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India Inc’s FY20 topline growth likely to be the weakest in 4 years

Cos may find it difficult to clock substantial revenue growth for the ongoing fiscal year.

, ET Bureau|
Last Updated: Mar 10, 2020, 06.54 PM IST
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Revenue of companies in the BSE 500 grew 2.4 per cent on average between April and December, the slowest pace since the same period in financial year 2016.
ET Intelligence Group: India Inc’s revenue growth is likely to hit a fouryear low in the ongoing financial year, as slack demand in the first nine months and a higher base due to double-digit revenue increase in the previous fiscal year are expected to play spoilsport.

Revenue of companies in the BSE 500 grew 2.4 per cent on average between April and December, the slowest pace since the same period in financial year 2016, an analysis by ET Intelligence Group showed.

In the absence of any major sign of a turnaround, these companies may find it difficult to clock substantial revenue growth for the ongoing fiscal year given the steep 17.5 per cent growth seen in the year-ago period, which serves as a high base.

ETIG surveyed 423 companies which reported financial numbers since financial year 2014 to arrive at the conclusion.

Sales growth in the nine-month period of the ongoing fiscal year was lower due to poor showing by companies in the auto and ancillaries, cement, construction, metals, and oil and gas sectors. In comparison, it increased 29.3 per cent in the first nine months of the previous fiscal year, the analysis showed.

BCCL

Net profit fell by 6.8 per cent in the first three quarters of the current fiscal year after losses at telecom service providers. It was the sharpest fall in at least five years.

Separately, Care Ratings said in its report on India Inc’s performance for the nine-month period that the “top-line of (our) sample set of companies analysed has been subdued and indicative of overall slowdown in various industries.”

ETIG’s analysis also showed that for companies in the Nifty 50 index, net sales grew 2.1 per cent compared with the higher base of 37.6 per cent in the corresponding period of the previous year.

Net profit rose 11.2 per cent, helped by a reduction in the corporate tax rate, compared to the tepid 0.4 per cent growth in the year-ago period. For the nine months to December 2019, the Nifty sample’s effective tax rate fell to 26.6 per cent from 32.7 per cent a year ago.

“It appears that most of the Nifty earnings per share (EPS) growth in the first nine months of FY20 has come primarily due to the corporate tax cut announced in September 2019,” Emkay Global Research said in a report. “With the asking rate for Q4FY20 and FY21 being high, we foresee further earnings cuts going forward.”

Other brokerages have turned bearish on India Inc’s FY20 earnings growth given the slowing pace in the fiscal year so far.

“For FY20, our Nifty EPS estimate is revised down marginally to Rs 527 (from Rs 538), and we now expect 9 per cent profit growth for the Nifty, singularly led by Financials,” Motilal Oswal Financial Services said in a report.

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