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 The operating profit margin (OPM) for India Inc is projected to improve in the second half of current financial year (FY), led by boost in rural demand and uptick in government spending and additionally supported by the festive season, according to a report on Monday. 

As a result, the credit metrics of India Inc in Q3 FY25 are estimated to improve with the interest coverage ratio in the range of 4.5-5.0 times, against 4.1 times in Q2 FY2025, said the report by credit rating agency ICRA.

“While corporate India witnessed a muted sequential revenue growth in Q2 FY2025, the same is expected to improve in the coming quarters,” said Kinjal Shah, SVP and Co-Group Head–Corporate Ratings, ICRA.

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, he mentioned.

The analysis of the Q2 performance of 590 listed companies (excluding financial sector entities) revealed a 6 per cent revenue growth (year-on-year) for corporate India and a moderation in OPM, by 102 bps to 16.9 per cent.

On a sequential basis, the OPM declined by around 81 bps in Q2 FY2025.

Despite the variations in debt levels across sectors, India Inc. reported largely stable credit metrics over the recent past, said the report.

“With the RBI Monetary Policy Committee (MPC) having taken a pause on rate hikes since its April 2023 meeting and with expectations of improvement in OPM, India Inc.’s interest coverage is expected to increase in the near term”, Shah said.

According to the report, evolution of the global economic scenario, pick up in government spending and a revival in urban demand would remain the key monitorables over the near term.