Corporate Profits, Margins Soar as Market Concentration Rises

Corporate India has exhibited strong pricing power in recent years, resulting in a steady rise in profit margins across many sectors despite fluctuations in raw material and energy prices, and a persistent slowdown in revenue growth.

- KRISHNA KANT

The margin expansion has been most pronounced in the post-pandemic period.

This improvement in corporate margins has coincided with a steady rise in market concentration in key domestic sectors, as larger players have captured greater market share, either through mergers and acquisitions or through organic growth.

Market concentration, as measured by the Herfindahl-Hirschman Index (HHI), was higher in six of eight sectors in FY25 compared to levels seen in FY15 and FY20. Only two sectors, paints and two-wheelers, have seen a moderation in concentration over the past decade. In all other sectors—aviation, cement, passenger vehicles (or cars), steel, telecom, and tyres—the HHI is now close to all-time highs. Annual HHI scores for these sectors are available beginning FY06.

The average HHI score across these sectors increased to 2,532 in FY25, from 2,167 in FY20 and 1,980 in FY15. According to the US Department of Justice's HHI scale, these levels indicate an extremely high degree of market concentration in key industries.

Historical data shows a positive correlation between HHI scores and corporate margins.

For instance, the average profit before tax (PBT) margin of listed companies, excluding those involved in banking, financial services, insurance, oil and gas, and IT services, have risen nearly 300 basis points over the past 10 years.