According to data from the Centre for Monitoring Indian Economy (CMIE), profit after tax (PAT) as a percentage of capital employed rose to 10.47% in September, up from 8.41% a year earlier. This is the highest level recorded since March 2010. The data covers 3,307 non financial companies, where capital employed includes both equity and borrowed funds.
Another key metric, profit relative to net worth, climbed to 15.66%, also the strongest reading in over a decade, indicating improved returns for shareholders.
Market experts attribute the trend to operational resilience. Independent analyst Deepak Jasani said companies protected margins during periods of weak sales growth, and as revenues recovered in the July–September quarter, profitability improved further.
Sector-wise, manufacturing companies reported strong gains, with PAT to capital employed rising to 13.74%, while non-financial services also showed improvement. However, returns declined in electricity, mining, construction, and real estate. Financials and engineering firms are expected to remain resilient, while IT faces global uncertainty and automobiles may see temporary saturation.
Higher return ratios could attract foreign portfolio investors (FPIs). A recent Motilal Oswal report highlighted India’s superior return on equity above 15% compared to other emerging markets, strengthening its long-term investment appeal despite near term risks.