Growth despite rising input costs

Written by Pradip Kumar Dey | Updated: Mar 4 2011, 08:15am hrs
Two years after the global economic crises, corporate India is back on a strong growth path and has witnessed a rebound in both topline and bottomline. India Inc is optimist of growth despite the sharp increase in cost of raw materials in the last one year. Sales of the FE 500 were marginally high. FE 500s net sales reached the high of Rs 30.55 lakh crore with a growth rate of 5.18%. However, in comparison with 2008-09, the sales growth was low.

The FE 500s sales growth was 19.35% in the year 2008-09. Though consolidated sales figures are considered for the year 2009-10 and 2008-09. The top ten, in terms of composite ranks, seemed significantly slower than the FE 500 as a whole. Their sales growth, at 0.74%, was actually significantly lower than the FE 500 which recorded a collective growth of 5.18%.

In absolute terms also, the top ten ended 2009-10 with a lower record: their aggregate sales as a percentage of the total FE 500 actually saw a marginal decrease from 31.56% in the year before to 30.23% in 2009-10. Barring Reliance Communications, all the other nine who graced the super league in 2008-09, also showed up in the same starry league the next year. For 2009-10, the top spot was Reliance Industries and the second spot was captured by Oil and Natural Gas Corporation (ONGC). The third runners-up was Indian Oil Corporation and the fourth runners-up was NTPC.

The other six top tenners, in descending order of their composite ranks were: Coal India, Bharti Airtel, SAIL, Tata Steel, Larsen & Toubro and Hindalco Industries. Within the top ten group, some shifting of the positions had taken place. Thus, Bharti Airtel, seventh in 2008-09, moved up to the sixth position and SAIL lost the position from sixth to the seventh. Tata Steel also lost the position from fifth to the eighth. Larsen & Toubro kept the ninth position intact during both the years. The FE 500, clubbed in five groups the first 100, the second 100, the third 100, fourth 100 and the rest.

So, the comparisons, if any, have to be made within the FE 500. As against an overall sales growth rate of 5.18% for the 500 as a group, the sub-groups of 100 each recorded growth rates of 2.98%, 11.95%, 11.90%, 10.90% and 10.90%, respectively during 2009-10.

The top 100 group (according to composite rankings) saw seven new companies making an entry in 2009-10. Mention may be made of Lanco Infra, JSW Energy, Tech Mahindra, Ruchi Soya Industries, Asian Paints, India Cements and Rajesh Exports.

The highest rate of rise in net sales in the first set was recorded by the Rajesh Exports (57.29%), NHPC (47.99%), Neyveli Lignite Corpn. (45.87%), Maruti Suzuki (42.98%), Hindustan Zinc (41.04%), Bajaj Auto (39.54%), Jaiprakash Associates (35.13%), Torrent Power (34.69%) and Reliance Industries (34.38%). The laggards in the top 100 were Tata Steel (-30.24%), EID Parry (I) (-26.75%), DLF (-26.03%), Great Eastern Shipping (-25.42%), Tata Chemicals (-25.35%), Chennai Petroleum Corpn.(-21.87%) and Suzlon Energy (-20.94%). Some 12 companies in the first group of 100 recorded more than 30% increase in net sales in 2009-10. The second set of 100 companies grew at 11.95%, much higher than the FE 500s average. Their combined net sales increased from Rs 3.46 lakh crore (on an annualised basis) in 2008-09 to Rs 3.87 lakh crore in 2009-10.

The second set saw many changes, but the more noteworthy among them were the 13 new entrants from lower ranks in 2009-10. The highest rate of rise in net sales was recorded Prism Cement (343.88%) followed by GVK Power & Infra (247.75%), ITI (170.23%) and Apollo Tyres (62.51%). Among the poor performers in this group was Rashtriya Chemicals & Fertilisers (-32.56%), Coromandel International (-31.79%), Bharat Forge (-30.22%) and Maharashtra Seamless (-21.86%). Like second group, the third group of 100 companies did perform well in terms of net sales growth. Aggregate net sales of the set increased by 11.90% from Rs 1.74 lakh crore in 2008-09 to Rs 1.95 lakh crore in 2009-10. In terms of individual performance, 21 companies recorded declines in the third set. Of them MOIL recorded highest (-25.05%), followed by ISMT (-21.68%), Divis Laboratories (-20.20%), Electrosteel Castings (-18.88%) and Gujarat Industrial Power Company (-18.45.)

Bombay Burmah Trading Corporation (935.08%), Gujarat State Petronet (103.48%), Sakthi Sugars (61.64%), Dish TV (I) (47%), Ramky Infrastructure (9.26%), Plethico Pharma (38.47%) and Dalmia Bharat Sugar & Industries (37.53%) were among those registering significant sales growth.

There were 28 new members in the set in 2009-10. Not all the new members, however have cause for jubilation. As many as 13 of them are rejects from the second set, including such big names like Rolta (I), DCM Shriram Consolidated,Hindustan Copper, Havells (I), Electrosteel Castings and Balrampur Chini Mills.

Almost 15 others which were in fourth set in 2008-09 but entered the third set of companies in 2009-10. Mention may be made of Bajaj Electricals, Chettinad Cement Corpn., D B Corporation, Gokul Refoils & Solvent, Indraprashtha Gas, BASF(I), Strides Arcolab and Educomp Solutions.

The fourth set of 100 companies registered the slightly lower growth in sales compared to second and third set but significantly higher than first set, indicating that at the bottom of the corporate heap there is an increase of enterprise. The fourth group of companies grew at 10.90%, and their combined net sales increased from Rs 1.23 lakh crore (on an annualised basis) in 2008-09 to Rs 1.36 lakh crore in 2009-10. The highest rate of rise in net sales was recorded by Tecpro System (105.79%), followed by Spanco (69.58%), McNally Bharat Engg. Co. (62.25%), C & C Constructions (56.65%), BOC (I) (50.75%), Vascon Engineers (45.52%) and KSL & Industries (43.84%). Most interesting part of FE 500 is the sales growth of fifth set of 100 companies. The fifth group of companies grew at 10.90% which is same as fourth hundred but lower than second and third hundred. Their combined net sales increased from Rs 95,189 crore in 2008-09 to Rs 1.05 lakh crore in 2009-10.

Looking at the FE 500 as a whole, it is obvious that individual performance was substantially determined by the fortunes of the industry in which they operated. The fastest growing industries in 2009-10 were food processing, diamond cutting/jewellery, textile products, computers software converts, packaging, healthcare, automobiles-LCVs/HCVs, computers education, automobiles-motorcycle/mo- peds and tyres.

The slowest growing industries were steel sponge iron, diversified medium/small, diversified large, steel medium/small, computers software large, air conditioners, couriers, computer hardware, FMCG, glass and glass products.

Given the overall growth rate of 5.18% for the FE 500, asset growth showed significantly higher than the sales growth. The combined total assets of the FE 500 (according to sales) rose by 13.39% from Rs 35.56 lakh crore in 2008-09 to Rs 40.32 lakh crore in 2009-10.

While building assets, the FE 500 were more concerned about profits. Gross profits increased significantly during the study period. The total gross profits of the FE 500 increased from Rs 3.74 lakh crore (on an annualised basis) in 2008-09 to Rs 4.95 lakh crore in 2009-10-a 32.36% increase.

The top 10 of FE 500 accounted for a major share of the booty (Rs 1.88 lakh crore), leaving Rs 3.07 lakh crore to be divided up among the remaining 490.

ONGC, the number 1 profit-maker of the year, notched up gross profits of Rs 48,854 crore, a 4.82% increase from Rs 46,609 crore in the previous year. The other nine companies in the top 10 list in terms of gross profits were Reliance Industries (Rs 39,705 crore), Indian Oil Corpn. (Rs 18,369 crore), Bharti Airtel (Rs 18,028 crore), Coal (I) (Rs 15,336 crore), NTPC (Rs 14,466 crore), SAIL (Rs 11,800 crore), Reliance Communications (Rs 10,671 crore), Hindustan Zinc ( Rs 9,531 crore) and Tata Consultancy Services (Rs 9,183 crore).

Reliance Industries topped in terms of net worth during 2009-10, it raised net worth to Rs 1.41 lakh crore, a 16.35% rise from Rs 1.21 lakh crore in the previous year. The other companies in the Top 10 list in terms of net worth were ONGC (Rs 1.01 lakh crore), NTPC (Rs 62,628 crore), Indian Oil Corporation(Rs 52,462 crore), Reliance Communications (Rs 43,360 crore), Bharti Airtel (Rs 39,879 crore), Sterlite Industries (Rs 37,012 crore), Cairn (I) (Rs 33,868 crore), SAIL (Rs 33,739 crore) and DLF (Rs 30,433 crore).

The aggregate net worth of the FE 500 increased by 18.62% from Rs 13.69 lakh crore in 2008-09 to Rs 16.24 lakh crore in 2009-10. Eight companies namely United Breweris Holdings, Kingfisher Airlines, Tata Teleservices (Maha), Spicejet, Lloyd Steel Industries, SPIC, Maytas Infra and Vishal Retail had a negative net worth in absolute terms.

As for market capitalisation, performance was somewhat good. The aggregate market capitalisation of FE 500 corporates increased by 8.02% from Rs 45.94 lakh crore as on January 29, 2010 to Rs 49.62 lakh crore as on January 31, 2011.

The highest increase in market capitalisation among the FE 500 companies was witnessed in the case of Lanco Infratech (965.33%), Gokul Refoils & Solvent (796.88%), Bajaj Electricals (521.97%), Sanwaria Agro Oils (246.74%), United Breweries (220.37%), Spice Mobility (208.93%), Force Mo-tors (204.72%), Adani Enterprises (183.21%), Polyplex Corpn. (180.22%) and Surana Industries (142.16%).

In contrast, 217 companies showed decrease in market capitalisation during the study period. Mention may be made of Tata Global Beverages (-89.11%), Lupin (-70.15%), HDIL (-52.17%), NMDC (-47.29%), Punj Lloyd (-46.61%) and HCC (-45.12%).

The top 10 in terms of market capitalisation in 2009-10 were Reliance Industries (Rs 3.01 lakh crore), ONGC (Rs 2.52 lakh crore), Tata Consultancy Services (Rs 2.26 lakh crore), Coal India (Rs 1.92 lakh crore), Infosys Techno (Rs 1.78 lakh crore), NTPC (Rs 1.56 lakh crore), ITC (Rs 1.25 crore), Bharti Airtel (Rs 1.21 lakh crore), Bharat Heavy Electricals (Rs 1.08 lakh crore) and Wipro (Rs 1.07 lakh crore).

The market capitalisation of top 10 companies (in terms of composite rank) increased by 14.58% to Rs 13.71 lakh crore on 31st January 2011 from Rs 11.96 lakh crore on January 29, 2010. The share of top 10 market capitalisation in FE 500 increased from 26.04% on January 29, 2010 to 27.62% on January 31, 2011.