In a year marked by financial fortitude, India’s private sector corporations have demonstrated remarkable growth in profits while successfully reducing their debt levels, according to the Reserve Bank of India’s (RBI) latest data.
Operating profit margins, as well as net profit margins, saw significant improvement across major sectors during the 2023-24 fiscal year. The operating profits surged by 15.3% compared to a modest 4.2% growth in the previous year. Notably, the manufacturing and services sectors exhibited robust performance with operating profit growth of 13.2% and 15.5% respectively, bouncing back from a challenging 2022-23.
The net profit after tax saw a substantial increase of 16.3% during 2023-24, with the services sector posting an impressive post-tax profit growth of 38.1%, outpacing the manufacturing sector’s growth of 7.6%.
The financial strength of these non-government non-financial (NGNF) public limited companies was further reflected in the decline of their debt-to-equity ratio, which continued to moderate throughout the year. The interest coverage ratio (ICR) also improved, reaching 4.1 as gross profit growth surpassed the rise in interest expenses. Manufacturing companies maintained a stable ICR at 6.3, while the services sector experienced a slight improvement to 3.2.
Internal sources of funds accounted for over two-thirds of the total funds of these companies, driven by a rise in reserves and surplus. Additionally, the gross fixed assets of these public limited companies increased by 10%, with notable growth in sectors such as chemicals, pharmaceuticals, electrical equipment, and motor vehicles.
The report highlighted that private limited companies, which are not listed on stock exchanges, also experienced accelerated profit growth during 2023-24. Profit margins, measured by operating profit and profit after tax to sales ratios, improved significantly during the fiscal year.
Leverage levels, indicated by the debt-to-equity ratio, remained steady at approximately 45.2% in March 2024. Despite remaining highly leveraged, sectors like electricity, gas, steam, air conditioning supply, and construction saw some moderation in leverage during the year.
The ICR for private limited companies improved to 3.1 from 2.7 in the previous year, with the manufacturing and services sectors showing enhanced ratios of 8.3 and 2.7, respectively.
This data release underscores the growing financial strength and resilience of India’s private sector, showcasing its ability to navigate economic challenges and emerge stronger.
