaining steady revenue growth, as per the report.
Conversely, the steel sector faced challenges, as coking coal prices fell year-on-year, but iron ore prices rose due to global market trends, increased export demand, and strong domestic consumption. This resulted in a margin contraction of 40-60 basis points. Similarly, the cement industry experienced a margin decline of 110-130 basis points, attributed to subdued pricing despite easing cost pressures.
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