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While the US, Europe and China struggle with a growing pool of loss-making companies, India has emerged as a rare bright spot. For investors looking for stability in turbulent times, the profitability story unfolding in Indian equities is difficult to ignore.

According to an analysis by Yes Securities, Indian firms have one of the strongest profitability profiles globally. The share of loss-making firms in the country has nearly halved, falling from 17.3% in 2020-21 to just 8.2% in 2024-25, which is a clear sign of structural turnaround.

The contrast with global peers is stark.

China has moved in the opposite direction, with its proportion of unprofitable firms rising from 10.7% in 2020 to 25.1% in 2024. The US firms remain under pressure too, with 35.2% of companies still in the red, well above the pre-pandemic average of 28-29%. Western Europe has managed only a partial recovery, stabilizing at 18.4%.

Japan, however, has joined India in the winners’ club. Through disciplined corporate restructuring, Japanese companies reduced their share of loss-makers from 14.1% in 2021 to 6.5% in 2024. “This positions Indian and Japanese equities as the most resilient globally in terms of profitability," said Hemant Nahata, executive vice-president—strategy, Yes Securities.

The study covered companies with market capitalizations of over $100 million.

Much of India’s improvement has been driven by the mid-cap universe. In 2019-20, nearly 14% of mid-cap companies were unprofitable; that figure has dropped to just 2.7% in 2024-25. Large-cap firms, too, have seen a sharp turnaround, with only about 4% reporting losses compared to 14.3% five years ago.

Small-cap firms remain the laggards, though progress is visible. The number of loss-making firms in this basket has declined from 19% in 2019-20 to 9.4% in 2024-25.

“Since 2020-21, Indian equities have undergone a notable transformation in earnings quality. The proportion of loss-making companies has consistently declined across market segments, with mid-cap stocks leading the improvement," said Nahata.

“While small-cap stocks, though improving, remain more vulnerable. This broad-based improvement highlights both cyclical recovery after the pandemic and structural efficiency gains driven by better corporate governance, deleveraging and sectoral reforms," he added.

Beneath the broad gains lies a sharp divergence across industries. Heavy sectors—once weighed down by weak demand, high leverage, and regulatory bottlenecks—have powered India’s revival.

Automobiles have staged one of the sharpest turnarounds, cutting their loss-makers from 10.5% in 2020-21 to below 3.4% by 2024-25. Metals and mining, once among the worst hit with 43.3% of companies in the red, have also improved significantly, reducing that share to 16.1%. Capital goods have seen a steady recovery too, bringing loss-making firms down from 15.8% in 2020-21 to just 4% in 2024-25. Construction companies, long plagued by weak demand, slashed their losses from over 26% in 2020-21 to just 4.1% in 2024-25. Utilities mirrored this trend, trimming loss-making names from 11.1% in 2020-21 to 8.3% in 2024-25.

Not all sectors, however, have shared in the revival. Telecom remains deeply troubled, with loss-makers rising from 36.8% in 2020-21 to 41.2% in 2024-25. Media and parts of metals continue to struggle, while consumer-facing sectors present a more nuanced picture. FMCG and durables have remained steady, easing from 10.6% in 2020-21 to 9.3% in 2024-25, while healthcare and IT have shown resilience without the dramatic turnaround witnessed in heavy industries.

“The sectoral analysis reveals sharp contrasts within India’s equity landscape. Traditional heavy industries such as automobiles, capital goods, construction and utilities have seen remarkable improvement. This underscores the success of post-covid recovery dynamics, government-led infrastructure push and sector-specific reforms," Nahata said.

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