India Inc's profit after tax (PAT) for FY22-24 will log a compounded annual growth rate (CAGR) of 17 per cent, said Motilal Oswal Financial Services Ltd.
In a research report on Indian corporate sector decadal earnings 2012-22, Motilal Oswal said: "We estimate an FY22-24 PAT CAGR of 17 per cent, led by banking, financial services and insurance (BFSI) and automobiles."
The decade 2012-2022 saw India Inc's earnings multiply 2.6 times and reported a compounded annual growth rate (CAGR) of about 10 per cent, said Motilal Oswal.
As per the report, the decade under review is divided into two distinct phases -- Phase 1 (FY12-17) that clocked a muted profit after tax (PAT) CAGR of 6.3 per cent underpinned by a gross domestic product (GDP) CAGR of 7.1 per cent.
During this five-year period, corporate profit grew at a slower pace due to multiple macroeconomic headwinds and high interest rates, the report notes.
The Phase 2 (FY17-22) that posted a higher PAT CAGR of 13.9 per cent, though the GDP growth slipped to 3.7 per cent.
During this period, corporate profit growth recovered smartly fueled by tax rate cuts, reduction in the banking sector NPAs and post-pandemic tailwinds that drove profitability of sectors after a weak two-year base.
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According to Motilal Oswal's report, the defensive or the essential sector reported healthy performance during Phase 1 with 15 per cent CAGR over FY12-17 and concurrent increase in profit pool contribution to 30 per cent in FY17 from 20 per cent in FY12.
In Phase 2, the sector witnessed a sharp moderation in growth rates.
The private financial sector has been a star performer during the period under review recording a PAT CAGR of 14.6 per cent over Phase 1 and 18.2 per cent over Phase 2.
The private banks and the non-banking finance companies (NBFC) combined PAT share climbed up 760 basis points (bp) to 17.8 per cent in FY22 from 10.2 per cent in FY12 and 14.8 per cent in FY17.
On the other hand, the automobile sector's profit share moderated to 2.5 per cent in FY22.
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The auto sector posted an FY12-22 PAT CAGR of minus three per cent.
According to Motilal Oswal, India's earnings cycle has seen a turnaround after almost a decade and continues to remain healthy, amid the current adverse macroeconomic scenario with heightened worries on rising interest rates, elevated crude oil prices and liquidity tightening that has kept the market volatile and jittery.
