Year Of Super Chargers
New Delhi 29-Oct-2010
We told you so. Last year, we had predicted that IndianOil’s (IOC) days at the top of BW Real 500 were numbered as runner up Reliance Industries (RIL) was fast catching up. Sure enough, this year, for the first time ever, a private sector firm has topped the list, as India’s largest private sector player consolidated the merger with Reliance Petroleum and revenues from the gas fields began pouring in.
Though the 51-year-old IOC continues to remain India’s biggest corporate entity in terms of revenues with a lead of over 28 per cent, 44-year-old RIL has trumped it in this year’s rankings powered by its Rs 2.60 lakh crore asset base, which is 54 per cent bigger than IOC’s.
RIL’s surge also symbolises how the great PSU (public sector unit) hold over the top of the BW Real 500 list is loosening, even as the real impact of the two-decade-old reforms and unshackling of various industries begins to take effect. And it has never been more glaring than in this ninth anniversary of the listing.
A decade ago, when the BW Real 500 methodology was reformatted to tune it to the changing times, we devised a unique blend of the past, the present and the future in a single listing. The past was captured by the total assets created by the company till date; the present was captured by the income in the current fiscal; and the future was captured by the market capitalisation. The main ranking, though, was based on assets plus sales (remember, the dotcom bust that preceded the new methodology had made us all wiser about which parameters to trust more than the others) since it reflects the financial health of an organisation more robustly. Now that we are in the midst of yet another bull cycle, this methodology is more robust than ever before.
In 2000-01, policy and protection-powered PSUs occupied all the top five slots, and as many as seven among the top 10 and 18 among the top 25 in the BW Real 500. Ten years since, they are far less relevant. In 2009-10, the private sector (RIL and Tata Steel) has broken into the top five. While the top 10 list has five private firms, the top 25 has reversed the balance against PSUs with 15 private firms. By the way, PSUs continue their hold over the unlisted firms with the top three slots in the unlisted firms’ ranking on net profits firmly in the grip of state-owned companies.
Forget about PSUs, even some private companies are unable to keep pace with the super-chargers and are slipping from the big league. For instance, Hindustan Unilever, the darling of the stockmarkets right through the 1990s, which stood at No. 15 in 2000-01, is now struggling to keep its place among the top 50 — at No. 47. Ispat Industries — owned by L.N. Mittal’s brothers Pramod and Vinod Mittal — which was ranked at No. 28, couldn’t even make it to the top 500 this year. And Bajaj Auto has slipped from No. 43 to outside the top 50 at No. 58 this year.
Most upheavals of this nature take place when the economy goes through a churn such as the one we are witnessing now. The slowdown seems to be behind us and the growth engines are just about beginning to fire. For a change, we even have numerical evidence of what we have known for a few quarters — companies have become leaner and meaner. The total income of the BW Real 500 companies has risen barely 5.64 per cent in 2009-10, but net profit has grown 36.51 per cent (the previous year, it had shrunk 9.38 per cent).
Since assets have grown only 17.95 per cent (as against 46 per cent in the previous year), indications are that companies sweated their assets much better this year. Also, the fact that operating profit of the 500 companies has grown slower (28.61 per cent) than net profit, shows that companies have managed to tighten their belts considerably. When the growth spikes, the hungry ones will break through the ranks and rise up the ladder, bringing down even more PSUs and stodgier private firms.
We seem to be at one of those cusps. So, this year’s BW Real 500 is the most comprehensive listing we have ever produced with 18 different rankings using all kinds of permutations and combinations. Besides the past, present and the future covered by assets, income and market capitalisation, we have ensured that the listing meets every need of the discerning investor. The top 50 in the listing have been laid out on a new grid designed to give you an instant snapshot of the comparative health of a company (on page 48-49). For instance, it will tell you that this year’s leader RIL is No. 1 or No. 2 on most parameters, except two — return on capital employed or ROCE (174th) and return on net worth or RONW (186th).
New tables such as the one on how productive and how profitable are the employees in different organisations or the one on interest payout as a percentage of total debt (page 89) provide a completely new dimension to the way corporate India’s numbers have been looked at.
