Indian Inc braces for revenue uncertainties in Q1 on slow govt spending, monsoon onset: Icra

Corporates are bracing for revenue uncertainties in the April-June period due to a slowdown in government spending and the onset of the annual monsoon season, domestic rating agency Icra said on Monday.

The sequential revenue growth will taper in the first quarter of the fiscal, the agency said in a note, adding that there was a 6.5 per cent growth in revenues in the March quarter compared to the preceding December quarter.

"While signs of a revival in rural demand have emerged, headwinds, such as a slowdown in the Government of India's (GoI) spending during the Parliamentary elections and onset of the monsoon period, are likely to weigh on growth in H1FY25," the agency said.

"India Inc braces for revenue uncertainties in Q1FY25," it added.

Its co-group head for corporate ratings Kinjal Shah said the sequential revenue growth will slow down because of a relatively high base amid a perceived temporary pause in the infrastructural activities for a major part of the quarter due to the general elections and the dependency on rural demand on the monsoon.

Shah added that the concerns around the ongoing geopolitical tensions may adversely impact demand sentiments, especially for export-oriented sectors.

The rating agency, however, said that the steady raw material costs will help ensure that the operating profit margin (OPM) will remain steady in the range of 15-18 per cent, and credit metrics will also be largely stable.

The agency said its analysis of 558 listed companies' performance in the March quarter indicates an improvement in the profit margins by 0.92 per cent compared to the year-ago period at 17.2 per cent.

The improvement in profit margins was mainly aided by the softening in commodity prices and benefits of operating leverage, it said, adding that the margins remained flat on a sequential basis.

The interest coverage ratio of Icra's sample set companies, adjusted for sectors with relatively low debt levels like IT, FMCG and pharma, improved marginally in the March quarter, according to the agency.

There was a marginal increase in the debt levels, the agency said, adding that sectors like gems and jewellery, construction, sugar, and chemicals borrowed more due to an increase in working capital requirements.