Bouncing Back: Some companies got it right after facing a difficult FY24. What worked?

Businesses are often pushed to the limit. The ability to rebound is what sets them apart. In that sense, financial year 2023-24 (FY24) was marked by multiple challenges. What set the year apart was the beginning of the current geopolitical turbulence, which, by the looks of it, could be prolonged.

Understandably, many firms slipped into the red. But the sturdy ones got their act together and bounced back in FY25, as reflected in the BT500 India’s Most Profitable Companies list. Of course, that is not to suggest that the current fiscal year or the immediate future will be any less difficult.

Coping and Charge

The nature of the challenge varied depending on the industry. In steel, for instance, FY24 was marked by an uneven global macroeconomic landscape. T.V. Narendran, Chief Executive Officer and Managing Director of Tata Steel, which saw the biggest turnaround (see table), says China’s transition from investment to consumption-led growth contributed to reduced demand, exacerbated by a sluggish real estate sector. “Overcapacity in China and higher exports pressured global steel prices, while capacity in regional markets intensified competition.” On top of that, there was geopolitical tension, which disrupted supply chains.

By contrast, FY25 began with optimism. India’s steel sector saw higher output and consumption. “In FY25, Tata Steel achieved its highest crude steel production ever at 21.7 million tonnes (MT) and deliveries of 20.9 MT, driven by near full capacity utilisation across sites. Plus, we successfully commissioned India’s largest blast furnace unit (5 MT) at Kalinganagar,” says Narendran, adding that Neelachal Ispat Nigam, a recent acquisition, delivered a strong performance—Rs 1,000 crore Ebitda (earnings before interest, taxes, depreciation and amortisation) and positive free cash flows.

Vipul Prasad, Founder & CEO, Magadh Capital Advisors, says Tata Steel’s turnaround was driven by scaling up, improving efficiency and portfolio rebalancing. “Higher output in India set the stage for higher margin production in Tata Steel’s consolidated basket. In Europe, they streamlined operations by shutting older UK blast furnaces and ramping up low-cost, high-efficiency production in the Netherlands,” he adds.

In agrochemicals, the challenges included channel destocking, excess inventory and adverse weather conditions. For UPL, the turnaround was the result of a combination of strategic and operational measures. That covered portfolio realignment, innovation-led growth, digital transformation and financial recovery, all of which triggered a surge in net profit and a $1 billion reduction in debt.

“We undertook a significant realignment of the business model to enhance resilience and future-readiness,” says UPL Group CFO Bikash Prasad. The firm put in place four platforms—global crop protection, India crop protection, seeds and specialty chemistries. “It was a shift away from a unified approach to enable more targeted growth within each business,” he says.

Other initiatives were portfolio optimisation, digital integration, capital efficiency and ESG integration.

Tightening The Screws

One of the major turnaround stories has been scripted by the Anil Ambani-promoted Reliance Group India, earlier known as the Reliance ADA Group. Two of its companies, Reliance Infrastructure and Reliance Power, became debt-free. Net worth took off and financial standing improved. A group spokesperson says “Reliance Power has emerged as India’s largest integrated player in solar plus battery energy storage system with a clean energy pipeline for solar at 3.2 GWp and a storage capacity exceeding 3.3 GWh.” Reliance Infrastructure, it added, through its partnership with Dassault Aviation, “will manufacture Falcon 2000 business jets outside France for the first time.” The boards of the companies have approved plans to raise Rs 18,000 crore through a combination of equity and debt.

Vipin Singhal, Director of Anand Rathi Investment Banking, says the group’s pivot to high-growth sectors such as defence (Reliance Infra) and renewable energy (Reliance Power) has helped. “Plus, its partnerships with global firms like Diehl Defence and major solar-plus-storage projects have helped reshape market perception from distressed assets to turnaround stories,” he says.

But one worry is the recent Enforcement Directorate summons in a suspected Rs 17,000 crore loan fraud case involving the group. Besides, State Bank of India and Bank of India have classified the loan account of Reliance Communications as fraudulent and named Anil Ambani, over alleged fund diversion in 2016, according to an exchange filing. Singhal thinks it will impact the companies. “The stocks hit the lower circuit, reflecting heightened investor concern and uncertainty. If the operational progress is maintained with financial discipline, they may rebound only after the case stabilises,” says Singhal.

There were a few who took a slightly different path. In the instance of Essar Shipping, CFO & Whole-time Director Vipin Jain says they remain committed to optimising value across the global portfolio. He credits strategic financial management for the rise in FY25 profit after tax. “This growth was driven by monetisation of select investments, closure of outstanding loans and foreign exchange loans,” he says.

For companies that are back in the black, the sense of optimism is palpable. UPL’s Prasad, for instance, expects to maintain a higher growth trajectory versus the projected global crop protection market CAGR (compounded annual growth rate) of approximately 2% over the next five years.

“This will be supported by volume gains, innovation and strategic execution. We continue to maintain our FY26 guidance of 4-8% revenue growth and 10-14% EBITDA growth,” he says. For Tata Steel’s Narendran, the confidence comes from the ability to maintain a resilient balance sheet.

Looking Ahead

Obviously, nothing tightens a company more than a challenging phase. Glenn Saldanha, Chairman and Managing Director, Glenmark Pharmaceuticals Ltd., does not hold back when he describes FY25 as “a defining year” for his company. “It was proof that the tough but bold choices we made to sharpen our portfolio, strengthen execution and anchor growth in sciences were the right ones,” he says.

To put it in perspective, 60% of Glenmark’s revenues come from branded markets and “breakthrough launches such as Brukinsa (for blood cancer) and Tevimbra (for immuno-oncology) in India, Winlevi (for acne) in the UK and Ryaltris (a nasal spray for allergies) across geographies are reshaping our presence in high-value therapies.”

This July, Ichnos Glenmark Innovation, an alliance between New York-based Ichnos Sciences and Glenmark, inked an exclusive global deal with AbbVie in the US. The aim is to develop and commercialise ISB 2001, an innovative cancer drug. “The $1.9 billion partnership has validated the strength of our science and placed us firmly on the global innovation map,” says Saldhana.

Of course, it’s still the beginning of a long journey for the likes of Reliance Power and Reliance Infra, but Anand Rathi’s Singhal gives them credit for lowering the debt-equity ratio.

“The group’s pivot to strategic sectors seems promising and there are early signs of financial recovery. However, the medium-term outlook hinges on successful execution of defence and renewable projects, continued debt reduction and transparent corporate governance,” he says.

The lessons learnt during the turnaround could prove invaluable considering the ongoing turbulence in the global trade order.

@krishnagopalan