'Corporate profit margins to drop 200-250 bps in Q4'

CRISIL Research has said that it expects corporate India to report a 200-250 basis points (bps) decline in aggregate earnings before interest, taxes, depreciation and amortisation (EBITDA) margins in January-March 2012 qaurter (Q4).

Revenue growth is projected to be around 15 per cent, down appreciably from a far healthier 25.5 per cent in Q4 FY11, reflecting the slowdown in consumption and investment growth, and an uncertain global environment.

“Corporate India continues to feel the pinch of demand moderation, higher input costs and lack of pricing power. Based on an analysis of the aggregate financial performance of 227 companies across 26 industries (excluding banks and oil companies), Crisil Research anticipates that net margins are likely to decline even more sharply from the 12.7 per cent reported in Q4 FY11 due to higher interest costs,” explained CRISIL Research Senior Director Mukesh Agarwal. On a quarter-on-quarter basis, however, EBITDA margins will improve marginally due to the usual seasonal effect.

The pressure on revenue growth and margins will be broad-based and felt across industries. CRISIL expects airlines, commercial vehicles, metals, real estate, hotels, textiles, organised retail and paper sectors to experience a particularly steep moderation in revenue growth compared to Q4 FY11.

EBITDA margins for players in airlines, aluminium, hotels, cotton yarn, and manmade fibres sectors are forecast to decline by a sharp 400-800 bps y-o-y in Q4 FY12 due to slower demand growth and high input costs. Automobiles, steel, and paper manufacturers and organised retailers are expected to report a 100-300 bps decline in EBITDA margins.

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