Revenues of corporates are expected to log a robust 12.1% on-year growth in the second quarter of fiscal 2019, or nearly twice the 6.4% growth in the corresponding quarter of last fiscal, because of low-base effect and higher realisation for steel makers.
On the flipside, cost pressures are clearly rising. To be sure, aggregate operating margins would be up 5-10 basis points (bps) in the second quarter, but this would be primarily because of the performance of steel makers. Shorn of steel, that number would be plunging ~70 bps. And if cost pressures continue to rise, the gradual ascent in operating margins seen from the fourth quarter of last fiscal could reverse.
Says Prasad Koparkar, Senior Director, CRISIL Research, “Demand recovery is expected to be driven by discretionary, consumption-led sectors such as airline services, automobiles, fast-moving consumer goods (FMCG) and retail. While automobiles are expected to see an 18% growth in sales, airline services should see passenger traffic rise 16% on-year.”
