India Inc’s Interest Coverage Ratio Climbs To 12‑Quarter High

India Inc lifted its aggregate interest coverage ratio (ICR) to 5.8 times in Q4 FY 2024‑25, the highest level in three years, on the back of better margins and lower interest costs, ET Intelligence Group data show.

The common sample of 2,658 non‑financial companies had slipped to an ICR of 4.8 times in Q2 FY 2024‑25 but has now improved for two straight quarters.

India Inc’s margins expand as input costs ease

Manufacturers and consumer‑linked firms booked healthier profits after raw‑material prices and global crude oil cooled.

Operating margins for the sample widened 110 basis points year‑on‑year to 15.3 % in the March quarter.

“Lower input costs and easing inflation boosted Q4 operating margins, improving efficiency across manufacturing and consumption sectors,” said Vinod Nair, Head of Research at Geojit Investments.

EBIT growth outpaces interest outgo

Operating profit (EBIT) rose 12.7 % year‑on‑year, while interest expenses increased at a slower 6.8 %.

“Commodity‑price relief sharply cut raw‑material bills and lifted profitability,” noted Vinit Bolinjkar, Head of Research at Ventura Securities.

Except for the September 2024 quarter, India Inc has maintained an ICR above 5 times for two years.

Analysts expect interest costs to soften further as domestic lending rates decline, but future improvements in ICR will also hinge on the trajectory of corporate earnings.

With commodity prices still moderate and rate cuts filtering through, companies could see additional breathing room on debt servicing, provided operating performance remains firm.

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