It's been a tough year, not just for the economy, but for India Inc. too. As the economy wades through a longish slowdown, India Inc. appears to have strengthened its resolve and tightened its belt. Total income of BT 500 companies rose 16.4 per cent in 2018/19 as against an 11 per cent in 2017/18. Profit after tax recorded a remarkable 19.4 per cent increase as opposed to the 12.2 per cent decline last year. However, the overall market cap of BT 500 companies fell for the first time in seven years, down 1.5 per cent (October 2018-September 2019 period) as against a 23.4 per cent increase in the same period the previous year and 20.5 per cent in 2016/17; though the decline is not as bad as the last recorded drop of 6.5 per cent in 2011/12.
Among the leading indicators tracked in the BT 500 listing, a 10.04 per cent growth in total assets during the year is lower than the 12 per cent recorded in 2017/18, indicating a slowdown in asset creation.
The fall in overall market cap has, however, not affected the leaders. The top three companies - Reliance Industries (RIL), Tata Consultancy Services (TCS) and HDFC Bank - have retained their rankings this year too. Both RIL and TCS have recorded a 24.2 per cent increase in average market cap. Among the top six, only ITC has moved down two notches from rank 4 that it had retained for the last two years.
Both HDFC Bank and HDFC make it among India's leading five companies, again after 2016/17. When the market is tough, the tough get going. India Inc.'s leaders have strengthened their position in the midst of a slowdown. The Top 10 in BT 500 recorded gains. Eight of them recorded double-digit growth. This year, the average market cap of the Top 10 companies accounts for 31.3 per cent of the overall average market cap of BT 500 companies, as opposed to 26.1 per cent last year.
But lower down the line, the impact of the economic slowdown has started to show. Among the Top 25 companies, the biggest loser is India's largest automobile company, Maruti Suzuki India, which saw its market cap fall 23.1 per cent. That's not surprising in a market where automobile sales have been sliding for close to a year now, barring an uptick in October due to Diwali.
A slowing economy also meant there were fewer new entrants to BT 500, just 11 this year as opposed to 22 last year. More importantly, there is no new entrant in the top 100 list; the first new entrant is Dalmia Bharat at No. 136 with average market cap of Rs19,334 crore. One area of worry is the rise in debt levels. The debt of the top 100 borrowers increased 15.4 per cent during 2018/19, a sharp uptick from 6.4 per cent in 2017/18 and 6.9 per cent in 2016/17. Debt is not a worry in a growing economy as companies invest, but in a slowing economy, it could be a huge liability. Among private companies, Vodafone Idea led with a 117.2 per cent increase in debt from Rs57,985 crore to Rs125,940 crore during the year.
It was followed by Adani Power, which saw debt increase 103.5 per cent to Rs19,491 crore during the year. In terms of absolute debt levels, India's largest company, Reliance Industries, tops this list at Rs1,61,720 crore, a 38.4 per cent increase over last year. The two big gainers in ranks this year are Procter & Gamble Health and Tata Steel BSL, both of which have risen 197 ranks. Tata BSL moved up the ranks as the Tatas acquired ailing Bhushan Steel as part of the Insolvency and Bankruptcy Code (IBC) process and turned it around.
The biggest losers in this year's ranking are PC Jeweller, which fell 235 ranks to 466; Vakrangee, down 220 to 362; and Arvind, down 205 to 444. Where From Here? At a sectoral level, the big gains have been in BFSI (banking, financial services and insurance) sector, which has seen its share rise to 26.3 per cent in 2018/19 from 24.8 per cent in 2017/18 and 21.8 per cent in 2016/17. Not surprisingly, auto and ancillaries has seen its share fall from 8.6 per cent in 2017/18 to 6.7 per cent in 2018/19.
That's going back to where it was in 2013/14. With the Indian economy being in a slowdown mode for longer than expected, much will depend on what the government can do to kick-start economic activity and investment quickly. The recent decision to not join the 16-nation Regional Comprehensive Economic Partnership (RCEP) for the time being may provide a small window for businesses. But the quicker the government integrates the economy with the global value chain, the better it will be for businesses, small and large.
Similarly, Indian business should start looking at being a global player and building economies of scale rather than focusing only on the large domestic market. Only then will the industry be in a position to match the power that, say, China has with its immense manufacturing capability. It remains to be seen what steps the government takes in that direction and India Inc. makes its corresponding move.