A comparison between 100 major MNCs operating out of India and 100 major domestic companies shows that in terms of profit, both groups showed a decline. More than 47% of the MNCs that were part of the study showed a rise in the profitability ratio in the second quarter, compared to 23% of domestic companies. Profitability ratio of MNCs was higher than that of domestic companies during the July-September 2008 quarter.
Whereas in case of MNCs, the profitability ratio (PAT to sales) at the aggregate level showed a marginal decrease during July-September 2008 from the level of July-September 2007, in case of Indian companies, the ratio showed a significant decrease during period.
Aggregate sales of the 100 MNCs that constituted the study rose 19.1% from Rs 29,782 crore in July-September 2007 to Rs 35,464 crore in July-September this year. Their total PAT decreased almost 4% during the period, declining the profitability ratio. It was 13.13% in the second quarter last fiscal, compared to 10.59% in July-September 2008.This is significant, as with lower sales growth, MNCs have recorded a marginal decline on their return on sales.
Indian companies, on the other hand, achieved a 42.2% growth in sales at Rs 4.98 lakh crore during July-September 2008. PAT decreased by 45.1% to Rs 23,278 crore during the second quarter of this fiscal, compared to Rs 42,396 crore during the year-ago period. The profitability ratio, as a result, decreased significantly from 12.1% to 4.67% during the period.
Significant increase in profitability, among the Indian companies, was seen in the case of Sterlite Industries. It increased from 6.01% in July-September 2007 to 12.38% in the second quarter of this fiscal. The PAT of the company increased by 117.5% to Rs 463 crore in July-September 2008 from Rs 213 crore in the year-ago period. Sales of the company increased 5.5% during the period.
Among MNCs, Sesa Goa showed a significant improvement in profitability ratio. The PAT to sales ratio rose from 24.81% in July-September 2007 to 36.75%. PAT of the company increased by 272.6% to Rs 306 crore in July-September 2008 from Rs 82 crore during the year-ago period.