GDP: Quarterly growth rises, annual expansion falls

The latest growth data from the NSO revealed that gross value added (GVA) growth rose to 6.8% in Q4 FY2025 from the upward revised 6.5% in Q3 FY2025. The pace of acceleration in the GDP growth was much sharper between these quarters, with the same printing at 7.4% vis-à-vis 6.4%. However, in annual terms the GVA and the GDP growth both slowed down materially by 215-270 bps in FY2025, to 6.4% and 6.5%, respectively, from as much as 8.6% and 9.2%, respectively, in the previous year.

While an improvement in growth was anticipated in Q4 FY2025 vis-à-vis Q3, the extent of the acceleration exceeded our expectations. The sizeable 102 bps acceleration in the GDP growth print between these quarters was largely led by net indirect taxes, which in turn was possibly impacted by the unevenness in the trends in quarterly subsidy pay-outs. Consequently, this 7.4% GDP growth reading for Q4 FY2025 should be interpreted with some caution.

The modest 27 bps acceleration in the GVA growth print between these quarters was mainly led by the industrial sub-sectors, particularly manufacturing and construction, which also outperformed ICRA’s expectations. The growth in the services eased to 7.3% from 7.4% in Q3 FY2025, led by the trade, hotels, transport and communication and services related to broadcasting, as well as public administration, Defence and other services segments, remaining above the 7.0% mark for the third straight quarter. Besides, the agri-GVA growth slowed to 5.4% from 6.6%, between these quarters, while remaining rather healthy, supported by a low base as well as robust growth in the output of most rabi crops.

Anupama Reddy

Vice President and Co-Group Head, Corporate Ratings

Total addressable market for flex office spaces in India is estimated to rise to 240 msf, surpassing
Rs. 600 billion in value by March 2027

India’s flexible workspace sector is set to witness five major IPOs, to raise over Rs. 7,000 crore. ICRA expects India’s flexible (flex)/co-working office supply to increase at a healthy CAGR of 21-22% during FY2025- FY2027 and reach ~125 million square feet (msf) by March 2027 (from ~80 msf as of December 2024) for the top six cities (Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai Metropolitan Region (MMR) and Pune). This segment, which has seen one successful initial public offer (IPO) in 2024, is set to witness five major IPOs in the next 12-18 months, which are projected to raise over Rs. 7,000 crore.

The flex office supply for top six cities has more than doubled to over 67 msf as of March 2024 from 32 msf as of March 2020. ICRA projects it to further expand to 121-125 msf by March 2027. The demand for such spaces has increased at a brisk pace - driven by flexibility, short-lease tenures and lower upfront cost in terms of capex for tenants. The share of flex workspaces in the commercial office segment (non-SEZ) is expected to double to 12.5-13.5% in FY2027 from 5.3% in FY2020.

While several flex office operators entered the space in recent years, the market remains organised with the top five players accounting for 40% of the flex office space in FY2024. Leasing activity remained strong for flex workspaces with absorption of ~13 msf against supply of ~14 msf in FY2024, supported by healthy demand from enterprise clients, start-ups and domestic corporates.

Ankit Jain

Vice President and Sector Head, Corporate Ratings

Outlook for telecom tower industry revised to Stable from Negative with improvement in receivables

ICRA has revised the outlook on the telecom tower industry to Stable from Negative, following healthy collections from customers along with receipt of overdue payments, in addition to the improvement in the credit profile of some key telecom service providers, who are the customers for tower companies, resulting in easing in the working capital cycle of tower companies. The industry was earlier facing headwinds owing to elongated receivables, on account of delays in payments by some of the telecom service providers.

The situation has improved materially in the last fiscal with consistent timely payments to the tower companies resulting in reduction of receivable days to around 45-60 days, lower than the ICRA’s negative outlook threshold of 80 days. This, coupled with recovery of the past overdue payments, resulted in the reversal of provisions made earlier in FY2023 and has enhanced the cash flows and liquidity position of the telecom tower industry. It has also moderated the reliance on external debt, which translated into improvement in the return metrics of the industry. The collections are expected to remain timely, going forward, thereby restricting the industry debtor levels to below 60 days. This will also result in a reduction in external debt, with ICRA projecting net external debt/OPBDITA at around 3.4x for FY2026.

Deep Inder Singh

Vice President and Sector Head – Financial Sector Ratings

Regulatory Tightening Cools Index Options
Surge: Signs of Stabilisation Emerge

ICRA highlighted that trading activity appears to be stabilising in index derivatives and options volumes, reflecting strategic recalibrations by market participants, after three consecutive months of declines, following regulatory interventions. Although margin trading facility (MTF) exposures had retracted closer to Rs. 71,000 crores from their December 2024 peak, given their strong correlation with market trends, a resurgence in investor confidence could drive the trajectory back towards the Rs. 1 lakh crore mark. In this regard, recovery is already visible in recent weeks. The phased implementation of regulatory measures, beginning November 2024, led to a sharp contraction of trading activity in index options. Between December 2024 and March 2025, the average daily premium turnover had declined by 18% compared to the April–November 2024 period, while the number of options contracts traded fell by 60%. Order volumes, critical for F&O brokerage, were moderately impacted (down 25–35%). Despite this, trading activity remains above historical levels. In Q4 FY2025, ICRA’s sample of nine securities broking firms reported a 19% YoY drop in net revenue and a decline in profitability1 to 26% — the lowest in the past 12 quarters. Also, after three consecutive months of declining options volumes, trading activity appears to be stabilising, reflecting strategic recalibrations by market participants. The anticipated uptake of the MSEI-SX40 weekly index options could also help cushion the impact. However, the overall activity remains highly sensitive to future regulatory developments.