India Inc is expected to report a three per cent year-on-year decline in profits for the July-September period, a report said on Wednesday.
This fall in profitability will be the fourth straight quarter of the decline in profits for the listed companies, rating agency Crisil's research wing said.
"Profitability...is seen declining 300 basis points (bps) due to elevated commodity prices," the report, based on research of 300 companies from 47 sectors, said.
"Rising revenue momentum is not translating into profit margin proportionately," Crisil Research's associate director Sehul Bhatt said.
The revenues are expected to rise by 15 per cent during the quarter when compared to the year-ago period, the report said, attributing it to moderate price hikes and steadily rising volumes.
It can be noted that starting earlier this week, major companies have been reporting their earnings for the July-September period.
On a sequential basis, that is when compared with the performance in Q1, the corporate revenue has declined by 3 per cent, the report said.
The report said nearly half of the 47 sectors have outpaced overall revenue growth during the quarter, with key sectors within consumer discretionary services logging maximum year-on-year growth.
The underperforming sectors include construction-linked, consumer staples and industrial commodities verticals, it said.
Consumer discretionary services, which accounted for 8 per cent of overall revenue, are estimated to have grown 35 per cent year-on-year, largely due to revenue more than doubling in sectors, such as airline services on account of a rise in passenger traffic and high fares and hotels due to the increase in occupancy and room tariff, it said.
The IT services sector will report a 15-17 per cent rise in revenues, aided by the rapid adoption of digital platforms across the world, the report added.
The construction-linked sectors, which accounted for 16 per cent of overall revenue, grew only 5 per cent on-year in the September quarter, it said, adding that the largest contributor steel products likely to de-grew by 3 per cent after a continued run-up in revenue growth over the past eight quarters.
"Given a relative tapering of growth in the second quarter compared with the first, overall revenue growth for the first half of this fiscal is estimated to be 25 per cent on-year," Crisil Research's director Hetal Gandhi said.
The operating profit margins of 70 per cent of the 47 sectors have shrunk during the quarter, the report said, adding that the sharpest reduction was in construction-linked sectors at over 10 percentage points due to high input costs and delays in passing those on to customers.
Bhatt said although key commodity prices such as coking coal and crude oil have cooled sequentially, they remain elevated year-on-year, eating into corporate profits, with absolute operating profit remaining flattish during the quarter.
When compared to the pre-pandemic levels, 94 per cent of the sectors have surpassed the performance in both revenue and absolute profits, its manager Jignesh Surti said.
