T.N.Ninan writes “The question is, how can these current champion sectors sustain their growth without profits to finance further growth? Of all the players in the two sectors, only Reliance has the money to keep investing because of profits from its refinery and petrochemical businesses. Indigo, though slipping into the red, still has a cash hoard. Both companies could play for greater dominance, rather than maximising returns — imitating companies in the e-commerce and other digital businesses that are deep in the red, but early enough in the growth cycle to be able to raise fresh capital that fuels continued growth. But if costs are twice revenue, as is the case with some of the new digital/e-commerce businesses, the story from the perspective of national accounting is of value destruction. The market valuation game tells it differently but, unless cash has ceased to be king, the issue is the same in all three sectors:”
My two cents….
“Look around you… the world of today is “Winners take all“. Till the time stock market continues to reward topline growth and not Profitability,we will continue to see fight for market share at the expense of profitability. This is not only harm full for employment generation but in the end Consumer will have to bear the burden in the form of higher prices to the last man standing.
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