India Inc.'s Q4 revenue growth to decline: Here's why
Companies have started reporting their Q4 FY23 results, and they have not been very positive so far. It seems we will see more of that. According to credit rating agency CRISIL, India Inc. is likely to report a 10-12% year-over-year decline in revenue in the January-March quarter. Let's look at the factors behind this slowdown in the revenue growth of corporates in India.
Why does this story matter?
India Inc. is on a recovery path. Both manufacturing and services Purchasing Managers' Index (PMI) has been growing, but the latter slowed in March. The last quarter was good for some sectors, but not for others. The factors behind the struggle were different for different sectors. However, ever-present economic uncertainties, fear of recession, and global slowdown remain key concerns.
Revenue growth for FY23 is estimated to be lower
In the January-March quarter in FY22, India Inc. recorded revenue growth of 22.7%. This year, however, the growth will come down. Per the report by CRISIL's Market Intelligence and Analytics arm, the revenue growth for the full fiscal FY23 is estimated to be 19-21%, which is lower than over 27% recorded in the previous fiscal.
Export-oriented sectors are expected to report a decline in growth
CRISIL analyzed over 300 companies across 47 sectors to reach its estimates. Commodities and export-oriented sectors were the hardest hit in the last quarter. The analytical company estimated textiles, gems and jewelry, and IT services to report a year-over-year decline. On the other hand, consumer discretionary products such as airlines, media and entertainment, retail, and hotels are expected to report positive results.
Decrease in global demand for steel products affected aggregate numbers
The aggregate decline in revenue growth in the March quarter is chiefly due to certain sectors. Steel products, which account for about 11% of total revenue, are estimated to have recorded a 7-9% drop in revenue. This is mainly due to the imposition of export duty in May 2022 and the decline in global demand amid the rising cost of raw materials.
IT firms are affected by general slowdown in global demand
The decrease in global demand has also affected the aluminum industry. Software players were impacted by the typical seasonality of the March quarter. Indian IT companies, which have significant global exposure, are also affected by a general decline in demand due to macroeconomic uncertainties. Top customers of these companies in the US and Europe have reduced discretionary spending.
