Mumbai(India), 08/08/23: Changes in the domestic and global economies as a result of the Covid-19 pandemic are reshaping the corporate profit league table in India. Reliance Industries (RIL), which had dominated the India Inc profit table for more than a decade, was beaten by State Bank of India (SBI) in the April-June 2023-24 (FY24) quarter (first quarter, or Q1).
During the trailing 12-month (TTM) that ended in June this year, India’s largest lender posted a consolidated net profit (adjusted for exceptional gains and losses) of ₹66,860 crore, beating RIL’s TTM adjusted net profit of ₹64,758 crore.
The public sector lender’s quarterly net profit of ₹18,537 crore in Q1FY24 was also higher than RIL’s quarterly net profit of ₹16,011 crore.
This is only the second time in the last two decades that SBI has posted a higher TTM net profit. SBI reported a TTM net profit of ₹18,810 crore in the 2011-12 (FY12) July-September quarter, compared to RIL’s consolidated net profit of ₹18,588 crore.
Historically, RIL has fought for the title of the country’s most profitable corporation with public sector oil and gas companies such as Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation (IndianOil).
RIL was last beaten by IndianOil in the profit league table during the TTM of April-June quarter of 2012-13. Until the October-December quarter of FY12, ONGC was ahead of RIL in the profit league.
RIL’s position in the league table was eroded by a dramatic drop in refining and petrochemicals (petchem) at its oil-to-chemicals division as a result of adverse price movement in the global fuel and petchem markets during the Russia-Ukraine war.
As a result, RIL’s consolidated net profit fell 10.6 percent year on year (YoY) to Rs 16,011 crore in Q1FY24, the company’s poorest performance in 11 quarters.
SBI, on the other hand, announced another quarter of record earnings, owing to advantages from quicker credit growth, an increasing difference between interest on loans and interest on deposits, and the reversal of previous bad loans.
On a low basis in the previous fiscal year (2022-23), the lender’s net profit increased 153.1 percent year on year in Q1FY24.
The incredible turnaround in SBI’s net profit from losses till the first quarter of 2018-19 is part of a larger process of the banking, financial services and insurance (BFSI), and stockbroking sectors’ gaining clout in the Indian economy and business sector.
Companies in the BFSI sector now account for approximately 35% of corporate profits, up from around 10% prior to the epidemic.
In contrast, enterprises in the industrial and manufacturing sectors have experienced a relative fall in recent years, resulting in weak revenue and profit growth. For example, RIL’s oil refining and petchem division’s annual earnings before interest and tax has stayed basically stable over the last four years.
The majority of RIL’s incremental earnings growth has come from its newer non-industrial commercial initiatives, such as retail and telecommunications services. These newer divisions, however, are not as profitable as its traditional industrial industries, putting pressure on the company’s overall earnings.
Despite growth in its new operations, RIL’s consolidated net profit in Q1FY24 was relatively similar to its results in the 2020-21 October-December quarter.
