BW Real 500: The Tough Grind It Out

For India inc, 2015 was not the best year. After long sluggish years, corporate biggies had tremendous groundwork to cover.

A dramatic drop in commodity prices due to the dominance of China, with oil and copper prices collapsing more than 30 per cent in 2015 saw some large commodity operators, which make up much of the BW Real 500 list, in a tight spot. Domestically, corporates reeled under lower capacity utilisation, stuck projects, cost escalations, lower realisations, and higher operational costs.

In some ways, the industry did indeed recover ground. From larger losses in FY14, revenues and net profits of the top-50 companies were just 5.2 and 4.5 per cent lower respectively in 2015, reflecting the efforts of corporate India to control costs, and improve profitability.

But despite the hiccups, the final performance has been commendable, to say the least, with continuing investments and restructuring the buzzwords of the day. India Inc increased its asset base over 2015.

BW Real 500 Rankings are unique as, unlike other rankings, we look at asset size and the ability of businesses to generate revenues from their investments. Hence, size, scale and efficiencies are paramount in our rankings.

In terms of scale, as always, the sheer scope of its investments domestically and overseas, oil and now telecoms businesses once again propelled Reliance Industries to the top spot in our BW 500 Real rankings. The company embarked on massive investments in its telecom offering Jio last year, which saw its total assets zooming 20 per cent.

Indian Oil Corporation ranks second on our list even as the company increased its assets by a mere 3 per cent. Being a giant in one of the most capital-intensive sectors, Indian Oil is comfortably perched, and other companies would need massive investments or acquisitions to outrank this public-sector behemoth. Third on our list is Tata Motors, which has been scaling the growth charts thanks to its acquisition of Jaguar Land Rover in 2008.

Overall, despite a slowly chugging economy, many Indian companies clocked decent gains in rankings. Bharti Airtel and Larsen & Toubro zoomed from 9th and 10th positions respectively in 2014 to 5th and 6th the year after, while a notable dip in ranking has been Bharat Petroleum, which slipped from 5th position in 2014, to 9th.

On the growth front though, on the left side of the weighing scale, commodity companies dragged down performances. On the right side, software, domestic utilities and consumption, and select engineering companies perked up performances. Engineering giant L&T saw its income rise 11.4 per cent, while Coal India, Power Grid and Tata Consultancy experienced 12.4, 18.6 and 14.1 per cent income gains respectively.

Over the past few decades, China had become the manufacturing hub of the decade, guzzling commodities to fuel its infrastructure-led boom. In 2015, a cyclical slump seemed to have derailed the speeding growth rates of the country, at the same time slowing the massive consumption of commodities there.

Little surprise then, that income of oil-producing companies slumped, while metal companies reeled under lower prices. Reliance Industries and IOC saw their incomes drop respectively 25.7 and 20.6 per cent, while the same for Hindalco also dropped 3.8 per cent. Operating profits saw flat growth during the year.

However, despite the squeeze of a slowing economy, India Inc. continued to invest and add capacities. The top-50 companies in the BW Real 500 list saw their assets increase 6 per cent to Rs 54.7 lakh crore. Reliance Industries and Tata Motors ranked among the top in asset additions during 2015.

For the finance companies, led largely by public-sector banks, the growth story has been much more painful. Stringent recognition of non-performing assets affected the balance sheets of many, with some of the top banks recording huge losses. For instance, Bank of Baroda provided heavily for NPAs as its losses amounted to Rs 5,035 crore. Ditto for PNB, which saw losses of Rs 3,663 crore.

SBI tops the financial list of BW Real 500 due to its sheer size and scale. SBI and its subsidiaries are set to merge, which means that it could continue to dominate the asset and income sweepstakes of our rankings. ICICI and HDFC Bank have taken the 2nd and 3rd spots in our financial rankings.

Finally, the financial and business environment has seen a lot of changes. Finance companies are almost done with their massive exercise of cleaning up their balance sheets. Non-finance companies have consolidated and re-jigged their positions and also completed much of their capacity expansions, actually gearing up for the next leg of growth.