According to the Icra report, earnings before interest, tax, depreciation and amortisation margin of its sample declined by 44 basis points on a YoY basis and 23 basis points on a quarter-on-quarter basis to 16.6 per cent.
Illustration: Uttam Ghosh/Rediff.com
Weakness in consumer sentiments and softening commodity prices have led India Inc to deliver a six-quarter low revenue growth of 10 per cent in the fourth quarter of FY19, a report said on Thursday.
The revenue growth in consumer-linked sectors was only 3.8 per cent in the fourth quarter of FY19 on a year-on-year basis, down from 27.9 per cent in the third quarter of FY19.
Commodity linked sectors’ revenue growth slowed to 12.4 per cent in the January-March quarter of FY19 as against 51.4 per cent in the third quarter of FY19.
"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 second half of FY19.
"The decline in consumer sentiments was visible in both urban and rural segments," Icra's vice president (corporate sector ratings), Shamsher Dewan, said.
The agency said the Ebitda margin of its sample declined by 44 basis points on a YoY basis and 23 basis points on a quarter-on-quarter basis to 16.6 per cent.
However, several sectors such as airlines, cement, consumer food and consumer durables reported a sequential improvement in margins because of price hike initiated by companies in select sectors, lower cost of imports and softening in commodity prices, it said.
The interest coverage ratio of the agency's sample, adjusted for sectors with low debt levels (IT, FMCG and pharmaceuticals) witnessed a decline to 3.8x from 4.1x in the fourth quarter.
The rating agency expects the demand in the automobile sector to remain subdued owing to weak consumer sentiments following rising ownership cost, subdued rural demand and tight financing environment given the liquidity constraints in the financial markets.
"The growth in the sector will start stabilising most likely from the second half of FY20 because of pre-buying related to the impending implementation of BS-VI norms from April next year, especially in the CV segment," it said.
Despite expectation of slowdown in automobile sales, the auto component industry is expected to grow between 10 and 11 per cent in FY20 supported by increasing content per vehicle owing to transition to BS-VI and safety norms.
In FY20, the cement demand growth is likely to be around 8 per cent, while domestic steel demand growth will moderate to 7 per cent.
Icra said that despite the reduction in debt levels and de-leveraging plans along with some improvement in operating profits, the coverage indicators would continue to remain weak for telecom companies over the near-term.
The rating agency said its negative outlook for residential real estate sector continues to reflect liquidity crunch on the back of slow sales and reduced availability of credit.