Unlisted company margins at a record high, gap remains with listed peers

Profit margins haven’t been this high for the unlisted segment in over 30 years. The profit after tax as a percentage of total income by a sample of unlisted companies in FY25 hit a record high of 5.75 per cent, according to a Business Standard analysis of data from the Centre for Monitoring Indian Economy.

Unlisted companies release their financial numbers with a lag. The analysis looked at 3,973 listed and 3,175 unlisted non-financial sector companies that have available data. The equivalent margin for listed companies was 8.11 per cent, showing a continuing profitability gap between listed and unlisted segments.

Buoyant capital markets create a greater growth incentive for listed companies compared to unlisted ones, G Chokkalingam, founder of Equinomics Research, told Business Standard in December. Every incremental rupee of earnings leads to higher wealth because companies trade at a multiple of their earnings when they are listed on the stock exchange. For example, a company earning Rs 100 crore may well be valued at Rs 1,000-1,500 crore or more, creating as much wealth for its shareholders. A promoter who earns Rs 100 crore through an unlisted venture can broadly increase his wealth by Rs 100 crore in earnings alone. This may be one reason why margins are higher in the listed space with promoters having every incentive to minimise costs and squeeze out incremental earnings, said Chokkalingam.

Listed and unlisted companies reported higher profit margins though both reported single-digit growth in sales. Listed companies’ sales grew 5.1 per cent, while it was 8.62 per cent for the unlisted segment.

Large unlisted companies which have seen a slowdown in sales include Nayara Energy (sales growth of -3.4 per cent in FY25 compared to 13.4 per cent in FY24), Honda Cars India (4.6 per cent vs 16 per cent) and JCB India (7.7 per cent vs 23.2 per cent). Emails sent earlier to the companies did not receive a reply.

Research bears out advantages listed companies have.

“…listed companies tend to grow faster, use less financial leverage, invest less in tangible assets and experience a lower return on equity compared to unlisted ones,” said a March 2006 study called “Ownership Structure Heterogeneity and Performance: A Comparison between Listed and Unlisted Companies” by Italian University of Sannio researchers Arturo Capasso, Matteo Rossi and Biagio Simonetti.

Slower sales and lower demand may have weighed on capital expenditure by Indian companies. The value of private sector new project announcements saw a single-digit increase (8 per cent year-on-year) in the December 2025 quarter.

Around a quarter of the existing production capacity of companies lies unutilised, according to data from the Reserve Bank of India’s latest Order Books, Inventories, and Capacity Utilisation Survey which covered 1,114 manufacturing companies as of September 2025.

A pick-up in earnings is expected across the board with cuts in the goods and services tax expected to put more money into the hands of consumers and improve demand, according to Chokkalingam.