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With high inflation and rising energy costs, domestic ratings agency ICRA Ratings said India Inc's operating profit margin narrowed by a sharp 2.37% in the December quarter to 16.3% on an annual basis. When viewed sequentially, it said the operating profit margin for the December quarter expanded by 1.8% over the preceding September quarter, and attributed the same to the easing in input costs and also price hikes by many companies.

The agency said going forward, while price increases and sequential input cost reductions can boost margins in the near term, geopolitical tensions, recessionary concerns, and forex volatility continue to pose risks. The revenue of companies, excluding those in the financial sector, grew 17.2%, which was as per expectations, and that hotels, oil and gas, auto, airlines, and power sectors led the way. However, the revenue growth was a muted 1.4% from a sequential perspective due to inflationary headwinds weighing on consumer sentiment.

The interest coverage ratio for the agency's sample adjusted for sectors with relatively low debt levels like IT, FMCG and pharma witnessed a moderation in the third quarter to 4.3 times from 5.1 times on a sequential basis. This was mainly on account of lower earnings in select sectors compared with historical trends amid higher interest rates.