Profit rate of Indian Inc. behind MNCs’

When it comes to improving the bottom-line, Indian companies have still grown at a thing or two to learn from their multinational brethrens operating in this country.

According to the latest statistics in the first six month of this year the MNCs operating in India have seen an increase in their profit by 43% compared to 40% increase in profit of their Indian counterparts. Three percent is not much difference as Indian companies have also achieved a growth of 40 percent. But it becomes a big difference when we see the growth in sales of these companies. The Indian companies have seen a growth of around 35% in their sales where as MNCs have seen a growth of 23%. So with a lesser growth in sales they have achieved higher growth. It shows the MNCs have better profitability than their Indian counterparts.

The reason for higher profitability is that these companies are focusing on cost cutting measures. The expenditure of MNCs has seen very little growth compared to the Indian companies. The major expenses are increase in employees salary, increase in raw material price etc. Tata steel known for its low cost of manufacturing has seen around 15% growth in its expenses resulting profit growth of meager 4.4%. It affected the share price of the company also as the market was expecting a better growth in the net profit of the company. The wage bill of Tata increase by 3.4%

Reliance recorded growth less than 10%. It was due to the 42% increase in its expenditure. The wage bill of Reliance increased by 17.6% during the first 6 months of this year. Compared to this two Indian companies HLL registered 48% increase in its net profit in the first 6 months of this year. It was efficient in controlling its expenses which increased by only 1.9%. This figure looks more attractive when we see the increase in its sales figure. It increased by 10% resulting 48% net profit. So the Indian companies have to learn from the MNCs how to increase the profitability when you are not able to increase your sales at a rapid rate.