Global Economy

India Inc’s EBITDA margin shrank in Q3; first YoY decline in 12 quarters: CRISIL

Corporate India is facing a year-on-year decline in its EBITDA margin for the first time in 12 quarters amid soaring input costs, data from CRISIL Research suggests

Data shows that earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin, which is perceived as corporate profitability is likely to have dropped 100-120 bps year-on-year and 70-100 bps sequentially in Q3FY22. This outcome is based on CRISIL’s analysis of 300 companies (excluding those in the financial services, and oil and gas sectors).

CRISIL says as many as 27 of 40 sectors it tracks are likely to see their EBITDA margins shrinking.


“Companies were unable to fully pass on soaring input cost, especially key metals and energy prices. Flat steel prices were 48% higher on-year in the third quarter, while aluminium was up 41%. The price of Brent crude surged nearly 79%, while those of spot gas and coking coal rocketed almost 5.4x and 2.4x, respectively, on-year,” Hetal Gandhi, Director, CRISIL Research said

EBITDA margin for 9MFY22 is seen up 80-100 bps year-on-year to 22-24%, aided by the low base. CRISIL says the EBITDA profit growth should moderate to 10-12% year-on-year, compared with a scorching near 47% clocked in the first half of this fiscal — a number that was also bolstered by the low-base effect.

EBITDA marginAgencies

Corporate revenue is seen growing a healthy 16-17% to Rs 9.1 lakh crore, driven by surging commodity prices.

“In absolute terms, revenues of most sectors have now risen above their pre-pandemic levels, barring airlines and hospitality. But sectors linked to consumer discretionary products have been a drag on overall corporate revenue, which likely grew 7-9% on-year due to lower volume growth,” Drishti Chugh, Senior Research Analyst, CRISIL Research said.


While CRISIL sees EBITDA margin shrinkage across major sectors, it expects aluminium manufacturers’ margins to have improved year-on-year, driven by higher realisation and volume. Telecom companies too are expected to see a margin expansion owing to higher realisation from customer upgrades.

Sectorally speaking, margins in the consumer discretionary space saw a decline of 130-150 bps year-on-year. Research firm Nomura in its 2022 outlook report noted that it feels most companies’ (in the consumer space) traditional strategies/playbook will face challenges from the ongoing elevated input-cost inflation, among other factors.


When it comes to automobiles, sales volume of commercial vehicles likely saw a growth of 8% year-on-year while it may have dropped 9% and 20% respectively for cars and two-wheelers.

The research notes that realisations may just be higher, at 12% for passenger cars and utility vehicles, 7% for two-wheelers and 9% for commercial vehicles year-on-year owing to price hikes and a favourable product mix. That would take the overall auto segment revenue growth to around 4% year-on-year.

Analysts say that following the Indian economy’s recovery from the second wave of the pandemic in 2021, a slower recovery has been seen in the affordable/entry segment while a healthy pickup was seen in the premium segment. Demand for the entry segment has been affected by sharp price increases for vehicles and high fuel prices.

Rising input cost may have led to a contraction of 110-130 bps in steel products and pharmaceuticals both.

revenue growthAgencies

When it comes to the consumer business segment, leading FMCG players effected price hikes of 6-8% in the H1FY22, and prices likely remained high even in the reporting quarter.

Revenue from export-linked sectors like IT services likely grew 18-20% year-on-year, aided by rising share of digital transformation as well as the possible revival of deferred projects. However, the margins are expected to have contracted year-on-year due to higher facility, travel and sub-contracting expenses.

Revenue for pharma companies is seen growing at 6%, while for readymade garments and cotton yarn makers, it’s seen up 30-35% on-year amid higher exports.


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