MNCs one up on managing profits

Written by Pradip Kumar Dey | Mumbai, Dec 29 | Updated: Dec 30 2007, 05:14am hrs
Multinational companies (MNCs) seem to have stolen the march over their domestic compatriots when it comes to managing profitability.

A comparison between 50 major MNCs operating in the country and a similar number of major domestic companies shows that the MNCs performed better in terms of sales and profit before tax (PBT) growth during the first half of this year.

The profitability ratiomeasured as a percentage of the PBT to sales ratioof the MNCs rose from 17.63% in April-Sept 2006 to 18.61% in April-Sept 2007.

For domestic companies the profitability ratio increased marginally from 12.5 % to 14.75% during the above period.

Significantly, aggregate sales of the 50 multinationals grew by 22.2% from Rs 27,338 crore in April-Sept 2006 to Rs 33,401 crore in April-Sept 2007 and their aggregate PBT increased by 29% during the period.

The sample set of domestic companies achieved an 8.5% growth in sales to Rs 5,75,541 crore during the first half and the PBT increased by 28% to Rs 84,868 crore during April-Sept 2007 from Rs 66,320 crore during April-Sept 2006.

Thus, despite a higher sales growth, MNCs managed to generate better profitability.

For corporate India, significant increase in profitability was seen in the case of Bharti Airtel.

The profitability ratio of Bharti Airtel increased from 24.61% in April-Sept 2006 to 31.70% in April-Sept 2007.

The PBT of the company increased by 91.2% to Rs 3,699 crore in April-Sept 2007 from Rs 1,935 crore in April-Sept 2006.

The sales of the company increased by 48.4 % during the same period.

Among the multinational companies, Colgate Palmolive showed a significant improvement in the profitability ratio.

The PBT to sales ratio rose from 10.71% in April-Sept 2006 to 20.60 % in April-Sept 2007.

The PBT of the company increased by 118.4% to Rs 147 crore in April-Sept 2007 from Rs 67 crore in April-Sept 2006.

The sales of the company also increased by 13.5% during the above period.

Slightly more than 56% of the MNCs showed a rise in the profitability ratio in the first half, while 72% of the domestic companies showed an increase in the profitability ratio in the same period.

One interesting thing is that the profitability ratio of multinationals was higher than the domestic companies in April-Sept 2007.