InvestorQ : How are operating margins expected to pan out in the June 2022 quarter for Indian companies?
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How are operating margins expected to pan out in the June 2022 quarter for Indian companies?

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Juvina Maggie answered.
1 month ago
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If you go by the latest estimates put out by CRISIL, this could end up being the third successive quarter of margin pressures for Indian companies. There are several reasons. Rising input costs, supply chain constraints combined with higher manpower costs have hit the operating margins of most of the companies across sectors. It is the companies in the paints, automobiles and consumer goods sectors which have taken the sharpest margin pressures. CRISIL based its study on 300 companies across the corporate spectrum.

Now, these 300 companies are across 47 sectors but exclude financial services and oil & gas. Despite the pressure on margins, the top line is still expected to see healthy growth. CRISIL estimates revenues to log a healthy growth of 30% in Q1FY23. This growth in top line would be a function of price hikes across most industries and a very moderate boost from volumes. This is especially true of companies across autos and FMCG products.

On an overall basis, the EBITDA margins are expected to have contracted to 19% to 21% range, largely due to elevated prices of metals and energy. That will be the lowest level of median OPMs in a long time. On a positive note, big revenue drivers in June quarter are expected to be automobiles and cement.

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