Sequential revenue growth for India Inc in Q3 on rise in rural demand: ICRA

However, it said that headwinds such as uneven urban demand and evolving global uncertainties could weigh on growth in the second half of the fiscal

Rating agency ICRA on Monday said it expects sequential revenue growth for India Inc in the December quarter, led by improved rural demand and uptick in government spending, additionally supported by the festival season.

However, headwinds such as uneven urban demand and evolving global uncertainties could weigh on growth in the second half of the fiscal, it said.

On balance, ICRA said it 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 the October-December period of FY25 are estimated to improve with the interest coverage ratio in the range of 4.5-5 times, against 4.1 times in Q2 FY25, the agency said.

Commenting on the trends, Kinjal Shah, Senior Vice President and Co-Group Head -- Corporate Ratings, ICRA -- said while corporate India witnessed a muted sequential revenue growth in Q2 FY2025, led by the ongoing slowdown in urban demand, lower government spending amid monsoon-related disruptions, the same is expected to improve in the upcoming 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 government capex spending as well as increased rural demand," Shah added.

ICRA's analysis of the September quarter performance of 590 listed companies (excluding financial sector entities) revealed a 6 per cent year-on-year (YoY) revenue growth for corporate India and a moderation in OPM, by 102 bps to 16.9 per cent.

Despite the year-on-year growth in revenues, higher input cost with weak urban demand, adversely impacted the margins, it said.

On a sequential basis, the OPM declined about 81 bps in the July-September period of the ongoing fiscal year.

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 in FY22), ICRA added.