13 Mar 2009 4:44 PM

Corporate India to witness a recovery in 2009-10: CMIE

We expect growth in industrial output to show a recovery from the quarter ended March 2009 onwards. While manufacturing output in 2008-09 is expected to end with 3.4 per cent growth, we expect industrial production to grow by 5.1 per cent in 2009-10. Commissioning of a substantial number of the projects during 2009-10 will bolster industrial output. Projects entailing investments worth a record Rs.5 lakh crore are expected to be commissioned in 2009-10.

Correction in interest rates and property prices by an average of 150 basis points and 25-30 per cent, respectively, since September 2008 is expected to regenerate buying interest in real estate. The commencement of the real estate construction from the June 2009 quarter is expected to stimulate demand for a gamut of sectors such as steel, cement, paints, glass and ceramic products. Mining and quarrying output as well as electricity generation is expected to rise at a healthy pace in 2009-10.

The recovery in the growth in industrial production is expected to result in higher sales and profitability of the manufacturing sector. While we expect a flat growth in income of the manufacturing sector because of the steep fall in commodity prices, PAT margin is expected to improve to 4.1 per cent in 2009-10 from 0.5 per cent in 2008-09. The improvement will come almost entirely on account of the net profits expected to be made by the petroleum products sector.

Corporate India is expected to record a sales growth of 7.4 per cent. This will be largely driven by the banking, construction, non-financial services and electricity sectors. Aggregate net profits of Indian corporates are expected to rise by 77.3 per cent resulting in an improvement in PAT margin to seven per cent from 4.1 per cent in 2008-09. This again, is largely on account of the recovery in the petroleum sector. This sector is expected to yield a substantial profit in 2009-10 as against the huge losses made in 2008-09.

Sonal Bhatia
bsonal@cmie.com