T N Ninan: Big, bigger...

WEEKEND RUMINATIONS

, shows that the 100 largest companies accounted for as much as 72 per cent of the sales of all 1,000 companies""and 83.5 per cent of net profit. To any observer, that would seem like enormous concentration of financial muscle.

It wasn't always like this. Similar numbers for the 1,000 largest companies 10 years earlier (1994-95, which is when the big public sector companies got listed) show that the 100 companies at the top of the pack accounted for no more than 59 per cent of sales and 64 per cent of profits. What this tells us is that the last decade of reform has been unusually good for the biggest companies in the country""who have increased their share of the cake, any way you look at it.

By way of contrast, the companies ranked from 501 to 1000 in this year's listing accounted for barely 6.3 per cent of the total sales of the 1,000""and an even tinier 3.5 per cent of net profit (the detailed listings will be published next week, in the BS1000). These companies are not pygmies: Company No 501 is Elecon Engineering, with net sales of Rs 272 crore. But""and this is the point""these are not very large companies, either. In most sizeable economies, and India's is the 10th largest in the world, any company with less than $100 million of sales (Rs 450 crore) slips into the medium-scale category. By that yardstick, India has all of 324 large companies, with the last one to make the grade being West Coast Paper. In other words, while India has more firms listed on the stock market than any other country, barring perhaps the United States, this is a mirage. If companies ranked from 501 to 1,000 earned barely Rs 3,500 crore as profit (or about as much as Tata Steel did), then the companies ranked from 1,001 to 5,000 would probably have earned even less""in other words, not enough to make a difference to the big picture.

More interestingly, if you look at the tally of all 1,000 companies, 10 per cent lost money last year. But if you take companies ranked from 901 to 1,000, 20 per cent lost money. It might be a fair bet, then, that the percentage of loss-making companies climbs even more as you go further down the sales rankings. So, is the problem the dominance of the 100 largest firms, or the lack of depth and sustainability in the rest of India's corporate sector?

Some analysis of the effects of India's economic policy, done by economists at the International Monetary Fund and presented at a conference recently, shows in fact that Indian companies are small by international standards""i.e., when you compare them with companies in other markets in the same industries. In other words, the past stress on monopoly control (and perhaps the equal stress on small-scale industries) resulted in the stunting of the big firms and a dispersal of industry structures. With many of the shackles removed during the last decade, the bigger companies have begun to run faster. No one should complain about that since they are small by international standards, but what about those lower down the ladder? Why are they losing out, at least in relative terms?

No quick answers are possible because no serious analysis has been done. But when it is recalled that the survey of small-scale industrial units showed high rates of mortality and/or sickness (which, to some degree, is to be expected), it would be tempting to hypothesise that, below the radar screen provided by the headlines, there is a fair amount of corporate stress because of the changing dynamics of markets and the greater levels of competition that now exist. At the same time, though, the anecdotal evidence points to an entrepreneurial flowering, of the birth and successful establishment of many new businesses. But these can lead to only tentative conclusions. Closer study is needed before we really know what is going on in India Inc.