ICRA says the credit metrics of India Inc. in Q3 FY2025 are estimated to improve with the interest coverage ratio in the range of 4.5-5.0 times, against 4.1 times in Q2 FY2025.
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Ratings agency ICRA on Monday said it expects sequential revenue growth for India Inc in Q3 FY2025, led by improved rural demand and an uptick in government spending, additionally supported by the festive season. It, however, added that headwinds such as uneven urban demand and evolving global uncertainties could weigh on growth in H2 FY2025.
“On balance, ICRA expects the operating profit margin (OPM) for India Inc to improve in the coming quarters. As a result, the credit metrics of India Inc. in Q3 FY2025 are estimated to improve with the interest coverage ratio in the range of 4.5-5.0 times, against 4.1 times in Q2 FY2025,” ICRA said in a statement.
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ICRA said its analysis of the Q2 FY2025 performance of 590 listed companies (excluding financial sector entities) revealed a 6 per cent YoY revenue growth for corporate India and a moderation in OPM, by 102 bps to 16.9 per cent.
Despite the YoY growth in revenues, higher input cost with weak urban demand, adversely impacted the margins. On a sequential basis, the OPM declined by around 81 bps in Q2 FY2025. While the input costs have softened in recent months, they remained higher compared to the historic levels, and accordingly, India Inc’s OPM is yet to revive to its historic highs (19 per cent seen in FY2022).
Kinjal Shah, senior vice-president and co-group head for corporate ratings at ICRA Limited, said, “While corporate India witnessed a muted sequential revenue growth in Q2 FY2025, led by ongoing slowdown in urban demand, lower Government spending amid monsoon-related disruptions, the same is expected to improve in the coming quarters. This would be supported by continued growth in consumption-oriented sectors like FMCG, retail as well as improved revenues in commodity oriented sectors like iron and steel and cement, among others, led by uptick in Governemnt capex spending as well as increased rural demand.”
Nonetheless, ongoing geopolitical tensions and the possibility of higher tariffs remain an overhang on demand sentiments, especially for export-oriented sectors such as textiles and cut and polished diamonds, Shah added.
