Revenue riding north

India Inc appears to be on the path to recovery with revenue up 15-17% on-year to Rs 6.9 lakh crore in the fourth quarter of fiscal 2021 for ~300 companies, excluding banking, financial services and insurance (BFSI), and oil companies. There has been a recovery across sectors, led by higher volumes and commodity prices, although consumer discretionary services, such as airline services and media, continue to tread water. Sequentially, revenue is up 6-7% on-quarter.

Volume gains in the fourth quarter are also attributable to the low base of March 2020, when the lockdown to tackle the Covid-19 pandemic was imposed. That said, we are also seeing a sequential recovery in demand across sectors.

Among the sectors expected to perform well, steel products, construction and cement, which are construction-linked, are forecast to grow 30-32% on-year, aided by higher realisations, coupled with an increase in infrastructure activities on a low base.

The automobiles industry is expected to record steep growth, pegged at 45-47% on-year, given a low base, higher wholesale sales volumes, and higher realisations led by the implementation of Bharat Stage-VI (BS-VI) emission norms. This, in turn, is expected to have driven growth for ancillary segments such as auto components and tyres that are estimated to grow a robust 26-28% on-year.

However, not all sectors are expected to grow, with a cloud of uncertainty continuing to loom over consumer discretionary sectors. Revenue in sectors like airline services is estimated to drop by ~30% on-year, owing to social distancing measures to contain the spread of the pandemic as well as constrained disposable incomes.

With a visible recovery in the second half of fiscal 2021, the overall revenue for ~300 companies is estimated at Rs 23.8 lakh crore in fiscal year 2021, a mere 0.5% lower on-year.

Despite pandemic-related restrictions, there was sustained growth in export-linked sectors such as IT services and pharmaceuticals, with players reporting an ~6% on-year increase in revenue in fiscal 2021. The government thrust on public spending also arrested a fall in revenue for construction-linked sectors. Construction players are estimated to clock an ~10% on-year decline in revenue due to a weak performance in the first half of the fiscal. On the other hand, players in the commodity space, such as steel players, gained from a volume recovery in the second half of the fiscal, coupled with higher realisations – resulting in an ~10% on-year increase in revenue during the year.

However, overall revenue growth for India Inc was constrained by a fall in consumer discretionary products and services revenue. The pandemic posed a severe blow to players in this segment as revenue fell 10-12% on-year in fiscal 2021 due to a shift in consumer spending patterns, with consumers increasingly cautious about spending money.