Domestic cos outsmart MNC peers in profits

Written by Pradip Kumar Dey | Mumbai, Sep 1 | Updated: Sep 2 2007, 06:21am hrs
Indian companies have performed better than their multinational counterparts in India in the first quarter of FY08. While the margin is not very significant when it comes to revenue, the gap was large in terms of profits before tax.

A comparison of Q1 performance of 50 companiesboth Indian and multinationals with revenue above Rs 400 crore indicates that sales for the domestic companies grew 22.2% over the same period in the previous year to touch Rs 1,34,001 crore. The sales of multinationals grew 21.8%, from Rs 22,682 crore in Q1 2006 to Rs 27,631 crore in Q1 2007.

In the same period, however, the profit before tax of Indian companies grew at 43.1% to touch Rs 25,099 crore in Q1, while the profit before tax for multinationals grew at 23.9%.

Says DR Dogra, ED, Care Ratings, Most multinationals are in sectors like FMCG which are in mature businesses and are not growing at a very fast pace. Also there are several high growth sectors where multinationals are not allowed due to regulations.

Individually, Bharti Airtel registered significant increase in profitability. The profitability ratio (profit before tax as a percentage of sales) for Bharti increased from 24.72% in April-June 2006 to 33.99% in April-June 2007. Among the multinationals, Bayer CropScience showed a significant improvement in the profitability ratio. The PBT to sales ratio rose from 9.10% in April-June 2006 to 10.51% in April-June 2007.

More than 58% of the multinationals showed a rise in the profitability ratio in Q1, while 66% of the domestic companies showed an increase in the profitability ratio in the same period.