India's Corporate Profit Margins Expected to Rise in H2 of FY25

New Delhi, Dec 2 (NationPress) The operating profit margin (OPM) for India Inc is anticipated to enhance in the latter half of the current financial year (FY), driven by an increase in rural demand and a rise in government spending, further supported by the festive season, according to a report published on Monday.

Consequently, the credit metrics of India Inc in Q3 FY25 are expected to improve, with the interest coverage ratio projected to be in the range of 4.5-5.0 times, compared to 4.1 times in Q2 FY2025, as stated by credit rating agency ICRA.

“While corporate India experienced a slow sequential revenue growth in Q2 FY2025, this is predicted to improve in the upcoming quarters,” remarked Kinjal Shah, SVP and Co-Group Head–Corporate Ratings at ICRA.

This improvement would be bolstered by sustained growth in consumption-oriented sectors such as FMCG and retail, along with enhanced revenues in commodity-oriented sectors like iron, steel, and cement, driven by increased government capital expenditure and heightened rural demand, he noted.

The analysis of Q2 performance from 590 listed companies (excluding financial sector entities) indicated a 6 percent year-on-year revenue growth for corporate India, although there was a slight moderation in OPM, which decreased by 102 basis points to 16.9 percent.

On a sequential basis, the OPM fell by approximately 81 basis points in Q2 FY2025.

Despite varying debt levels across sectors, India Inc. maintained largely stable credit metrics in recent times, the report highlighted.

“With the RBI Monetary Policy Committee (MPC) pausing interest rate hikes since its April 2023 meeting, and with the anticipated improvement in OPM, India Inc.’s interest coverage is likely to rise in the short term,” Shah added.

The report also emphasized that the evolution of the global economic landscape, an uptick in government spending, and a revival in urban demand will be key factors to monitor in the near future.