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Cost cuts and smart capex kept India Inc's bottom line strong in FY25-but with sales still sluggish, can capacity utilisation and demand catch up in FY26?

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IN SPITE OF GEOPOLITICAL tensions, inflationary pressures, global tariffwar ignited by US President Donald Trump and tepid urban demand, corporate India is in a good shape on the most important parameters-balance sheets, profitability and credit quality. Companies listed on the domestic bourses reported a record net profit of nearly 17 lakh crore in the previous financial year on highest-ever gross sales of almost 180 lakh crore compared to consolidated profit and gross sales of 15.2 lakh crore and 165 lakh crore, respectively, in FY24.

However, the profits were driven by cost control and lower capacity utilisation. Capital expenditure (capex) was primarily driven by the government, while private capex remained subdued, five years after the government reduced the corporate tax rate from 30% to 22% if the company does not avail any tax exemption or incentive.

Yet, key financial metrics indicate India Inc emerged resilient in FY25.

While sales growth slowed to 7.7% in FY25 (from 8% in FY24 and double-digits before), several indicators from net profit margins to debt ratios-suggest that Indian corporates are well-placed to navigate global headwinds. The corporate profit-to-GDP ratio was at a 14-year high of 5.1%, compared to 5% in FY24 and 4.4% in FY23.

"Corporate earnings, as a percentage of GDP, are on an upward trend. Indian corporates remain less leveraged, with no significant rise in debt levels. Most of the capex is being funded through internal accruals or equity issuance. Overall, the health of domestic corporates still looks strong, especially considering the global backdrop," says Hitesh Jain, Strategist, Institutional Equities Research, YES Securities.

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