Representational Pic
A recent report by the State Bank of India (SBI) reveals that around 4,000 listed Indian companies experienced a 6 per cent growth in revenue or gross sales during the financial year 2024. While the revenue growth was relatively moderate, key financial indicators, such as earnings before interest, taxes, depreciation, and amortization (EBIDTA) and profit after tax (PAT), showed robust increases of 28 per cent and 32 per cent, respectively.
The SBI report noted that the top-line revenue growth was accompanied by a significant rise in both EBIDTA and PAT. However, the report also highlighted a noticeable slowdown in the growth of employee expenses. Employee costs rose by just 13 per cent in FY24, a considerable dip from the 17 per cent increase recorded in the previous year (FY23). This moderation in wage growth suggests that companies have been focused on managing their wage bills more efficiently while ensuring continued profitability.
Despite the slower wage growth, Indian companies have managed to maintain a consistent EBIDTA margin of approximately 22 per cent over the past four years. During this period, the annual growth in wage bills has averaged around 12 per cent. This trend illustrates that companies are adeptly balancing their employee-related costs and other operating expenses to sustain healthy profit margins.
In a further analysis of the expenditure side, using the weighted average contribution model, the report found that employee expenses continue to play a significant role in influencing EBIDTA performance. However, the negative contribution of employee expenses to EBIDTA growth has decreased, dropping from 8.6 per cent in FY23 to 7 per cent in FY24. This indicates that companies are improving their cost management strategies and controlling wage growth without undermining profitability.
ALSO READ
Indian economy ends 2024 with strong growth as PMI hits 60.7 in December
India's CPI inflation to ease to 4.7-4.8 pc in FY25, driven by lower food prices
'India has become fastest growing economy; Maharashtra to be its backbone'
Rupee recovers from all-time low, appreciates to 84.83 against US dollar
Inflation decline sharper in high-income states, according to SBI report
Looking ahead to FY25, listed companies have continued to show positive financial performance, with a 7 per cent growth in EBIDTA during the second quarter. However, employee expenses grew at a slower pace of 5.6 per cent, further confirming the trend of moderated wage increases.
As per ANI, the report demonstrates that Indian companies are adopting a strategic approach to balancing revenue growth with cost management, ensuring profitability while controlling employee-related expenses. This careful modulation of wage growth, alongside consistent profits, highlights the companies' ability to navigate a volatile economic environment effectively.
(With inputs from ANI)
