The Reserve Bank of India (RBI) reported that Indian corporate profits surged 15.3% in FY24, despite a mere 5.5% growth in sales. The strong profit growth was driven primarily by cost-cutting measures, which allowed companies to maintain their financial strength despite economic uncertainties. The services sector outperformed the manufacturing sector, with sales increasing by 6.8% and operating profits rising by 15.5%. The services sector’s profit after tax (PAT) surged 38.1%, driven by efficiency in operations.
In contrast, the manufacturing sector struggled, with sales growth slowing to 4.1%. However, manufacturers managed to boost operating profits by 13.2% and PAT by 7.6%, recovering from a 3.9% decline in FY23. The report highlights that cost-cutting strategies were crucial in driving profit growth, with operating expenses increasing by just 3.4%. Additionally, employee remuneration growth slowed in both sectors, allowing firms to maintain stable financials and improve operating and net profit margins.
The RBI’s analysis of 6,955 non-financial public companies revealed improved financial health, with debt-to-equity ratios declining and interest coverage ratios (ICR) rising to 4.1. This indicates that companies are better equipped to meet their debt obligations. Overall, the report suggests that Indian corporations are showing resilience and adaptability in the face of economic challenges, with cost management playing a key role in driving profit growth.