Mishra and Suar (2) demonstrated that industries such as Fast-Moving Consumer Goods (FMCG) and pharmaceuticals benefit more from CSR due to direct consumer interaction, leading to enhanced brand loyalty. On the other hand, capital-intensive industries like oil and gas and automotive faced challenges in converting CSR spending into direct financial gains due to high operational costs and market volatility.

Carroll and Shabana (3) assert that CSR contributes to long-term financial performance by enhancing brand reputation, increasing customer loyalty, and improving employee engagement. Similarly, we can see that Porter and Kramer (4) introduce the concept of creating shared value (CSV), arguing that CSR is not merely a philanthropic activity but a strategic tool for achieving competitive advantage. These foundational theories suggest that when CSR initiatives align with corporate goals, they can drive profitability rather than merely serve as additional costs.

Bhunia and Das (5) analyzed Maharathna companies in India and found a mixed impact of CSR on profitability, indicating that industry-specific factors play a crucial role. Their findings showed that while CSR had an inverse relationship with profit after tax in companies like BHEL and ONGC, it had a positive impact on firms like GAIL and NTPC. This suggests that the financial benefits of CSR are contingent on how well the initiatives align with a firm’s operational strategy.

Rathod (6) did a study on the Indian banks and found that the CSR spending positively affected financial health, particularly in terms of return on assets (ROA) and net interest margin (NIM). This study concluded that CSR enhances customer trust and regulatory compliance, leading to sustained profitability in regulated industries like the banking and finance sectors.

Sawant (7) examined the manufacturing firms and highlighted that a firm with well-integrated CSR strategies experienced higher financial returns due to improved customers, suppliers, investors, and employee relationships and operational efficiency. The study emphasized the role of regulatory policies in ensuring the CSR’s effectiveness.

KPMG (8) suggests that technology firms like Infosys and TCS have successfully leveraged CSR to enhance innovation and brand perception, translating into long-term profitability. The study noted that in technology-driven industries, CSR initiatives related to digital inclusion, education, and sustainability are particularly effective in improving financial outcomes.

This study follows a quantitative approach, utilizing descriptive and inferential statistical methods to know the relationship between the CSR expenditure and financial performance. This study employs a panel data analysis, allowing for a detailed examination of firm-level trends over time. By incorporating multiple regression analysis, correlation analysis, and hypothesis testing, this study aims to determine the extent to which CSR spending translates into financial gains and sustainable business growth.

To analyze the relationship between CSR expenditure and financial performance indicators (ROA, ROE, and net profit margin) among the Indian industry and firms.

To examine the sector-specific variations in the impact of CSR spending on financial performance in the competitive market.

To evaluate the influence of regulatory amendments, particularly the Companies (Amendment) Act, 2022, on CSR implementation and corporate profitability.

To provide strategic recommendations for companies to optimize CSR investments for sustainable financial performance.

Annual reports of selected companies, including financial statements and CSR disclosures.

CSR disclosures mandated under section 135 of the Companies Act, 2013, and its subsequent amendments.

Regulatory filings from the Ministry of Corporate Affairs (MCA) of India and stock exchanges (NSE/BSE).

The selection of companies for this study draws upon the top 1,000 rankings from the Economic Times and Business Today reports covering 2015 through 2022. The technology company and manufacturing companies are designated as sample units for this study. We have chosen the company based on some factors like market cap, net profit, total assets.

Indian top manufacturing and technology’s 40 companies

For the sampling method, the stratified method is used. At the first step, all the manufacturing and technology companies are systematically divided into eight categories, namely technology, cement, pharmaceutical, auto, oil and gas, FMCG, chemical and mining and fertilizers. During the second step, we choose five companies form each sector for the research, culminating in a total of 40 companies under study.

Correlation analysis—to assess the relationship between CSR expenditure and profitability indicators (ROA, ROE, and net profit margin).

Hypothesis testing—using a t-test to evaluate the statistical significance of CSR’s effect on profitability.

Sector Comparison—examining how the different industries respond to CSR investments in terms of financial returns and sustainability.

This study integrates key regulatory changes brought by the companies Amendment Act, 2022, which was introduced.

Mandatory disclosure of unspent CSR funds and their reallocations.

Stricter impact assessment mechanisms to measure CSR effectiveness.

Revised compliance guidelines and penalties for non-compliances.

The net profit margin is valuable when we are calculating for the purpose of overall profitability of the business and to know the efficiency of the business operations. This ratio is necessary to articulate the cost of efficiency in the operation. If a business is making a high net profit margin, we can say that the business is making sufficient returns for the owner and positions the business to withstand economic downturn conditions.

Given that the reference p-value obtained from the one-sample t-test is 2.0%, which is less than the significance threshold of 0.05, the null hypothesis (H0) is rejected, indicating a statistically significant difference. Consequently, we accept the alternative hypothesis (H1). Conversely, if the p-value was greater than 0.05, we would fail to reject the null hypothesis (H0) and reject the alternative hypothesis (H1). In the present analysis, however, the null hypothesis (H0) is retained, and the alternative hypothesis (H1) is rejected (Table 4).

Here, we have a reference value sample t-test with a p-value = 2.0% (H0) null hypothesis. We are rejecting and accepting the (H1) alternative hypothesis if the p-value is less than 0.05; if not, then the null hypothesis (H0) is going to be accepted and (H1) is going to be rejected.

The CSR average expenditure as a percentage of present-year profit is significantly different from the reference value of 2.0% across all financial years, with p-values less than 0.001. Until 2016–2017, the expenditure was notably lower than 2.0%, but from 2017 to 2018 onward, it exceeded 2.0%. Notably, industries like cement, iron, steel, and mining have been closer to the 2.0% target post-2018–2019, while sectors like pharma, chemical, technology, and oil and gas have consistently deviated from the benchmark throughout the study period from 2015–2016 to 2021–2022.

Tables 5 and 6 show that the mining industry consistently has the highest average % net profit margin across financial years, followed by the FMCG and pharma industries. In contrast, the automobile and oil and gas industries have lower average % net profit margins. Overall, the % net profit is relatively stable across all industries and financial years (Table 7).

The percentage of CSR expenditure is positively and significantly linked to the net profit margin of upcoming years across all kinds of industries researched. p-value less than 0.05. We are going to reject H0 and hence accepte H1.