Ever since the pandemic began in CY2020, Corporate India's performance has fluctuated significantly, with new challenges arising and becoming more acute with each passing quarter. While domestic demand
has clearly increased in all sectors this fiscal year, with robust YoY revenue growth
, the profitability has remained under pressure due to the ongoing inflationary environment. In addition, there are indications of a slowdown in important industries due to ongoing geopolitical upheavals and global inflationary pressures, casting doubt on the export sector's pace. While supply-side issues have undoubtedly improved since the Covid-19-related disruptions, things still aren't back to normal everywhere just yet.
According to an ICRA analysis of around 250 listed firms (excluding banking sector entities), the aggregate performance in H1 FY2023 has demonstrated favourable trends in sales, with Corporate India's aggregate revenues increasing by 35.2% Y0Y. This expansion was facilitated optically by the previous year's low base, which was affected by the pandemic's second wave. Furthermore, price increases across numerous industries as the demand climate stabilised, as well as the pass-through of inflationary pressures from input costs, aided growth. The secular increase was recorded across many industries on a YoY basis.
However, revenue growth was softer on a sequential basis (compared to H2 FY2022), at 10.8%, with diverse trends recorded across industries. The higher realisations reflected the global economy's energy cost inflation and the heightened crude oil price trend, which was exacerbated by the Russia-Ukraine war. Revenue growth was accordingly the highest in the commodity-oriented sectors. However, while the oil and gas and power sectors witnessed a 30% and 38% growth in revenues, respectively, vis-à-vis H2 FY2022 levels, the iron and steel sector saw a sequential contraction in revenues by 6%, led primarily by softening in steel prices in recent months, although it still remains almost 50% higher than the April 2020 levels.
Other sectors that reported a visible increase in revenues from H2 FY2022 levels were IT, automotive and fertilisers. For IT, the growth was led largely by increased levels of digitisation globally, and to some extent by benefits of INR depreciation vis-à-vis US$. However, the sustainability of this growth remains to be seen, especially with the recessionary trends brewing in the developed markets of Europe and the US, which are key markets for Indian IT companies.