The performance of India Inc continued to weaken under multiple headwinds during Q3 FY2020. Revenue growth slowed down to the lowest in more than sixteen quarters, owing to continued weakness in consumer sentiments, benign commodity prices and general slowdown in the economy.

ICRA’s analysis of Q3 FY2020 financial results of listed companies in the Indian corporate sector (excluding financial sector entities) showed aggregate revenues contracting by 0.1 per cent on a year-on-year (Y-o-Y) basis. The major impact on revenues came from commodity-linked sectors, revenues from which contracted by 4 per cent on a Y-o-Y basis.

Shamsher Dewan, Vice President - Corporate Sector Ratings, ICRA said, “With subdued urban as well as rural demand sentiments, and consumer confidence levels dipping low, several consumer-linked sectors exhibited continued weakness. Despite the seasonally strong festive period, automobiles sales contracted by double-digits, while FMCG volumes failed to offer impetus. Additionally, tepid realisations driven by benign commodity prices, coupled with subdued volumes in light of the macroeconomic slowdown, resulted in revenue contraction for all major commodity sectors, including oil & gas entities, metals & mining and iron & steel.”

In the infrastructure and construction segments, entities with international exposure were able to offset the slowdown in project execution in the domestic market. Nevertheless, pace of execution of infrastructure projects remained weak, with slow release of funds from the government, harsh winters impacting execution, cancellation of orders and muted growth in order inflows due to deferrals in awarding new contracts.

Aviation industry was the only saving grace among consumer-oriented sectors, wherein revenues expanded in strong double-digits, driven by capacity additions undertaken by select airlines. With growing passenger traffic (8 per cent during Oct-Nov 2019) and pricing power improving, the sector reported healthy growth during the quarter.

Cement production also declined during the quarter by 2 per cent (compared to 13 per cent growth in FY2019), given continued slowdown in infrastructure, housing and industrial/commercial sectors due to slow release of funds, construction ban in select markets and cancellation of some orders. Steel production also contracted by 6 per cent on a Y-o-Y basis and 5 per cent sequentially, hurt by subdued demand from both infrastructure and automotive sectors.

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