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SML-190: Bottom-Line Net Profit (PAT, Profit After Tax) Net profit, also called Profit After Tax (PAT), is what remains of a company's earnings after all costs, interest and taxes. It is the last line of the income statement, so it is called the bottom line (SML-185). How it is calculated: PAT = Profit before tax (PBT) − Tax expense Net profit margin = PAT ÷ Revenue × 100 EPS (earnings per share) = PAT ÷ Number of shares Example (illustration only, in ₹ crore): Revenue: 1,000 Profit before tax: 140 Tax: 35 PAT: 140 − 35 = 105 Net profit margin: 105 ÷ 1,000 = 10.5% With 10 crore shares, EPS = ₹10.5 What PAT is used for: It is the profit that belongs to shareholders. The company may pay part of it as dividends and keep the rest as reserves in the balance sheet (SML-184). It is the basis of EPS and the P/E ratio (SML-182). Good to know: In consolidated results, check the profit attributable to the company's own shareholders. Part of the profit may belong to minority shareholders in subsidiaries. Check whether you are reading standalone or consolidated numbers. What to check: Is PAT growing steadily over several years? Is PAT growing in line with sales? If sales rise but PAT falls, costs or interest may be rising (SML-186, SML-187). Is the net profit margin stable or improving? Is EPS growing? Does profit turn into cash? Compare it with operating cash flow (SML-184). Red flags: Profit rises only because of a one-time gain, such as the sale of an asset A very low tax rate that may not continue Large share of profit coming from other income, not the main business Profit growing while operating cash flow stays weak Caution: One quarter's PAT can mislead. Look at several years. Accounting choices, such as depreciation methods, affect reported profit (SML-189). Compare net margins with similar companies in the same industry. Key takeaway: PAT is the profit left for shareholders, but its quality matters as much as its size. Check where the profit comes from and whether it turns into cash.