Heavyweights Unconquered

This year's BW Real 500 can be summed up in two contrasting phrases: "The more things change, the more they stay the same," and "Change is the only constant." Lock your eye to the top of the rankings, the top 5 of the non-financial category, the top 5 of the financial category and the top 3 of the PSUs have retained their rankings, despite stiff challenges. But there is upheaval in the ranks below.

Last year's No. 8 Hindustan Petroleum Corporation has swapped positions with sixth ranked Tata Motors this year in the main ranking of non-financial companies. And Bharti Airtel has made it back to the Top 10 of the listing — thanks to its acquisition of Zain's African assets for $10.7 billion in 2010. Then, there is the remarkable debut of Coal India
in 2010, which has got in straight to No. 14 in the rankings.

Logistics firm Arshiya International has climbed the most — 132 ranks — since last year to No. 329 in 2011 rankings. And following a restructuring and demerger of cement business, Dalmia Bharat Sugar & Industries has dropped the most in rankings from 152 to 470.

But despite an average 21-odd per cent growth in total income plus total assets among the BW Real 500 companies, the average market capitalisation grew just 14 per cent as markets remained shaky on negative global cues. FY2011 grew at such pace on the back of an investment burst in the first half as companies emerged leaner and hungrier from the aftermath of the US recession and a global slowdown.

It reflects in the 21 per cent growth in asset creation for that companies ended up raising resources, which grew total debt for the BW Real 500 companies by 25 per cent.

Even as the great Indian corporate growth engine chugged along in FY2011, that is just one side of the story. In corporate lifecycles too, change is the only constant. And FY2012 has brought that about by beginning on a damp note. "This fiscal will be a much weaker year," predicts Kaushal Sampat, president and CEO of Dun & Bradstreet India. "There is enormous interest in the fiscal now. To what extent it deviates will be seen with interest," says Samiran Chakraborty, head of research, Standard Chartered Bank.

IIP (index of industrial production) growth is struggling at around 4 per cent, the central government's excise collections are down 8.7 per cent (September 2011) and growth in advance tax collections have almost halved from 19 per cent in April-June to a 9.9 per cent in July-September. The year's GDP (gross domestic product) projections have been revised downwards the third time to less than 8 per cent. In comparison with the dramatic drop in corporate fortunes, the consumption slowdown is rather gradual and may show up on corporate profit and loss accounts and balance sheets with a lag. "We are already seeing capex being hit. People are worried about demand. They don't want to lock in capex at high interest rates," says Sampat.

According to mergermarket.com, in the first three quarters of 2011 the Indian M&A market has shrunk 41.5 per cent by value to $26.8 billion and 16.9 per cent by volume to 177 deals as compared to the same period in 2010. Energy, mining and utilities accounted for 29.2 per cent of the deals by value, but shrank 36 per cent. Telecom was No. 2 with 23 per cent of the deals by value, but also shrinking 69 per cent.

"Business sentiment has tanked," says Sachchidanand Shukla, senior vice-president and economist, Enam Securities. "(There are) no greenfield projects, nor borrowings or fresh capacity addition." And even though the slowdown has not yet reached an alarming level, the scope for stimulating the economy this time round is limited, says Chakraborty, because the fiscal deficit is already at 5 per cent as against about 3 per cent in 1998 when India went for the last stimulus.

As for bright sparks: global economy may rebound; inflation could moderate; India may wake up from policy paralysis and reforms may pick up pace; and, foreign investment cycle may resuscitate. Who knows?