Tough times continue for India Inc. and the economy at large. The Indian economy has been buffeted by rising global oil prices and widening current account deficit, leading to a sharp fall in the value of the rupee.
However, despite the weaker rupee, exports have not taken off. The only bright spot has been an 8.2 per cent increase in gross domestic product during the first quarter of 2018/19. However, there are few indicators that this can be sustained during the rest of the financial year.
With the next general elections a few months away, there are enough reasons for worry on the economic front. Over the past few weeks, the BSE Sensex has been in a free fall. It hit a high of 38,989.65 on August 29 but has since fallen 5,640 points and closed at 33,349 on October 26. But 2017/18 was an entirely different story. The aggregate average market capitalisation of BT 500 companies during 2017/18 (October 1, 2017-September 30, 2018), the period we have taken for our BT 500 study, increased 23.4 per cent. This is better than the 20.5 per rise the year before, and phenomenally better than the minuscule 0.1 per cent achieved the year before that.
The current round of Sensex fall started around the time rating agencies downgraded Infrastructure Leasing & Financial Services in mid-September after it defaulted on a debt payment, triggering fears about the creation of another round of non-performing assets in the banking sector.
The Donald Trump administration's plan to revise the definition of employment and specialty occupations under the H1-B visa starting January 2019 has also hit sentiment at Indian IT firms, leading to a fall in their share prices.
But the big development this time round in the BT 500 rankings is the emergence of a new leader. The continued rise in oil prices has resulted in Reliance Industries overtaking Tata Consultancy Services, or TCS, for the top slot in the BT 500 ranking by market capitalisation.
Reliance had ceded the top slot to TCS in 2012. Reliance's market capitalisation rose 50.8 per cent - the highest among the Top 20 companies - to Rs 6,27,315 crore from Rs 4,16,625 crore in 2016/17. The other development is India's largest FMCG company, Hindustan Unilever Ltd, rising four ranks to make it to the top 5, driven by a 49.8 per cent increase in average market cap over the year.
Among the indicators we track, there has been a 12 per cent increase in combined total assets of BT 500 companies, and an 11 per cent increase in total income. However, this time, profit after tax declined 12.2 per cent during 2017/18 over 2016/17. That's a steep fall from the 17.8 per cent increase in 2016/17 over the previous fiscal. Also, the ranking of 282 companies has fallen from last year.
Despite the fall in the value of the rupee, 13 companies have notched profits of over $1 billion (Rs 7,400 crore), which is the same as last year. There is no change in the top four companies by profits - Reliance Industries, TCS, IndianOil and ONGC. Infosys makes it to the fifth spot. HDFC Bank has the highest market capitalisation among BFSI companies.
The debt level of the top 100 borrowers increased 6.4 per cent during the year, quite in sync with the 6.9 per cent increase during 2016/17. Three sectors - power, oil & gas, and mining & minerals - account for 64 per cent of the total debt of 399 companies (excluding BFSI). The power sector accounted for more than a quarter of the total debt at 26.9 per cent followed by oil & gas (20.9 per cent) and mining and minerals (16.2 per cent). The share of companies with debt to market capitalisation ratio of less than one is 62.6 per cent.
Only one sector, pharma and healthcare, saw market capitalisation fall by 2.6 per cent. The real gainer has been retail, which saw a 57 per cent increase in market capitalisation. Surprisingly, even telecom, which has seen a sustained fall in value over the years, saw its market capitalisation rise, by 6 per cent.
The two big gainers in this year's listing - HEG and Graphite India - are reaping the gains of the global shift from blast and induction furnace in the steel industry to electric arc furnace. HEG's rank rose 447 points to 218 this year from 665 last year while Graphite India rose 284 ranks from 465 to 181. As China cracked down on polluting steel plants, the demand for graphite electrodes increased. The two Indian companies, which account for 23 per cent of the global graphite electrode production, gained.
Among the top 50 companies in the BT 500 listing, four sectors - auto & ancillaries, BFSI, FMCG, mining & metals, and oil & gas - had five companies each accounting for half the list. The real leaders are companies in the BFSI sector. Each of the top five BFSI companies - HDFC Bank, Housing Development Finance Corporation, State Bank of India, Kotak Mahindra Bank and ICICI Bank - has an average market capitalisation of over Rs 1.9 lakh crore; they are ranked within the top 12 companies in the BT 500 listing.
Among the big losers was Force Motors that slipped 135 ranks to 429 from 294 the year before. Strides Pharma Science fell 132 ranks. Anil Ambani-owned Reliance Communications was also among the big losers with a 123-point fall from 230 to 353.
Now, as India goes into the election mode, there would be lesser focus on economic issues. That could lead to a slowing of rise in market capitalisation of companies. Things will depend to a large extent on economic decisions that the new government takes soon after coming to power. It is wait and watch for now.