Rs 2 trillion cash profit in sight

India Inc may cross another milestone this financial year.

India Inc's cash profit is set to cross Rs 2 trillion in the current financial year. In the first half of the year (April-September 2005), 3,050 companies registered cash profits of Rs 94,157 crore.

Historically, over 55 per cent of the cash profits of the Indian corporate sector come in the second half of the year. Assuming that there will not be any deviation from this tradition, the estimated cash profit of the 3,050 companies in March 2006 would be Rs 2,09,238 crore.

In April-September 2005, the cash profit of the corporate sector increased by 14.32 per cent compared to the same period in the previous year.

Even if the growth momentum continues at the same pace, India Inc's cash profit would be over Rs 2,15,236 crore in 2006. So either way, the figure is all set to cross the Rs 2 trillion mark. Cash profit is derived after adding depreciation provisions to net profit.

In other words, this signifies the cash flow for a company. During the financial year ended March 2005, the corporate sector had earned cash profits of Rs 1,88,275 crore against Rs 1,47,896 crore in the previous year, registering 27.30 per cent growth.

At Rs 2,09,238 crore, India Inc would show 14.32 growth in cash profit this year. The cash profit in the second half of the last financial year was Rs 98,992 crore, taking the figure for the trailing 12 months ended September 2005 to Rs 1,93,149 crore.

A BS Research Bureau study of the 3,050 companies reveals that the top 100 companies ranked by cash profits during the trailing 12 months account for over 78 per cent of India Inc's profits.

There are around 37 companies in the public sector which account for almost 50 per cent of the cash profit of the top 100 companies. The study further reveals that the public sector companies are the major source of cash profit for the corporate sector.

Eighty-one PSUs, including nationalised banks and oil, gas and other manufacturing companies, have generated cash flow of Rs 36,350 crore in the first half of the current year. This is 38 per cent of the cash profits of the companies studied.

Among the sectors, refineries (including oil, gas and marketing companies), banks, steel and information technology generate over half of the cash profit of India Inc. The refineries account for 24.64 per cent, followed by banks (10.51 per cent), steel (8.65 per cent) and information technology (6.32 per cent).