India Inc sees uptick in credit metrics
Interest coverage ratio increasing to 4.5-5x in Q3 FY2024 from 4.5x in Q2 FY2024
image for illustrative purpose
Moderating Tailwinds
- Improved earnings
- Operating profit margins look good
- Commodity prices rising
- Input costs higher
New Delhi: ICRA expects the credit metrics of India Inc to show slight sequential improvement in October-December quarter 2023-24 financial year, with the interest coverage ratio increasing to 4.5-5 times in Q3 FY2024 from 4.5 times in Q2 FY2024. The interest coverage ratio is calculated by dividing a company’s earnings before interest and taxes (EBIT) by its interest expense during a given period.
The credit metrics would result 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, the credit rating agency said.
ICRA’s analysis of the Q2 FY2024 performance of 601 listed companies (excluding financial sector entities) revealed expectedly improved operating profit margins, increasing by 398 bps and 64 bps on a year-on-year and sequential basis, respectively.
