We are pleased to launch the 17th edition of our Industry Multiples in India report. The report provides an overview of trading multiples for various key industries in India as of March 31, 2022, and June 30, 2022, using constituents belonging to the S&P BSE Large Cap, S&P BSE Mid Cap and S&P BSE Small Cap indices.
Key Highlights
- Market capitalization of companies in the pharmaceuticals and biotechnology industry have decreased by 8.8% from Q1 CY 2022 to Q2 CY 2022. Underperformance of the pharmaceutical sector was primarily due to cost pressures and rising raw material prices, which ultimately impacted the companies’ profitability. Indian pharmaceutical companies, having foreign revenue from the United States, continued to face high competition, which further impacted their margins and earnings growth. However, the outlook for the domestic market remains good. Tepid growth of pharmaceutical companies in May 2022 indicates that the pressure will continue in the near term. The Indian pharmaceutical market in May 2022 fell by 3.3% in revenue when compared to May 2021; the media reports explained the decline in domestic revenue was due to a decline in sales volume of acute segment therapies, such as anti-infectives, vitamins and respiratory products.
- Market capitalization of companies in the auto industry have increased by 13% from Q1 CY 2022 to Q2 CY 2022. The year 2022 has been marked as the first year of recovery from the pandemic, after the impact of the lockdowns. As per media reports, it is expected that the auto industry may reach its pre-pandemic highs by 2024. The Indian auto retails also witnessed a rise in revenue across all segments, except the tractor segments. While the two-wheeler segment recorded the smallest growth, the three-wheeler segment saw a 50% increase, private vehicles witnessed a 14% growth and the commercial vehicle segment saw a 45% growth, compared to the previous year.
- Market capitalization of companies in the IT industry have decreased by 21% from Q1 CY 2022 to Q2 CY 2022. As per a media report, the IT sector in India was accelerating until Q4 2021 and then started slowing down beginning Q1 2022. The deceleration is only expected to worsen in 2022 and 2023, due to tougher competition, supply-related issues and a worsening macro situation. The NSE IT index saw a steep drop in April 2022, weighed down by muted results from large-cap IT companies and valuations. The sharp fall in capitalization of IT companies was due to a huge selling of large-cap IT stocks. The IT sell-off was largely driven by concerns about the U.S. economy, where we may see a hike in interest rates to contain inflationary pressures.
- Market capitalization of companies in the real estate industry have decreased by 17% from Q1 CY 2022 to Q2 CY 2022. India's real estate sector remained resilient during the pandemic as home prices remained stable, aided by low interest rates. However, as investors have grown worried about the impact of rising interest rates, realty stocks have fallen in terms of market capitalization. Higher interest rates will drive up mortgage rates, which in turn, would diminish demand for real estate properties.
- Market capitalization of companies in the metals and mining industry have decreased by 21% from Q1 CY 2022 to Q2 CY 2022. Metal and commodity prices have risen to new highs during Russia’s war on Ukraine, due to the sanctions being imposed on Russia. Russia produces 6% of the world's aluminum and 7% of the world's mined nickel. Aluminum prices rose to all-time highs while the nickel rose close to the decade high. Share prices of metal companies reeled under severe pressure with the S&P BSE Metal index hitting a 15-month low amid demand slowdown concerns. For 2022, the outlook is highly uncertain due to Russia’s war on Ukraine. The war has had a major impact on the European Union, due to its reliance on Russian energy and its geographic proximity to the conflict area. There are further downside risks, including COVID-19 virus infections and rising interest rates. The World Steel Association predicts that steel demand will increase by 0.4% globally.
We hope you find this report helpful. Connect with us to receive additional information on related topics or discuss any findings of this analysis.
