HomeLifestyleRising inflation will reduce profits, pressure will be seen on these sectors...

Rising inflation will reduce profits, pressure will be seen on these sectors including steel, see this report before investing

Highlights

India Ratings has changed its outlook on the mid-corporate sector for the remainder of FY 2022-23.
The Ebitda margin of the steel sector declined to 5.5 per cent in the first quarter of FY23.
The unprecedented price fall in the US market will affect the EBITDA margins of pharma companies.

Mumbai. Major industrial sectors like steel and textiles have seen tremendous growth in revenue and profit in the last one and a half years and these industrial sectors are performing as per the market expectations. However, according to a report by India Ratings (Ind-Ra), there may be some decline in profits of key sectors due to increase in input costs amid rising inflation across the world.

The rating agency has changed its outlook on the mid-corporate sector for the remainder of FY 2022-23 and retained the ‘stable’ rating for FY23.

textiles industry
India Ratings said that the textiles sector’s profit in terms of Ebitda margin has remained stable at 7.90 per cent in H1 FY23 as against 7.70 per cent in FY22. Margins were better on account of rise in raw material prices and thus the industry getting inventory benefits. But the agency believes that credit metrics will be affected by capex in FY 2023.

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steel sector
The Ebitda margin of the steel sector declined to 5.5 per cent in the first quarter of FY23 as against 6.8 per cent in FY22. This is due to the change in export duty on steel prices and higher coking coal cost.

India Ratings in its report said, “Interest coverage in Q1 FY23 is stable as compared to H2 of FY22. But the pressure on margins may impact the credit profile of this sector.”

auto sector
Margins declined by 106 bps in the first quarter of FY23 due to increase in input cost in the auto sector. In addition, companies in this sector are supplying large quantities of products to MNCs, thereby increasing the concentration of customers and value to cover the increased input cost.
developed.

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pharma sector
The Ebitda margin of the pharmaceutical sector improved marginally in the first quarter of FY23. India Ratings believes that unprecedented price fall in the US market for generic drugs due to stiff competition will impact EBITDA margins.

Tags: business news, Indian economy, stock market

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