Yes Bank Ltd. on Friday said it expects the third quarter of the current financial year to remain subdued for companies but sees improvement in revenue in the March quarter on the back of government measures.
The muted demand environment amid economic slowdown weighed on corporate earnings during the second quarter of 2019-20 with an aggregate revenue recording a contraction of 3.5 percent year-on-year compared to an expansion of 3 percent in the preceding quarter of the financial year, Yes Bank said in a note on ‘Corporate Earnings and Sectoral Outlook: Q2 FY20'.
“Going forward, we expect Q3 FY20 to remain subdued, however topline growth in Q4 (fourth quarter) FY20 could see some relative improvement as the economy is likely to gradually respond to measures rolled out by the government along with improved monetary policy transmission,” the lender said.
The private sector lender said the benign commodity prices led companies to rein in expenses while helping them to protect their operating margins.
On the net profit front, transition to a new corporate tax regime shored up profit after tax margins for majority of the companies under coverage, it added.
On the macroeconomic front, India's gross domestic product growth dropped to a 26-quarter low of 4.5 percent year-on-year in second quarter of 2019-20 from 5 percent in first quarter of 2019-20, it added.
“With this anticipated downbeat print in Q2 and early signals from some high-frequency data released for the month of October, we have downgraded our FY20 GDP growth estimate to 5.2 percent from 6 percent earlier and vis--vis 6.8 percent a year ago,” Yes Bank said.
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