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Informist, Friday, Dec. 6, 2024

MUMBAI – India Ratings and Research Ltd. expects the revenue growth of Indian companies to pick up in the second half of the current financial year due to improved volumes and better ability to pass the impact of inflation to the customers. The expected recovery in rural markets and the plateauing urban consumption after a fall in the first half of the year will also drive the growth in the revenue of these companies, the ratings agency said in a report. The ratings agency said that growth after this financial year can only sustain if the income levels improve in both rural and urban areas. 

The sustained recovery in the rural market is expected to benefit mass products' sales and a slight improvement in urban consumption will likely support the growth in the discretionary sector. While the positive macroeconomic signals, including rising real wages and an expected increase in government spending, point towards an expected recovery in demand for the second half, the companies are also working on innovating products, marketing, and channels to boost sales, India Ratings said.

The listed companies posted subdued revenue growth for the first half in multiple sub-sectors, India Ratings said. Adverse weather, slowdown of economic activities during the election, limited employment, stagnant real wages, and increased household leverage affected demand during the period. However, strong revenue growth in the discretionary sector was primarily driven by an increase in prices, the ratings agency said. Some premium sectors that cater to upper-middle income households, remained resilient during the period. Despite registering an uneven trend in the revenue growth, the margins for most sectors were strong due to the cost-cutting measures they undertook in the past three quarters. This helped these companies to maintain adequate debt and interest coverage ratios, the ratings agency said.

About eight out of 24 key consumer-facing sectors saw an on-year fall in their volume growth, the ratings agency said, according to its analysis of 907 companies' earnings for the Apr-Sept. Sequentially, the demand in the mass market remained tepid during the period as the government spending pushed the growth in the second half of 2023-24 (Apr-Mar), India Ratings said. Demand was also affected due to a moderation in consumer credit growth, which is expected to further slow down due to a recent increase in the delinquencies in credit card dues and other unsecured loans.

A strong revenue growth in the range of 9-24% in sectors including e-commerce, organised retailing, hotels and resorts, gems and jewellery, cigarettes and tobacco, and breweries and distilleries, indicated volume-led revenue growth, the ratings agency said, according to its analysis of 155 companies.  End

Reported by Aman Aryan

Edited by Akul Nishant Akhoury

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