Macro 500

Waiting for the Wave


Image Credit: Nilanjan Das

Lead Essay: Fortune 500

THE EUPHORIA has left the building. If there is anything definite we can say about 2015, a year that will be remembered for the countless memes around #GoodDays, #SwachhBharat, and #MakeInIndia, it is this. 

The year began on a very different note. The government was still young, and experts argued it needed time to pull India out of the morass it had inherited. But the overall mood was unmistakably buoyant. That the wave of reforms and faster economic growth would return was a given. It was a question of “when”, not “if”. 

Early in the year, this magazine examined how much of that mood was the byproduct of the story of a resurgent India, spun by a large, disparate set of players around Narendra Modi’s high-decibel election campaign. We found that spin played a disproportionate role in manufacturing the euphoria. So compelling was the evidence of this everywhere—politics, media, business—that we even put the spin on our cover and called it “the move of the year”, a distinction ordinarily reserved for the year’s finest corporate stratagem.

As the year winds down and we unveil another Fortune India 500 (FI 500), the performance of the elite Indian companies is proof, if any was needed, that spin alone can’t carry the day. Till March 2015, our consideration period, which had a nine-month overlap with the new government’s term, the FI 500 grew revenue by a meagre 2.7%, while profit fell a precipitous 5.9%. Compare that with the last full year, when revenue grew 9.5%, while profit was 4.5% higher.

The slump is across revenue clusters. Revenue in the uppermost cluster, above Rs 50,000 crore, declined by 1.1% this year, compared with a 13% rise the year before. Companies below Rs 5,000 crore didn’t fare any better: an average increase in revenue of 4.2%, almost half of their takings last year.


For the 474 listed companies out of the 500, revenue shrank 3.7% and operating profit rose 1.4% in the first three quarters of this calendar year, compared with the same period of 2014. A fall of 18.7% and 2.43% in raw material cost and power cost, respectively, contributed to a 5.49% dip in total expenditure of these companies. However, salaries rose by 14.9%, while interest cost for 397 companies (excluding banks, finance companies, and oil and gas companies) increased by 10.9%. Collectively, net profit of the listed companies fell by 15.8%.

Apart from the hit taken by the iron and steel and capital goods sectors on account of the collapse in commodities prices, you could say corporate karma is catching up overall: For the 50 most leveraged companies (excluding banks and NBFCs; see page 194), debt outgo and interest outgo have been growing at a CAGR of 15.3% and 22.6%, respectively, between 2011 and 2015. Tellingly, 33 of these 50 most debt-laden companies are among the top 100 in FI 500. Naturally, shareholders aren’t too chuffed: Dividend rose 10.8%, compared with 14.8% last year. 

A SECTORAL VIEW of the FI 500 reveals that the 292 manufacturing companies on the list, which account for 64.2% of the entire set’s revenue, grew at an abysmal 0.2%, while their profits (45% share in the entire universe) fell 22.6%. Revenue of the 147 service companies, on the other hand, saw a 10.8% increase, while profit grew 6.7%.

Construction and diversified companies, which number 38 and 23, respectively, accounted for 2.4% and 3.1% of the FI 500’s revenue. Construction companies posted a collective loss of Rs 3,924 crore, while diversified companies recorded a profit of nearly Rs 10,181 crore.

The oil and gas sector bore the full brunt of hostile market conditions. Lower oil prices led to an 11.14% decline in the revenue of oil and gas companies, while their profits fell by 22.13%. Similarly, the downtrend in commodity prices led to a dismal 1.1% and 5.1% rise in the revenue of iron and steel and metals and mining companies, respectively. The iron and steel sector turned loss-making, while profits of the metals and mining companies contracted 83.25%. Power companies were a bright spot, with a 16.7% rise in revenue and a 14.8% growth in profits.


In the services sector, banking posted annual revenue growth of 13.1%, compared with an 8.8% fall last year. Non-banking financial services companies grew revenue significantly, by 18.7%, compared with 0.8% increase a year ago. Their profits also soared to 16.8% against a 1.3% fall last year. But the traditional poster child of the services sector, IT, saw annual revenue growth more than halve at 13%. Profit growth, too, was substantially lower at 6.8%, compared with a 39.3% increase last year. Telecom, which is one of the most disrupted sectors the world over, also managed a muted growth of just over 3%, compared with over 33% a year back. The good news: Profits have jumped 19.9%.

The small core of foreign-owned companies in the FI 500 also had some good news: The 54 such companies on the list, accounting for 5% of the FI 500 revenue, registered an 8.53% growth.

In contrast, the 374 private sector companies on the list that have a 58.4% share in revenue, saw an increase of 7.18%. Public sector companies, 72 in number, accounted for 36.6% of the total revenue and showed a 2.14% decline. 


OF COURSE need to be read alongside the positive news that has just begun to stream in about the economy at large. For starters, India moved up several notches on the World Bank’s Ease of Doing Business index. Then, it eclipsed the U.S. and China to become the world’s leading FDI destination. And finally, days before we went to press, the government announced that GDP grew at 7.4% on constant prices, again beating China.

But net foreign portfolio investments remain muted. Total investments stood at a shade under $12 billion (Rs 69,607 crore) as of December 4, of which $3.2 billion was invested in equity. In the same period last year, total investments were substantially higher at $41.8 billion, of which equity’s share was $16.5 billion. 

 Also, the GDP data came under a cloud with persistent criticism of the new series, and with Bank of America-Merrill Lynch reportedly claiming that the growth would have been 5.2% had the conventional method been employed. 

There are other problems. As the country’s largest revenue earners, the FI 500 closely mimic the pace of reforms. With key reforms like the GST bill and land acquisition bill still trapped in the parliamentary logjam, the message could be frustrating for some: The government needs more time.


TO BE SURE, economies globally haven’t had it easy. In the U.S., for instance, growth moderated towards the end of 2014. The benefits of the fall in crude prices, thanks to the Organization of the Petroleum Exporting Countries staying firm in its resolve to make shale gas unviable, were offset by a stronger U.S. dollar in the aftermath of the Russia-Ukraine standoff (to see how Indian companies are reacting to the opportunities presented by that crisis, turn to page 130) and the Greece bailout conundrum. The suspense around the U.S. Federal Reserve hiking interest rates also resulted in bouts of speculation.

In Asia, while Japan saw positives from massive monetary accommodation, China began to see tempering in growth owing to excess capacities across industries and its weakening property market.

Back home, rural demand was subdued owing to the  shortfall in the kharif harvest, while the general weakness in consumption demand was reflected in the lower production of consumer goods. While inflation began to ease, weak domestic demand restrained India Inc.’s pricing power. Even the fall in commodity prices, mainly oil, has not brought respite owing to the weak rupee. The dollar price of oil and other commodities, on rupee-converted basis, has brought low to no cheer for India Inc.

In the current fiscal global challenges have gained greater bite, thanks to escalating geopolitical tensions in West Asia and further moderation in China, among other factors.

India, meanwhile, is grappling with another urgent threat, that of climate change, which can no longer be confined to distant academic conversations. On the one hand, insufficient rainfall led to half the country being officially declared drought-affected. On the other hand, there were floods in Chennai, which threatened to wreak havoc on the city’s infrastructure in general and its auto hub in particular. The full impact of the disaster was still unravelling when we went to press.

In sum then, this was a year marked by turbulence and, for some, an unexpectedly long wait for #GoodDays. In the data package that follows, we expound on these themes and tell you how some of India’s old-economy bellwethers are coping with uncertainty 
and disruption.