New Delhi. ICRA expects the credit metrics of India Inc. to show slight sequential improvement in Q3 FY2024, with interest coverage increasing to 4.5-5.0 times in Q3 FY2024 from 4.5 times in Q2 FY2024. This would benefit from improved earnings of Corporate India, on the back of continuing, albeit moderating tailwinds from commodity prices and seasonally strong demand during the recently concluded festive season.
Commenting on the trends, Ms. Kinjal Shah, Vice President & Co-Group Head – Corporate Ratings, ICRA Limited, said: “The 1.6% YoY and 0.1% sequential revenue growth for Corporate India in Q2 FY2024 was supported by steady demand; however, the YoY revenue expansion was curtailed to an extent due to a general decline in the realisation levels amidst softening of input costs for most of the sectors. While consumer and infrastructure-oriented sectors supported the expansion, commodity-oriented sector revenues contracted following price correction from the unprecedented levels in the recent past. While revenue growth is expected to continue into Q3 FY2024, aided partially by festive period demand, the ability of Corporate India to sustain the same remains to be seen, given the uncertainties in the global economic environment. The overall impact of food inflation on rural demand and associated sectors would also remain a key monitorable. Along with this, the concerns of on-going geo-political tensions may also adversely impact demand sentiment, especially for export-oriented sectors. Furthermore, the pace of growth is likely to remain muted as the base effect catches up, as is already visible in recent quarters,” added Ms. Shah.
ICRA’s analysis of the Q2 FY2024 performance of 601 listed companies (excluding financial sector entities) revealed expectedly improved operating profit margins (OPM), increasing by 398 bps and 64 bps on a YoY and seqential basis, respectively. This was primarily aided by softening in commodity prices. However, while the input costs softened in recent months, they remain elevated compared to the historic levels, and accordingly, India Inc. 's OPM is yet to revive to its historic highs.
rajmoni@fortunapr.com
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