ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Dissecting the Extraordinary Surge in Corporate Profits

Uneven profits across sectors, input cost pressures, and a rise in interest rates coupled with a weaker rupee could put the brakes on the pace of firms’ profits.

Radhika Pandey and Pramod Sinha write:

The COVID-19 pandemic derailed the economy but acted as a boon for the listed companies. The steep corporate tax cut in 2019 and pandemic-induced cost-cutting boosted the profits of firms. The pandemic year was also the time when Indian companies repaired their leveraged balance sheets. Due to the easy monetary policy regime characterised by low interest rates in financial year (FY) 2020–21, companies deleveraged by repaying high-cost loans through funds raised via bond issuances. Repayment of the existing high-cost debt reduced the interest cost and made companies more profitable. Going forward, the extraordinary surge in profits could see a moderation due to a rise in interest rates and a weaker currency.

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Updated On : 5th Jul, 2022
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