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Corporate News Today India – Corporates are raking it in

Corporate News Today India

Corporate News Today India – If govt isn’t getting more in tax, time to look at exemptions

Corporate News Today India – The Modi government’s changes to corporation tax rates were supposed to be revenue-neutral. Are they, however, genuine? If not, the finance minister should examine whether tax exemptions should be targeted. 
 
India’s corporate sector is undergoing a significant transformation. According to the Reserve Bank of India’s (RBI) corporate finance studies, net profits in the first half of this financial year are already nearly 80% of profits achieved in the entire previous year for a rotating sample of 2,600+ listed private companies, excluding banking enterprises.

Even if profit growth slows in the second part of the year, profits in the RBI sample for the entire year 2021-22 could climb by 60%. This comes after profits more than doubled in 2020-21, but it was primarily due to a rebound from a steep drop the year before. 
 
Corporate India tax rates have been reduced to 15% for new manufacturing enterprises and to 25% for companies that do not take advantage of tax incentives. 
 
It’s vital to note that the RBI’s sample database excludes a significant portion of the corporate sector, such as large unlisted companies (such as Hyundai, Coke & Pepsi, IBM, and Accenture), as well as banks and public sector behemoths (Indian Oil, ONGC, Coal India, etc). Still, banks (including those owned by the government) have performed better than in the past, and there is no reason to believe that major unlisted companies have performed differently from listed companies. 
 
Profit growth would be moderated due to non-bank public sector firms. Even if it is taken into account, as well as the poor performance of small and medium businesses (whose share of the total profit pie is small), profits should climb this year.  
 
This piece of positive news is followed by others, such as strong growth in the RBI sample’s sales revenue (up more than 30% year over year in the July-September quarter), accompanied by stable interest payments, resulting in greater net profit margins. The corporate India debt-equity ratio is at a six-year low, according to Business Standard. Such figures could explain a variety of things, including the stock market’s buoyancy in the face of widespread overvaluation. Perhaps, but when earnings are rising rapidly, price-earnings ratios can be deceiving. 

This achievement is impressive since it occurs despite poor capacity utilization and the presence of multiple troubled industries. Such an “output gap,” as it’s known, implies that there’s room for more sales growth without new capacity investment, and hence without the new debt that comes with an interest cost. If sales growth continues, margins could improve much more. 
 
Adani Power, RBL Bank, Indian Hotels Company, Federal Bank, Container Corporation of India, Hindustan Aeronautics, and Mahindra & Mahindra Financial Services led the BSE Mid-cap Index higher by 2.4 percent. Vodafone Idea, PI Industries, Gland Pharma, Abbott India, and the Steel Authority of India, on the other hand, were losers. 

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