Growth in corporate revenue – excluding banking, financial services, insurance, and oil companies – is expected to print at a 12-quarter high of 12.8% on-year for the first quarter of fiscal 2019, Crisil Research’s analysis of ~350 companies, which account for 50% of the market capitalisation (excluding banking, financial services, insurance, and oil companies) of the National Stock Exchange, indicates.

It would be the third consecutive quarter of double-digit growth. While the earlier two quarters had benefited from low-base effect following demonetisation in the corresponding year-ago period, this quarter will reaffirm a sustained pickup in demand in most consumption-linked sectors.

“The performance would be in line with our estimate of double-digit growth for the whole of fiscal 2019, with 15 of the 21 key sectors expected to log growth above 10% this time,” said Prasad Koparkar, Senior Director, Crisil Research. “The pick-up in volumes is expected to have sustained in both consumption- and commodity-linked sectors.”

Among consumption-driven sectors, automobiles, retail and airline services are expected to log revenue growth in excess of 15%, led by volumes.

Among commodity-linked sectors, natural gas and cement are expected to post robust growth, led by volumes, while the likes of petrochemicals and steel products would benefit from continued higher prices.

Export-linked sectors such as IT and pharmaceuticals, too, are expected to show an uptick in revenue growth, thanks to a 4% depreciation in the rupee over the quarter.

However, telecom is expected to show the impact of continued pricing pressure, which has forced incumbents slash tariffs to retain subscriber market shares. The toplines of sugar players, too, are expected to show the impact of bumper production on sugar prices.

Despite the firm revenue trend, operating profitability, or the earnings before interest, tax, depreciation and amortisation (EBITDA) margin, is expected to print 20 basis points (bps) lower on-year at 18.9%.

The pace of margin contraction, though, is seen easing to less than 30 bps on-year from 100-250 bps in the previous four quarters, aided by improvement in operating efficiency and utilisation.    

“Sectors such as automobiles, steel products, and pharmaceuticals are expected to log improvement in EBITDA margin,” said Hetal Gandhi, Director, Crisil Research, “On the other hand, higher commodity prices and structural headwinds would erode the profitability of sectors such as airline services, cement, natural gas, sugar, and telecom services. And for export-linked sectors, a depreciating rupee would have eased margin pressure.”