According to a recently released report by the noted credit rating agency ICRA, the broader Q4 financial results reflect growing pressure on the performance front for the companies. The report based on the analysis of 642 companies in the Indian corporate sector underlines revenue growth in Q4 FY2018-19 slipping to six-quarter low at 10%.
Weal consumer sentiments and softening of commodity prices have been cited as the major reasons for somewhat sluggish revenue growth pattern. Shamsher Dewan, Vice President – Corporate Sector Ratings, ICRA commented, “The weakness in the consumer-linked sectors was visible across most consumer-oriented sectors such as passenger vehicles, two-wheelers, consumer durables and FMCG since H2 FY2019. The decline in consumer sentiments was visible in both urban and rural segments”.
The EBITDA margin of ICRA’s sample declined by 44 bps on a YoY basis and 23 bps on a QoQ basis to 16.6%. However, several sectors such as airlines, cement, consumer food and consumer durables reported a sequential improvement in margins because of price hikes initiated by companies in select sectors, lower cost of imports (benefits of improvement in INR vis-a-vis US$ in Q4 compared to Q3) and softening in commodity prices. “Although commodity prices were higher on a YoY basis for both FY2019 and Q4 FY2019, there was a softening in prices of key commodities such as oil, steel and aluminium on a sequential basis which supported an improvement in the EBITDA margins on a QoQ basis,” Dewan added.