While the sustainability of growth would depend on demand continuing, the gains in profitability could be eroded in the coming quarters on rising input costs.
Financial results of 587 companies excluding financial services, showed aggregate revenues growth of 34.9 per cent in the second quarter from the previous one, but it was still 6.5 per cent lower on-year.
Automobiles and consumer goods are pulling the industry ahead while hotels, tourism and aviation continue to be a drag.
“Among consumer-oriented sectors, although large-ticket discretionary purchases like leisure travel and lifestyle retail continue to remain on the back-burner due to risk aversion and general uncertainty, the demand in several other sectors, including passenger vehicles, two-wheelers, consumer durables etc. have bounced back over the past few months,” said Shamsher Dewan, vice-president, corporate sector ratings at ICRA.
“Many entities aggressively rationalised costs through salary cuts, downsizing of the workforce, renegotiation of rentals and interest rates and curtailment of overheads,” said ICRA.
ICRA does not expect these margin levels to sustain, given the raw material headwinds due to the firming up of commodity prices, and the gradual reversion of costs to pre-pandemic levels.