India Inc revenue to grow 7-8% in Q4 on demand revival, govt spend: ICRA

Domestic rating agency ICRA on Monday said Indian companies are likely to clock 7-8 per cent revenue growth during the March quarter of the current fiscal year, led by revival in rural demand and uptick in government spending.

ICRA expects the private capital expenditure (capex) cycle to remain measured in view of the uncertainties around geopolitical developments and relatively subdued outlook on merchandise exports from India.

Nonetheless, certain sunrise sectors such as electronics, semiconductors and niche segments within the automotive space like electric vehicles (EVs) will continue to see a scale-up in investments, in line with various production-linked incentive programmes announced by the Government of India, it said.

In a statement, ICRA said the recovery in the operating profit margins (OPM) for India Inc witnessed over the past quarter is likely to be sustained at 18.2-18.4 per cent, supported by an increase in demand, led by improved consumer sentiments.

"Rural demand is expected to be upbeat in H1 CY2025 (January-March), aided by the robust output for most kharif crops and the favourable outlook for the ongoing rabi season. Beyond that, a normal and well distributed monsoon in 2025 is crucial to support the agricultural outcomes," said Kinjal Shah, Senior Vice President & Co-Group Head, Corporate Ratings, ICRA.

Urban demand, which has been sluggish over the last few quarters, is expected to improve, aided by the sizeable income-tax relief in the Union Budget 2025, the monetary easing by the Reserve Bank of India, and the expectations of a moderation in food inflation, which would augment discretionary consumption, Shah added.

ICRA said the evolution of the global economic and political scenario, movement in foreign exchange rates, impact of the new US President's policies, pick up in government spending and a revival in the domestic urban demand would remain the key monitorables over the near-term.

ICRA's analysis of the Q3 FY2025 (October-December) performance of 602 listed companies (excluding financial sector entities) shows a 6.8 per cent year-on-year revenue growth, supported by improved demand across consumption-oriented sectors like consumer durables, FMCG, retail, hotels and airlines, while a few commodity-oriented sectors like iron and steel witnessed some decline, following lower realisations owing to weak global demand and influx of cheaper imports from China.