Business Today - - CONTENTS - By Anup Ja­yaram Il­lus­tra­tion By Raj Verma

TOUGH TIMES con­tinue for In­dia Inc. and the econ­omy at large. The In­dian econ­omy has been buf­feted by ris­ing global oil prices and widen­ing cur­rent ac­count deficit, lead­ing to a sharp fall in the value of the ru­pee. How­ever, de­spite the weaker ru­pee, ex­ports have not taken off. The only bright spot has been an 8.2 per cent in­crease in gross do­mes­tic prod­uct dur­ing the first quar­ter of 2018/19. How­ever, there are few in­di­ca­tors that this can be sus­tained dur­ing the rest of the fi­nan­cial year.

With the next gen­eral elec­tions a few months away, there are enough rea­sons for worry on the eco­nomic front. Over the past few weeks, the BSE Sen­sex has been in a free fall. It hit a high of 38,989.65 on Au­gust 29 but has since fallen 5,640 points and closed at 33,349 on Oc­to­ber 26. But 2017/18 was an en­tirely dif­fer­ent story. The ag­gre­gate av­er­age mar­ket cap­i­tal­i­sa­tion of BT 500 com­pa­nies dur­ing 2017/18 (Oc­to­ber 1, 2017-Sep­tem­ber 30, 2018), the pe­riod we have taken for our BT 500 study, in­creased 23.4 per cent. This is bet­ter than the 20.5 per rise the year be­fore, and phe­nom­e­nally bet­ter than the mi­nus­cule 0.1 per cent achieved the year be­fore that.

The cur­rent round of Sen­sex fall started around the time rat­ing agen­cies down­graded In­fra­struc­ture Leas­ing & Fi­nan­cial Ser­vices in mid-Sep­tem­ber af­ter it de­faulted on a debt pay­ment, trig­ger­ing fears about the cre­ation of an­other round of non-per­form­ing as­sets in the bank­ing sec­tor. The Don­ald Trump ad­min­is­tra­tion’s plan to re­vise the def­i­ni­tion of em­ploy­ment and spe­cialty oc­cu­pa­tions un­der the H1-B visa start­ing Jan­uary 2019 has also hit sen­ti­ment at In­dian IT firms, lead­ing to a fall in their share prices.

But the big de­vel­op­ment this time round in the BT 500 rank­ings is the emer­gence of a new leader. The con­tin­ued rise in oil prices has re­sulted in Re­liance In­dus­tries over­tak­ing Tata Con­sul­tancy Ser­vices, or TCS, for the top slot in the BT 500 rank­ing by mar­ket cap­i­tal­i­sa­tion. Re­liance had ceded the top slot to TCS in 2012. Re­liance’s mar­ket cap­i­tal­i­sa­tion rose 50.8 per cent – the high­est among the Top 20 com­pa­nies – to ` 6,27,315 crore from ` 4,16,625 crore in 2016/17. The other de­vel­op­ment is In­dia’s largest

FMCG com­pany, Hin­dus­tan

Unilever Ltd, ris­ing four ranks to make it to the top 5, driven by a 49.8 per cent in­crease in av­er­age mar­ket cap over the year.

Among the in­di­ca­tors we track, there has been a 12 per cent in­crease in com­bined to­tal as­sets of BT 500 com­pa­nies, and an 11 per cent in­crease in to­tal in­come. How­ever, this time, profit af­ter tax de­clined

12.2 per cent dur­ing 2017/18 over 2016/17. That’s a steep fall from the 17.8 per cent in­crease in 2016/17 over the pre­vi­ous fis­cal. Also, the rank­ing of 282 com­pa­nies has fallen from last year.

De­spite the fall in the value of the ru­pee, 13 com­pa­nies have notched prof­its of over $1 bil­lion (`7,400 crore), which is the same as last year. There is no change in the top four com­pa­nies by prof­its – Re­liance

In­dus­tries, TCS, In­di­anOil and ONGC. In­fosys makes it to the fifth spot. HDFC Bank has the high­est mar­ket cap­i­tal­i­sa­tion among BFSI com­pa­nies.

The debt level of the top 100 bor­row­ers in­creased 6.4 per cent dur­ing the year, quite in sync with the 6.9 per cent in­crease dur­ing 2016/17. Three sec­tors – power, oil & gas, and min­ing & min­er­als – ac­count for 64 per cent of the to­tal debt of 399 com­pa­nies (ex­clud­ing BFSI). The power sec­tor ac­counted for more than a quar­ter of the to­tal debt at 26.9 per cent fol­lowed by oil & gas (20.9 per cent) and min­ing and min­er­als (16.2 per cent). The share of com­pa­nies with debt to mar­ket cap­i­tal­i­sa­tion ra­tio of less than one is 62.6 per cent.

Only one sec­tor, pharma and health­care, saw mar­ket cap­i­tal­i­sa­tion fall by 2.6 per cent. The real gainer has been re­tail, which saw a 57 per cent in­crease in mar­ket cap­i­tal­i­sa­tion. Sur­pris­ingly, even tele­com, which has seen a sus­tained fall in value over the years, saw its mar­ket cap­i­tal­i­sa­tion rise, by 6 per cent.

The two big gain­ers in this year’s list­ing – HEG and Graphite In­dia – are reap­ing the gains of the global shift from blast and in­duc­tion fur­nace in the steel in­dus­try to elec­tric arc fur­nace. HEG’s rank rose 447 points to 218 this year from 665 last year while Graphite In­dia rose 284 ranks from 465 to 181. As China cracked down on pol­lut­ing steel plants, the de­mand for graphite elec­trodes in­creased. The two In­dian com­pa­nies, which ac­count for 23 per cent of the global graphite elec­trode pro­duc­tion, gained.

Among the top 50 com­pa­nies in the BT 500 list­ing, four sec­tors – auto & an­cil­lar­ies, BFSI, FMCG, min­ing & met­als, and oil & gas – had five com­pa­nies each ac­count­ing for half the list. The real lead­ers are com­pa­nies in the BFSI sec­tor. Each of the top five BFSI com­pa­nies – HDFC Bank, Hous­ing De­vel­op­ment Fi­nance Cor­po­ra­tion, State Bank of In­dia, Ko­tak Mahin­dra Bank and ICICI Bank – has an av­er­age mar­ket cap­i­tal­i­sa­tion of over ` 1.9 lakh crore; they are ranked within the top 12 com­pa­nies in the BT 500 list­ing.

Among the big losers was Force Mo­tors that slipped 135 ranks to 429 from 294 the year be­fore. Strides Pharma Sci­ence fell 132 ranks. Anil Am­ban­iowned Re­liance Com­mu­ni­ca­tions was also among the big losers with a 123-point fall from 230 to 353.

Now, as In­dia goes into the elec­tion mode, there would be lesser fo­cus on eco­nomic is­sues. That could lead to a slow­ing of rise in mar­ket cap­i­tal­i­sa­tion of com­pa­nies. Things will de­pend to a large ex­tent on eco­nomic de­ci­sions that the new gov­ern­ment takes soon af­ter com­ing to power. It is wait and watch for now.

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