Financial Determinants of Profitability in Indian Manufacturing Firms: A Quantile and Sectoral Regression Approach

Abstract

This research investigates the factors that influence profitability of Indian manufacturing companies. A cross-section of 446 firms across four major sectors - Auto Components, Chemicals & Petrochemicals, Metals & Minerals and FMCG - was collected from Screener.in in relation to 2025. Profitability is measured by Return on Assets (ROA) and is measured through the Pooled OLS and Quantile Regression approach for heterogeneity of profitability. The findings show that leverage (Debt-to-Equity) is negatively related to profitability while liquidity (Current Ratio) and efficiency (Operating Profit Margin) are positively related to firm performance. Furthermore, factors facilitating returns in the Chemicals/FMCG sectors are liquidity and efficiency while Auto and Metals firms are more sensitive to leverage. In addition, quantile regression results show asymmetric effects, where growth-related variables are most pertinent in upper quantiles. Overall, the results provide strategic considerations for financial managers and investors alike, revealing heterogeneity across sectors and performance levels.