India's Corporate Profits Surge Ahead of GDP Growth: A Comprehensive Analysis
Corporate Financial Performance in India
Mumbai, July 3: A recent report reveals that Indian corporations have demonstrated exceptional financial resilience over the past five years, with corporate profits increasing at a rate nearly three times that of the nation's GDP from FY20 to FY25.
The profit-to-GDP ratio has significantly climbed to 6.9%, indicating robust earnings performance amidst various economic hurdles, as per data gathered by Ionic Wealth (Angel One).
The report, titled ‘India Inc. FY25: Decoding Earnings Trends & Path Ahead’, emphasizes that FY25 proved to be a strong year for Indian enterprises.
Revenue for Nifty 500 companies saw a year-on-year growth of 6.8%, while EBITDA increased by 10.4%, and profit after tax (PAT) rose by 5.6%.
Interestingly, mid-cap and small-cap firms outperformed large-cap companies in profit growth, achieving PAT increases of 22% and 17%, respectively, in contrast to a mere 3% for large caps.
In terms of sectors, the banking, financial services, and insurance (BFSI) sector emerged as a key contributor to profitability, with its share of total profits nearly doubling since the onset of the pandemic.
Additionally, the automotive, capital goods, and consumer durables sectors also reported substantial earnings growth.
Leading the charge, consumer durables experienced an impressive 57% PAT growth in FY25, followed by healthcare at 36% and capital goods at 26%, according to the report.
Companies have also reaped benefits from margin enhancements in sectors such as cement, chemicals, metals, and automotive, aided by decreasing inflation and improved input cost management.
The report highlights a notable increase in capital expenditure plans, with India Inc. aiming to nearly double its capex to Rs 72.25 lakh crore during FY26–30, primarily through self-funding.
Approximately 80% of this capex is directed towards upgrading existing operations and creating new revenue streams, with sectors like power, green energy, telecom, automotive, and cement spearheading the next investment wave.
Looking forward to FY26, sector-specific outlooks vary. Banks and non-banking financial companies (NBFCs) may experience stabilizing loan growth as interest rates are anticipated to decline in the latter half of the year.
The IT sector is expected to rebound, driven by cost-optimization initiatives and demand from BFSI clients.
Pharmaceutical growth will be bolstered by expansions in chronic therapies and hospital networks, while the fast-moving consumer goods (FMCG) sector is likely to benefit from improving rural demand and favorable monsoon conditions, as stated in the report.