Most Profitable Companies in India 2018

In order to find most profitable companies in India, the best tool is Return on Capital Employed (ROCE).

Investors can also look into Profit & Loss accounts to check net profit (PAT) levels.

But looking only into ‘net profits’ says less about companies profitability.

It is wiser to look into both balance sheet and earning report to check profitability.

All investors have a common objective of buying stocks of good business. The best business is one that is most profitable.

In financial terms checking ROCE is a excellent check of profitability of a company.

Return on capital employed (ROCE) is expressed as percentage (%) of total tangible capital invested in a business.

There are several advantages of being aware of ROCE of a company (more than just PAT).

Investors can use profitability levels (ROCE, PAT) of one company and compare it with other. Lets take an example company A & B.

The company with higher ROCE will be considered better for investment. Let us see an example:

PATProfitability (ROCE)
Company A$ 500,0006%
Company B$ 250,00012%

An investor must prefer Company B over A as B’s ROCE is better.

But if one does not know the ROCE concept, then by just looking at PAT, he/she will be tempted to invest in Company A.

The investing logic is simple, a company which has prospects of faster growth must be preferred for investing. Return on capital employed (ROCE) gives us this idea.

It shows us how profitable a company is, and how fast it can grow its profits in times to come.

ROCE measure profitability of a company from point of view of owners. How? Lets see…

Suppose you want to generate annual income of say $10,000.

In order to generate this income there are two possibilities.

  • One possibility asks you to invest $100,000 and get return of $10,000/year (RoCE=10%).
  • The other possibility asks only $90,000 and provides $10,000/year (RoCE=11.1%).

Which option will you choose?

Its obvious that the second option is more profitable.

ROCE looks at profitability of business from this angle. Profit generated per dollar of invested capital.

$100,000 & $90,000 is called as capital employed and $10,000 is the return on capital employed.

But if ROCE is so effective way to measure profitability of a company, then why lot of investors does not use it?

#1. Measure Profitability of a Company using ROCE

PAT figures are directly available on profit & loss accounts. Just by looking at PAT and Sales Turnover, an investor can quickly guess the PAT Margin.

But the same is not true for RoCE. Return on capital employed (ROCE) needs more manual calculations.

In this article we will see how to measure profitability of company using ROCE.

To buy shares of good business, it is very important to know the ROCE figures.

Return on Capital Employed (ROCE) = PBIT / Capital Employed
#1.1 PBIT (Profit Before Interest & Tax)

PBIT can be back calculated from Net Profit (PAT) by adding to it the interest and depreciation.

All three figures PAT, interest & depreciation can be easily obtained form the profit & loss accounts of company.

In order to compare the profitability of two companies, it is better to use PBIT instead of PAT.

This is because PBIT brings companies in same platform.

Different companies work in different geographical locations. Working in different locations imposes different interest rates and local tax structures.

Calculation of RoCE using PBIT makes all companies stand on the same ground level for evaluation.

PBIT = Net Profit (PAT) + Interest + Tax
#1.2 Capital Employed

Employed capital is that fund that a company is using to fund its operations.

Company generates its funds in two ways:

  1. From shareholders equity and
  2. Debt it takes from banks etc.

Idea of measuring profitability of company using ROCE is to know how much profit a company can generate from its capital employed.

Good companies will generate more profits, per dollar of invested capital, as compared to its rivals.

Capital Employed = Shareholders Equity + Debt

The invested capital creates profits (PAT).

The objective of any company is to generate maximum profits with minimum capital investment.

Lets take an example:

PATCapital EmployedProfitability (ROCE)
Company C$ 500,000$ 8,333,3336%
Company D$ 500,000$ 4,166,66612%

An investor would like invest in company D over C because it generates the same level of profits (PAT) from less capital employed.

This shows that the company D is more profitable than company C.

Most Profitable Companies in India - 1

Most Profitable Companies in India 2018

(Updated as on July’2018)

SLCompanyMarket Cap (Cr)Size (Market Cap)ROE (%)Operating Margin (%)FCF Margin (FCF/Sales) %RoCE %
1Indian Energy Exchange Ltd.4936.89Mid Cap48.3186.7108.0646.38
2Oracle Financial Services Software Ltd.33501.35Large Cap31.1342.737.4426.29
3HEG Ltd.15176.48Mid Cap75.6263.0518.7849.72
4Procter & Gamble Hygiene & Health Care Ltd.31993.79Large Cap39.9531.9729.3554.45
5Hindustan Zinc Ltd.118308.93Large Cap24.3964.9743.0820.47
6Info Edge (India) Ltd.14225.18Mid Cap31.5135.668.6626.02
7Sun TV Network Ltd.31254.85Large Cap26.7172.7123.5224.23
8CARE Ratings Ltd.3683.39Small Cap32.6674.9757.3324.68
9Tata Consultancy Services Ltd.715809.56Large Cap30.2929.3721.0430.23
10Eicher Motors Ltd.77045.7Large Cap34.1334.1418.4427.59
11ITC Ltd.322825.02Large Cap24.0742.2125.1622.27
12Symphony Ltd.9892.97Mid Cap42.5931.4424.0430.27
13Bajaj Corp Ltd.6028.32Mid Cap42.7933.6522.2841.6
14Infosys Ltd.293677.73Large Cap24.0931.4922.8424.72
15Hindustan Unilever Ltd.362825.1Large Cap74.8522.1815.9871.89
16Accelya Kale Solutions Ltd.1730.92Small Cap62.2242.5422.8849.92
17Nestle India Ltd.95131.46Large Cap36.5622.7118.9134.56
18Colgate-Palmolive (India) Ltd.31678.17Large Cap48.3227.4912.2644.34
19eClerx Services Ltd4962.95Mid Cap30.6736.7824.0324.07
20Larsen & Toubro Infotech Ltd.28296.28Large Cap3821.820.6528.8
21Monsanto India Ltd.4930.24Mid Cap31.2926.5541.1525.7
22Crisil Ltd.12802.46Mid Cap29.9428.9817.8727.8
23HCL Technologies Ltd.128853.32Large Cap28.5524.0918.5223.48
24Castrol India Ltd.15984.22Mid Cap69.1231.169.5857.8
25Gillette India Ltd.21314.48Mid Cap35.3424.1915.6235.58
26Tata Elxsi Ltd.8450.29Mid Cap37.0428.1414.1832.5
27Caplin Point Laboratories Ltd.3010.53Small Cap56.1433.7712.1140.21
28Divi’s Laboratories Ltd.29198.89Large Cap21.9837.4522.2414.66
29Gujarat State Petronet Ltd.10082.07Mid Cap11.1994.1232.8634.6
30Interglobe Aviation Ltd.41581.29Large Cap44.5516.1932.5218.65
31Aurobindo Pharma Ltd.36616.3Large Cap27.5723.8125.2315.23
32Glaxosmithkline Consumer Healthcare Ltd.26954.66Large Cap22.1827.0319.3920.07
33Page Industries Ltd.31232.41Large Cap44.5420.6111.136.23
34Pidilite Industries Ltd.54255.55Large Cap28.1524.4311.5826.14
35Bajaj Auto Ltd86179.29Large Cap20.5423.8220.1520.45
36Agri- Tech (India) Ltd.61.95V.Small Cap31.4330505.0512940.9219
37Dabur India Ltd.67126.88Large Cap26.2624.8713.3520.67
38Ajanta Pharma Ltd.9062.96Mid Cap25.9732.1112.6422.95
39VST Industries Ltd.4516.68Mid Cap37.0729.9210.831.25
40Marico Ltd.44283.1Large Cap37.5121.229.2729.11
41Mahanagar Gas Ltd.8015.32Mid Cap22.0534.2614.1522.83
42Dr. Lal Pathlabs Ltd.7774.52Mid Cap26.7828.6813.9721.59
43Nesco Ltd.3590.99Small Cap22.3782.7214.617.67
44Advanced Enzyme Technologies Ltd.2379.24Small Cap25.0346.3429.6914.39
45PI Industries Ltd.10869.85Mid Cap33.1425.9813.7417.85
46Godrej Consumer Products Ltd.86034.88Large Cap27.3721.3919.3214.83
47Hero Motocorp Ltd.69268.92Large Cap32.9718.0210.9730.48
48IST Ltd.485.23Small Cap16.6989.83370.2518.85
49L&T Technology Services Ltd.12443.26Mid Cap4819.8210.7124.43
50Zydus Wellness Ltd.5407.97Mid Cap21.4930.5917.7718.61

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