ICRA-the rating agency expects the sequential revenue growth for India Inc. to decline sequentially in Q1FY25. This is even as signs of rural demand recovery are visible, nonetheless, a slowdown in government spending during the Lok Sabha elections and the onset of monsoon will likely weigh on India Inc.’s growth in the first half of FY25.

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Further the rating agency sees the OPM or operating profit margin to remain static in the 15-18 per cent range, despite tapering revenue growth as the raw material costs are seen to be steady. So, consequently, the interest coverage ratio or credit metric of India Inc during the first quarter are estimated between 4.7-5 times as against 4.9 times in the previous March quarter.

Evolution of the global economic scenario and the onset and intensity of the monsoons in India, would remain a key monitorable over the near term, added ICRA’s release. 

Commenting on the trends, Kinjal Shah, Senior Vice President & Co-Group Head – Corporate Ratings, ICRA Limited, said: “The 5.0% YoY and 6.3% sequential revenue growth for Corporate India in Q4 FY2024 was supported by healthy demand in consumer-oriented sectors like airlines, hotels, automotive and FMCG. In addition, the growth in power and construction sectors was strong. The YoY revenue expansion was curtailed to an extent by a decline in realisation levels amid softening input costs (mainly raw materials), largely for sectors like fertilisers and chemicals, which also faced a demand slowdown due to channel inventory destocking. The growth is expected to marginally slow down in Q1 FY2025 (on a QoQ basis), on a relatively high base, amidst a perceived temporary pause in the infrastructural activities for a major part of Q1 FY2025 due to the General Elections and the dependency of rural demand on the monsoon. Moreover, the concerns of the ongoing geopolitical tensions may adversely impact demand sentiments, especially for export-oriented sectors.” 

Q4 performance analysis of listed universe 

The company’s analysis of the Q4 performance of the previous year of some 558 companies (excluding financial space) showed expectedly improved OPM, increasing by 92 bps to 17.2 per cent on a YoY basis. This was primarily aided by the softening in commodity prices and benefits of operating leverage. However, on a sequential basis, the OPM remained flat. Sectors like auto, power, pharmaceuticals and metals & mining reported YoY improvement in OPM on the back of gradual price hikes undertaken and softening of input costs, however, some others like chemicals and fertilisers reported YoY contraction due to weak demand for these sectors. While the input costs 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 (18-19% seen in FY2022).