New Delhi: The financial performance of India's private sector companies saw significant improvement in 2023-24, with higher operating and net profit margins across key industries, alongside a decline in debt levels, according to the latest data released by the Reserve Bank of India (RBI).
The report highlights a substantial 15.3 percent rise in operating profits during 2023-24, compared to the 4.2 percent growth recorded in the previous year. In the manufacturing sector, operating profit growth rebounded to 13.2 percent from a decline of 3.9 percent in 2022-23, while the services sector registered a 15.5 percent increase, slightly lower than the 16.8 percent growth seen the previous year.
Profit after tax grew by 16.3 percent in 2023-24, with services sector companies witnessing a remarkable 38.1 percent surge, outpacing the 7.6 percent growth recorded by manufacturing firms. The RBI compiled this data based on audited annual accounts of 6,955 non-government, non-financial (NGNF) public limited companies.
The debt-to-equity ratio of these companies continued to decline during 2023-24, indicating a reduction in leverage. The interest coverage ratio (ICR), a key measure of financial health, improved to 4.1 as gross profit growth outpaced interest expenses. While manufacturing companies maintained a stable ICR of 6.3, the services sector saw a slight improvement, with the ratio rising to 3.2.
Internal sources of funding accounted for more than two-thirds of the total funds utilized by public limited companies in 2023-24, driven mainly by an increase in reserves and surplus. Gross fixed assets grew by 10 percent, with notable expansion in sectors such as chemicals, pharmaceuticals, electrical equipment, motor vehicles, and other transport vehicles.
The report also noted that private limited companies, which are not listed on stock exchanges, experienced accelerated operating profit growth in 2023-24 across both manufacturing and services sectors. Consequently, their profit margins, as measured by the ratios of operating profit and profit after tax to sales, improved during the year.
The debt-to-equity ratio of the sample set of private limited companies remained close to the previous year's level at 45.2 percent as of March 2024. The report identified electricity, gas, steam, and air conditioning supply, as well as the construction sector, including civil engineering, as highly leveraged, though a slight moderation was observed.
At an aggregate level, the ICR for private limited companies improved to 3.1 in 2023-24 from 2.7 in the previous year. The manufacturing sector recorded an ICR of 8.3, while the services sector’s ratio stood at 2.7, further underscoring the financial resilience of India’s private sector.
With IANS inputs
