When it comes to investing, it is necessary to ensure that we put our money in assets that will appreciate over time and increase our capital. This means that we need to check the profitability of a company before investing in it. While there are many high profit making companies in India, we need to find the right ones to invest in. We have listed the most profitable companies in India. For this, we need to understand how to determine the profitability of a company.
How to determine Profitability?
The profitability of a business or company is its ability to generate revenue or profits higher than its expenses. It is measured using the profitability ratios like gross profit margin, net profit margin, EBITDA, etc. These ratios help investors and analysts to analyze the company and measure its ability to generate revenue to cover its operational costs, create value by increasing its assets, and analyze its capacity for expansion in the future.
A higher profitability ratio indicates that the company is performing well. These ratios are also used for comparing the performance of companies against each other. Analysts and investors use profitability ratios to determine whether or not to invest in the company and to estimate its growth in the future.
Profitability Ratios of a company can be of two types: Margin Ratios and Return Ratios.
Definitions of Profitability Ratios
Margin Ratios: These ratios compare sales to profits at various degrees of measurement. It includes Gross Profit Margin, Net Profit Margin, EBIDTA Margin, etc.
Return Ratios: These ratios measure the returns generated. It includes Return on Assets, Return on Equity, Return on Invested Capital, etc.
Net Profit Margin: It is the earnings generated after all the expenses and taxes have been paid. It is the ratio of the net profit to sales. Net profit is the profit earned after deducting the operational costs, depreciation, and dividend from the gross profit. A higher ratio/margin indicates that the company is earning enough to cover all its expenses, payouts to the shareholders, and reinvest for expansion and growth.
Return on Capital Employed: ROCE is used to analyze the profitability of the company in terms of capital employed. It is calculated as a ratio of EBIT to the capital employed. EBIT indicates the earnings of the company before deducting interest and taxes. Capital employed is calculated by subtracting the current liabilities from total assets. This encompasses shareholders’ equity and long-term debts.
List of Top 10 Most Profitable Companies in India
The following table lists the most profitable companies in India in 2022 –
|Name of Company||Ticker (on NSE)||Profit (FY 2022)||Net Profit Margin||Return on Capital Employed (ROCE)|
|Reliance Industries Ltd.||RELIANCE||₹67,565 Cr||9.36%||8.02%|
|Tata Steel Ltd.||TATASTEEL||₹41100 Cr||16.46%||28.31%|
|Tata Consultancy Services||TCS||₹38,449 Cr||20.05%||52.91%|
|HDFC Bank||HDFCBANK||₹38,151 Cr||28.06%||3.38%|
|State Bank of India||SBIN||₹35,373 Cr||12.53%||1.57%|
|ICICI Bank||ICICIBANK||₹25,783 Cr||27.09%||3.01%|
|Indian Oil Corporation Ltd.||IOC||₹24,491 Cr||4.15%||17.61%|
|Vedanta Ltd.||VEDL||₹23,709 Cr||17.86%||28.99%|
|Infosys Ltd.||INFY||₹22,146 Cr||18.20%||35.96%|
|ITC Ltd.||ITC||₹15,485 Cr||25.52%||31.89%|
Reliance Industries Ltd. is India’s largest private sector enterprise, that has diversified businesses, mainly in the following segments: energy, natural gas, petrochemicals, textiles, retail, mass media, telecommunications, and Green energy. It is a part of the Energy Sector and operates in the Oil, Gas and Consumable Fuels Industry.
Reliance Industries is one of the most profitable companies in India. It is the largest publicly traded company on the stock exchange by market capitalization (₹16,25,056) and the largest company by revenue and the most profitable companies in India. Reliance registered a sales growth of 48 per cent.
Tata Steel Ltd.
Tata Steel Ltd. is an Indian multinational steel company, part of the Tata Group. It is a part of Metals – Ferrous Sector and operates in the Steel – Integrated Industry.
It was formerly known as Tata Iron and Steel Company Ltd. (TISCO). It is one of the largest steel producers in the world with an annual crude steel capacity of 34 million tonnes. It has a market capitalization of ₹1,07,972. Its sales grew by 57 per cent this year.
Tata Consultancy Services Ltd. is an Indian multinational information technology (IT) services and consulting company, part of the Tata Group. It is a part of the IT Software Sector and operates in the IT Consulting and Software Industry. Its services portfolio consists of IT and assurance services, business process services, business intelligence and performance management, connected marketing solutions, mobility products and services, cloud services, and platform solutions. It serves healthcare, insurance, telecom, retail, and other industries.
It has a market capitalization of ₹10,95,739 Crore. It has registered a sales growth of 17% this year.
HDFC Bank Ltd.
HDFC Bank Ltd. is a Banking and Financial Services company. It is a Private Sector Bank operating in Retail Banking, Treasury, Wholesale Banking, Other Banking Business, and Unallocated segments. It is the largest private sector bank by assets and holds the highest weightage in the Banknifty Index.
HDFC Bank has been focusing on rural areas to drive its next leg of growth. Furthermore, as it will absorb HDFC in the next year, its profitability will increase. It is the third largest company by market capitalization (₹7,56,557 Crore).
State Bank of India
State Bank of India is India’s biggest public sector bank. It operates in multiple segments. The Corporate/Wholesale Banking segment includes lending activities of the commercial client’s group, corporate accounts group, and stressed assets resolution group. The Treasury segment includes the entire investment portfolio and trading in derivative contracts and foreign exchange contracts. The Retail Banking segment focuses on personal banking activities, lending activities to corporate customers, agency business and automated teller machines (ATMs). It is involved in providing a wide range of products and services to individuals, large corporates, commercial enterprises, institutional customers, and public bodies.
It has a market capitalization of ₹4,27,578 Crore.
ICICI Bank is a private sector bank with subsidiaries in Canada and UK, and branches in the US, Bahrain, Singapore, Oman, Qatar, and China. It has a large network consisting of 5,275 branches and 15,589 ATMs in the country. It has a market capitalization of ₹5,22,567 Crore.
ICICI Bank provides banking and financial services including commercial banking and treasury operations. The bank operates in Treasury, Wholesale Banking, Retail Banking, and Other Banking segments. Its wide range of products consists of savings accounts, senior citizen accounts, women’s accounts, current accounts, personal loans, home loans, gold loans, car loans, credit cards, recurring deposits, fixed deposits, and life and general insurance. It provides a range of Internet banking services and Mobile banking services.
For You – Top 10 Companies in India by Market Cap
Indian Oil Corporation Ltd.
Indian Oil Corporation Ltd. is a public sector undertaking of the Ministry of Petroleum and Natural Gas, Government of India. It has a market capitalization of ₹99,342 Crore.
Its business operations involve the entire hydrocarbon value chain, ranging from refining, pipeline transportation, and marketing, to exploration and production of petrochemicals, crude oil and gas, alternative energy sources, gas marketing, and other operations. It has a large network of bulk storage terminals, fuel stations, aviation fuel stations, inland depots, liquefied petroleum gas (LPG) bottling plants as well as lube blending plants. It has set up approximately 29 battery swapping stations and around 257 electric vehicle (EV) charging stations at its energy pumps. It owns and operates approximately nine refineries across the country.
Vedanta Ltd. is a diversified natural resources company. It explores for, extracts, develops, produces, processes, and sells zinc, oil and gas, lead, copper, silver, aluminium, steel, iron ore, pig iron, and metallurgical coke. The company also operates several thermal coal-based power plants and wind power plants. Furthermore, the company manufactures glass substrates in South Korea and Taiwan. It also has operations in many other countries across the world. Vedanta was formerly known as Sesa Sterlite Limited. It changed its name to Vedanta Limited in March 2015.
It has a market capitalization of ₹84,696 Crore and reported a sales growth of 51 per cent.
Infosys Ltd., formerly known as Infosys Technologies Limited, provides technology, business consulting, engineering, as well as outsourcing services. Its end-to-end business solutions comprise consulting, systems integration, enterprise solutions; business information technology (IT) services such as application development and maintenance, infrastructure management, independent validation services, and engineering services that comprise product engineering, life cycle solutions, and business process management. It also provides business platforms and solutions. Finacle is its banking product offering solutions to address the core banking, e-banking and mobile banking needs of corporate, retail, and universal banks globally. It also provides cloud computing services.
It has a market capitalization of ₹6,01,837 Crore and a sales growth of 21 per cent.
ITC Ltd. is a Tobacco company with a diversified presence in the FMCG sector, Hotels, Packaging, Paperboards & Specialty Papers, Agri-Business, as well as Information Technology. It is the market leader in its traditional businesses of Cigarettes, Paperboards, Hotels, Packaging, as well as Agri-Exports. ITC is rapidly capturing market share in its businesses of Packaged Foods & Confectionery, Personal Care, Branded Apparel, and Stationery.
It has a market capitalization of ₹3,62,711 Crore and a sales growth of 22 per cent.
The highest profit margin companies in India have been listed above. This comprehensive list makes it easier for investors and analysts to decide which companies to invest in based on profitability.
Q. What is EBITDA?
EBIDTA stands for Earnings before Interest, Tax, Depreciation and Amortization. It tells us about the overall performance of the company and is used for calculating many financial ratios. It is calculated as a sum of Net Income, Interest Expense, Taxes, Depreciation, and Amortization.
Q. What is the difference between the calculation of Gross Profit Margin and Net Profit Margin?
Gross profit margin shows the percentage of revenue that exceeds the cost of goods sold (COGS). Net Profit Margin is the ratio of Net Profit to Revenue.
Gross Profit Margin = (Revenue-COGS)/Revenue ×100
Net Profit Margin = (Net Income)/Revenue ×100
COGS = Cost of Goods Sold
Net Income = Revenue – COGS – Operation Expenses – Other expenses – Interest – Taxes