Nowhere is this more visible than at the top. Only half the 10 most valuable firms in March 2004 have been able to retain their places on the league table, 10 years on.
In 2004, government-owned upstream oil major Oil and Natural Gas Corporation (ONGC) was India’s most valuable company, with market capitalisation of about Rs 1.2 lakh crore, followed by Reliance Industries Ltd (RIL). Now, TCS is at the top of the table, followed by RIL and ONGC. India Oil Corporation, Wipro and Bharti Airtel have been replaced by Coal India, Tata Motors and ICICI Bank on the list. (M-CAP CHURN)
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In 2004, Hindustan Unilever was India’s most valuable consumer goods maker; now, ITC holds that position.
The most dramatic change was seen in the pharmaceuticals segment. In 2004, Ranbaxy was at the top spot; Sun Pharma wasn’t on the top-10 list. Now, a decade later, Ranbaxy has been acquired by Sun Pharma, which is among the 10 most valuable global pharmaceutical makers and is set to become the fifth-largest generic drug maker by revenue.
In banking, HDFC Bank raced ahead of its bigger rivals, State Bank of India and ICICI Bank, to become India’s most valuable bank.
The economic slowdown in the last three years led to huge stress on companies that had over-leveraged themselves in the boom years. By contrast, companies that were conservative emerged stronger. These companies include those in capital-intensive and cyclical sectors such as cement and steel.
Dhananjay Sinha, head (institutional equity), Emkay Global Financial Services, says, “The investment cycle was very strong under UPA (United Progressive Alliance)-I and disposable income was rising. The government augmented it through various re-distributive programmes. This created a strong positive cycle for companies, especially those catering to consumers in rural and semi-urban areas.”
The highest gains were recorded by those who were careful on the balance-sheet front. For instance, UltraTech Cement, which was a debt-laden, under-performing cement maker, became India’s largest and most profitable cement company in less than a decade. Now, it is the most valuable company in the Aditya Vikram Birla Group and has triggered a fresh round of consolidation in the sector, thanks to superior finances. Its peer Shree Cement used the boom years to become the fourth-largest cement maker through timely expansion; in 2004, it was just a single-plant cement maker.
A similar transformation was seen in the case of JSW Steel. In 2004, it was a financially-stretched, mid-sized steel maker; now, it is the second-largest in the domestic market, ahead of Tata Steel, with production capacity of 14 million tonnes (mt), against Tata Steel’s 10 mt. At the end of FY13, the company’s debt-to-equity ratio stood at 1.2, compared with 4.9 in FY04.
The most significant transformation was seen in the consumer goods segment and export-intensive sectors such as information technology (IT) and pharmaceuticals. Now, Havells is India’s largest and most valuable electric appliances firm and among the top five global lighting companies. Titan Company (formerly Titan Industries) has become a one-of-its-kind firm, with a leading position in the watches, jewellery, fashion accessories and luxury products space. Godrej Consumer Products has transformed itself from a mid-sized maker of soaps and mosquito repellent to a global company, with extensive operations in emerging markets.
Now, TCS is the world’s second most valuable IT services company, after IBM.
The churn has been dramatic in the case of mid- and small-sized companies. Auto component maker Motherson Sumi Systems used the 2008 meltdown in the European car market to become the world’s leading provider of vehicle interior systems by acquiring struggling European peers at low valuations.
Analysts attribute the churn to the growth paths followed by different promoters. “Companies that invested in brand building and leveraged their initial successes to make incremental gains raced ahead of those who went for reckless expansion,” says G Chokkalingam, founder, Equinomics Research & Advisory.
This explains the success of newbies such as Page Industries, Kaveri Seeds, Persistent Systems, P I Industries, Kajaria Ceramics and Astral Poly. A decade ago, these companies were unheard of; now, they are the first choice for consumers and investors in their respective segments.
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