Key sectors may post 7% growth in Q1: CRISIL

Crisil House at Hiranandani Powai in Mumbai.  

The aggregate topline of companies in key sectors, excluding banking, financial services and oil, is likely to have clocked about 7% growth in the first quarter of 2017-18, due to a pick-up in consumption, according to CRISIL Research.

In its ‘Q1 FY18 Results Outlook,’ CRISIL said the growth in these sectors, accounting for 61% of the market capitalisation of companies listed on the National Stock Exchange, was hemmed in by factors such as a rise in input costs, an appreciating rupee and output cuts ahead of the Goods and Services Tax (GST) regime rollout from July 1.

“Consumption-driven sectors, including automobiles, airlines, FMCG and retail, but excluding telecom, are estimated to have grown at a healthy pace of 10-11%. This is heartening, considering growth had slowed following demonetisation to 4-7% in the second half of fiscal 2017,” Prasad Koparkar, senior director, CRISIL Research said.

He added that commodity-linked sectors had been expected to do well, led by a robust increase in realisations in crude oil, steel and aluminium, and moderate growth in demand.

IT, pharma slow

However, export-linked sectors such as IT and pharmaceuticals, which had consistently outperformed the domestic industry by recording double-digit growth, is expected to have slowed down to only 3%.

This follows strengthening of the rupee, a surge in protectionism across the globe and pricing pressure in the U.S.

“The growth for the quarter would have been higher but for the Goods and Services Tax (GST), since manufacturers are expected to have limited production to clear existing inventory — especially in automobiles, FMCG and cement — before it took effect,” the rating agency’s research arm said.

It added that there could be demand and supply disruptions in the short term due to GST, though from a long-term perspective, the new regime will lead to efficiency gains and greater tax compliance.

Rahul Prithiani, director, Crisil Research said: “A rise in prices of key commodities such as crude oil, steel, aluminium and cement is expected to have pared the profitability of end-user sectors such as automobiles, petrochemicals, housing and tyres by ~130, ~230, ~330 and ~470 basis points (bps), respectively. The margin contraction could be much higher for pharma, at ~550 bps, given pricing pressure and lack of exclusivity period for generic drugs.”

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Printable version | Jun 14, 2021 10:04:49 PM |

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