In the world of business and investing, numbers matter. But not all numbers are created equal. One figure that truly reflects how well a company is doing is PAT growth — short for Profit After Tax growth.
Whether you’re an investor, an entrepreneur, or just someone trying to understand financial health better, PAT growth is a metric worth paying attention to.
First, What Is PAT (Profit After Tax)?
PAT, or Profit After Tax, is the net profit a company earns after paying all its taxes. It’s the final line on the income statement — the money left after operating expenses, interest, depreciation, and taxes.
In simple terms:
PAT = Net Income = Actual Profit
This is the money that can be reinvested into the business, distributed to shareholders, or saved for future use.
So, What Is PAT Growth?
PAT growth refers to the year-over-year or quarter-over-quarter increase in Profit After Tax. It tells us how much the company’s bottom line is growing.
For example:
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If a company made ₹10 crore in PAT last year and ₹13 crore this year, the PAT growth is 30%.
PAT growth is a great indicator of:
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Business efficiency
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Cost control
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Revenue quality
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Sustainability of profits
Why Does PAT Growth Matter?
Here’s why PAT growth is so important:
✅ 1. It Reflects Real Profitability
While revenue can grow due to sales volume, it doesn’t always mean the business is more profitable. PAT shows how much actual money the company retains after all expenses.
✅ 2. Investors Love It
For stock investors, consistent PAT growth is a sign of a healthy, well-run business. It often results in better earnings per share (EPS), which drives stock price appreciation.
✅ 3. It Helps Compare Companies
Two companies may have similar revenues, but the one with stronger PAT growth is likely managing costs and operations better — and that makes it more attractive to stakeholders.
✅ 4. It Signals Long-Term Viability
Stable or growing PAT means the company has strong fundamentals and can survive slowdowns, reinvest in expansion, or pay dividends.
How Can Businesses Improve PAT Growth?
Improving PAT growth isn’t just about increasing sales — it’s about improving margins and reducing leakages.
Here are some strategies:
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Optimize operating costs without cutting quality
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Automate or digitize processes to reduce overheads
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Diversify revenue streams for more consistency
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Focus on higher-margin products/services
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Plan taxes efficiently to reduce liabilities legally
Real-Life Example
Imagine two eCommerce companies:
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Company A grows revenue by 50%, but spends heavily on ads and ends up with only 5% PAT growth.
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Company B grows revenue by 20%, but optimizes operations and sees a 25% PAT growth.
Which one looks more stable and profitable? Most likely, Company B.
Final Thoughts
In today’s fast-moving economy, profitability matters as much as growth — sometimes more. PAT growth is one of the clearest indicators of business health and sustainability.
So, next time you read a financial report or pitch deck, don’t just stop at revenue. Scroll to the bottom line and check the PAT growth — it might just tell you the real story.