Indian companies, barring banks and oil companies, are likely to see a 200-basis-point decline in profit before interest and tax for the October-December 2011 quarter, said a report by Crisil Research.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins in the third quarter of FY 12 are expected to drop to around 17.7 per cent from 19.7 per cent in Q3 FY11.
The report is based on an analysis of the aggregate financial performance of select companies across 21 industries, excluding banks and oil companies.
Industries such as textiles, hotels and real estate are likely to see a higher impact as compared to others.
Revenue growth is also forecast to drop to 14-15 per cent, from 22.5 per cent in Q3 FY11, following a slowdown in consumption growth and investments.
Companies with substantial debt on their balance sheet will be further hurt by rising interest costs and marked-to-market losses on foreign debt and derivatives due to the depreciation of the rupee. Net margins are, therefore, likely to decline even more sharply, the Crisil report said.
“While the pressure on margins will be felt across industries, textiles, real estate and hotels will see a sharp drop of 300-500 bps, mainly due to slower volume growth and high raw material and wage costs. On the other hand, EBITDA margins for automobiles, steel, and organised retail are likely to decline by 100-200 bps”, said Mr Prasad Koparkar, Head - Industry and Customised Research, Crisil Research.
Airline companies are expected to report robust volume growth, but their EBITDA margins will remain under pressure, as these companies will be unable to fully pass on the sharp rise in fuel costs.
For cement manufacturers and telecom services providers, though volume growth would be muted, increased realisations will lend stability to EBITDA margins.
The depreciation of the rupee will not hurt all of corporate India. IT services companies, bulk drug exporters, pharmaceutical companies that focus on formulations exports, and oil exploration companies with a low proportion of foreign debt on their books will stand to gain from rupee depreciation as their profitability will improve, the report said.