Corporate revenue likely to inch up in FY25 after slow March quarter, says Crisil

Indian companies are likely to bounce back in the just-begun financial year following their slowest quarterly revenue growth since the pandemic, although it might not be much to boast about.

The overall revenue of Indian companies is likely to increase by 9-10% in the 2024-25 financial year driven by domestic consumption despite a global slowdown and possible interest rate hikes, research firm Crisil said following an analysis of 350 firms. The survey excluded companies in the financial services and oil and gas sectors.

Corporate revenue in FY24 is estimated to have increased 8%, said Miren Lodha, senior director, Crisil MI&A Research, despite growth moderating to 4-6% in the final quarter of the fiscal year.

The January-March period marked the slowest quarterly revenue growth since the economy recovered from the Covid-19 pandemic in September 2021. 

“Of the 47 sectors tracked, all but 15 sectors, accounting for 15% of the revenue, expanded, and only 12 likely showed an increase in both sequential and on-year revenue growth,” Crisil said in a statement.

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“In fiscal 2025, revenue growth should improve to 9-10%, driven by sectors less dependent on commodities and largely catering to the domestic market,” said Lodha. 

“Consumer discretionary segments, comprising both goods and services, will grow despite the easing of the post-pandemic release of pent-up demand. Growth in the consumer staples segment will pick up pace owing to the resumption of rural demand,” he added.

In the final quarter of FY24, the automobile sector witnessed healthy growth in sales of passenger vehicles, while sectors such as airlines and hotels benefited from a rebound in corporate meetings and travel, as well as weddings. The organised retail sector grew for the 13th quarter in a row on healthy urban demand, Crisil said. 

On the other hand, revenue from construction-linked sectors likely grew at a tepid pace as compared with the corresponding year-earlier fourth quarter that saw construction companies achieving their highest quarterly revenue. 

As for the cement sector, despite steady demand momentum during the quarter, revenue growth remained moderate as prices were under pressure amid higher supply and intense competition.

“On the margin front, an improvement of 100 (basis points) is estimated on-year in the March quarter. Overall earnings before interest, tax, depreciation and amortisation (Ebitda) margin for 350 companies continued to expand through fiscal 2024,” Crisil added.

Consumer discretionary services and export-linked sectors likely led margin expansion in the fourth quarter, the research firm said. Conversely, the steel sector, a construction-linked commodity, likely logged an on-year decline in margin as import pressures led to a fall in prices, Crisil added.

“Despite single-digit revenue growth, the margin has increased on-year consistently for four quarters, indicating a shift in corporate focus towards profitability,” said Aniket Dani, director, Crisil MI&A Research. “An improvement of 150 bps on-year is estimated for fiscal 2024.”

In FY25, commodity prices are likely to be less volatile, “helping India Inc. log a 50-150 bps improvement in EBITDA margin,” Dani said. “Sectors such as consumer staples, discretionary products and industrial sectors, which make up 52% of corporate India's EBITDA, are expected to clock the highest margin expansion.”