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India Q3 financial results: Which industry sectors will lead revenue growth? Auto, IT, construction in focus

India Inc’s revenue is expected to rise about 14 per cent on-year in the fiscal third quarter ended December 2022 to Rs 10.9 lakh crore, following a steady rise in volume sales and price hikes. Revenue of sectors like automobile, IT services and construction-linked companies would likely show on-year growth, according to a report by CRISIL. Revenue for airline services may ascend as much as 41 per cent on-year; while the automobiles sector would drive past 22 per cent on higher domestic volume and realisations for vehicle makers, the report said.

IT services revenue is expected to grow 13 per cent on-year; and construction-linked companies will grow courtesy ‘healthy rise in capex allocations by the government for infrastructure build-outs, healthy growth in orderbook and improved execution’. “Of the 20 sectors expected to outpace revenue growth, 10 should see a margin contraction and five marginal improvement. Companies are still not able to fully pass on higher commodity prices,” said Sehul Bhatt, Associate Director-Research, CRISIL Market Intelligence and Analytics. 

India Inc’s revenue growth leader in fiscal third quarter

“Revenue growth in the third-quarter growth would be driven by consumer discretionaries such as airlines and automobiles, while construction-linked ones such as steel, aluminium and some industrial commodities such as petrochemicals would underperform,” said Hetal Gandhi, Director-Research, CRISIL Market Intelligence and Analytics. Other sectors like ITeS (BPO services) gems & jewellery and textiles sectors will bear the brunt of slowdown winds in US and Europe, she added.

Operating margins under pressure for these sectors in Q3

Operating margin in steel products likely contracted upwards of 800 bps on-year, construction-linked sectors and industrial commodities would see a margin contraction of 500 bps on-year, and for cement makers margin is seen contracting 230 bps on-year. “Prices of key energy linked commodities such as crude oil, and non-coking coal are expected to be moderately higher on-year but fall significantly sequentially from multi-quarter highs of the past 3-4 quarters,” said Jignesh Surti, Manager-Research, CRISIL Market Intelligence and Analytics. For India Inc as a whole, operating margins would likely contract 270 bps on-year which is slower than the past two quarters.

The findings are based on CRISIL’s analysis of over 300 companies, excluding the firms in the financial services, and oil and gas sectors. Out of the 47 sectors tracked, around 20 are expected to outpace overall revenue growth in the third quarter with three-fourths of them likely seeing operating margin contracting on-year.

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