India Inc.’s operating margins are expected to have fallen 270 basis points (bps) to 18-19% in the December quarter due to lower commodity prices and moderating commodity growth. income, Crisil said in a report.

However, sequentially, operating margins are expected to increase for the first time in six quarters, the rating agency said on Tuesday.

Cheaper raw materials and weaker global demand will drive revenue growth of 14% YoY to ₹10.9 lakh crore, driven by steady volume increases in consumer discretionary segments and some price increases .

On a sequential basis, revenue growth is moderate at 0.9%, but profitability is up 140 basis points in the quarter.

Operating margins are expected to have contracted 270 basis points year-on-year, slower than in the past two quarters, as easing commodity prices provided support amid growth moderate income.

This is the fifth quarter of contraction over a year. On a sequential basis, operating margins would have increased for the first time in six quarters to 18-19% in Q3 from 17.2% in the prior quarter, Crisil said.

The number has been down since hitting 23.7% in the first quarter of the previous fiscal year, the agency said, based on analysis of more than 300 companies, excluding those in the financial services and oil and gas sectors.

For the nine months to December, revenue is expected to rise 24% year-over-year, while the margin likely fell 400 basis points, he added.

Of the 47 sectors tracked, 20 are expected to outpace overall revenue growth in the third quarter, while three-quarters are expected to see their operating margin shrink on the year, said Hetal Gandhi, research director at Crisil Market Intelligence and Analytics. .

Revenue growth in the third quarter would be driven by consumer discretionary such as airlines and autos, while those related to construction such as steel, aluminum and some industrials such as petrochemicals would underperform. .

A slowdown in the United States and Europe – the two biggest overseas markets for India Inc. – will reduce BPO services and lead to a contraction in exports of gemstones, jewelry and textiles, as consumers cut spending there.

While airline revenues are expected to grow 41% year-over-year following a significant increase in passenger traffic and fares, for automobiles they are expected to exceed 22% thanks to higher domestic volume and achievements.

IT services broadly tracked the overall revenue trend, growing 13% year-over-year.

Construction-related business revenue increases by a fifth thanks to a healthy increase in investment allocations by the Center and the States for the construction of infrastructure, healthy growth in order books and better execution.

According to Sehul Bhatt, the agency’s associate director, operating margins in the automotive, metals and construction subsectors, which had contracted in the second quarter, reversed sequentially in the third quarter. Of the 20 industries expected to outpace growth led by revenue growth, 10 are expected to experience margin contraction and five marginal improvement.

Steel companies’ operating margins likely contracted more than 800 basis points year on year due to a 15-20% year-on-year correction in flat steel and iron ore and coal realizations more expensive coke. Sectors related to construction and industrial raw materials would see a contraction in their margin of 500 basis points, due to the high cost of inputs and the inability to pass it on to customers.

For cement manufacturers, the margin should contract by 230 basis points, again due to the increase in the cost of inputs.