Amid slow economic growth, India Inc's return on capital shows improvement

In FY16, return on invested capital for the BSE 500 companies was 10.45 per cent; at the end of FY19, it had improved to 11.55 per cent

Amid the gloom and doom over earnings and economic growth, a key financial metric for India Inc is showing improvement. According to an analysis by Investec, the return on invested capital (ROIC), a metric for assessing efficient use of capital, has been on the rise in the past three financial years.

In FY16, ROIC for the BSE 500 companies was 10.45 per cent; at the end of FY19, it had improved to 11.55 per cent. The increase is even more encouraging if one factors in the falling interest rate. The spread between ROIC and the risk-free rate has gone