Higher standards set higher growth

Written by Pradip Kumar Dey | Updated: May 24 2008, 06:32am hrs
After a poor performance in 2005-06, the Indian corporate sector has bounced back in 2006-07. The spoilsports were the rising cost of raw materials and staff expenses, which created some obstacles to their growth path.

Thus, sales growth of FE 500 was significantly high. Speeding ahead at a rate of 28.02%, the FE 500s net sales reached a high of Rs 16,56,248 crore. In comparison in 2005-06, the sales growth was only 19.54% . Among the Top 10, in terms of composite ranks, sales seemed slightly slower than FE 500 as a whole. Their sales growth, at 25.52%, was actually a slightly lower than FE 500, which recorded a collective growth of 28.02%.

In absolute terms also, the Top 10 ended 2006-07 with a lower record: their aggregate sales as a percentage of the total FE 500 actually saw a marginal decrease from 31.99% in the year before to 31.37% in 2006-07.

Barring ITC and Gail, all the other eight who graced the super league in 2005-06, also showed up in the same starry league the next year. ITC, the smug top tenner of 2005-06, was a hapless company who was edged out by the Infosys Technologies in 2006-07.

Similarly, Gail was edged out by Larsen & Toubro. At the top spot was Reliance Industries. In the slot just behind it was stablemate ONGC; the third runner-up was NTPC.

The other seven Top Tenners, in descending order of their composite ranks were: Indian Oil Corp., SAIL, Bharti Airtel, Tata Steel, BHEL, Larsen & Toubro, and Infosys Technologies.

Within the top ten group some shifting of positions had taken place. Thus, NTPC, fourth in 2005-06, moved up to the third position and Indian Oil Corp lost the position from third to the fourth. BHEL lost ground and declined, from the 7th to the eighth. And SAIL and Bharti Airtel kept their position same for both the time periods. In the list of the top 100 (according to composite rankings) there were eleven new companies this time.

FE 500 clubbed in five groupsthe first 100, the second 100, the third 100, fourth 100, and the rest-were neck and neck. So, the comparisons, if any, have to be made within FE-500.

As against an overall sales growth rate of 28.02% for the 500 as a group, the sub-groups of 100 each recorded growth rates of 28.10, 31.63, 26.27, 25.57 and 21.45% respectively during 2006-07.

The highest rate of rise in net sales in the first set was recorded by the HCL Infosystems (407.61%), Unitech (283.28%), Tech Mahindra (129.98%), Hindustan Zinc (120.42%), Idea Cellular (117.55%), and Dr Reddys Lab (88.88%).

The laggards in the top 100 were MTNL (-11.75%), The GE Shipping (-5.87%) and CESC (-1.19%).

Some 19 companies in the first group of 100 recorded more than 50% increase in net sales in 2006-07.

The second set of 100 companies grew at 31.63%, higher than FE 500s average. Their combined net sales increased from Rs 1,33,423 crore (on an annualised basis) in 2005-06 to Rs 1,75,619 crore in 2006-07.

The second set saw many changes, but the more noteworthy among them were the 18 new entrants from lower ranks in 2006-07. The highest rate of rise in net sales was recorded by Lanco Infratech (257.63%), followed by Mphasis (189.71%) and Ansal Properties & Infra (121.74%).

Among the poor performers in this group was Essar Oil (-23.41%). Compared to the first two, the third group of 100 companies did not perform well in terms of net sales growth.

Aggregate net sales of the set increased by 26.27% from Rs 81,454 crore in 2005-06 to Rs 1,02,856 crore in 2006-07.

In terms of individual performance, 7 companies recorded declines in the third set. Of them, EID Parry (I) had the steepest fall (-40.43 %), followed by Sakthi Sugars (-14.9%), Godrej Inds (-11.75%), Asian Star Co (-3.61%), and Century Enka (-1.05%). Sterlite Technologies (118.77%), JBF Industries (104.53%), Jaibala Inds (149.08%), Era Constructions (145.47%), Bombay Rayon (145.94%), Nahar Spg (88.06%), SpiceJet (83.09%), and Adhunik Metaliks (73.96%) were among those registering significant sales growth. There were 33 new members in the set in 2006-07. Not all the new members however have cause for jubilation. As many as 19 of them are rejects from the second set, including such big names like Tube Investment, Ceat, Finolex Cables, Eicher Motors, Punjab Tractors, SPIC, and Marico.

Fifteen others, which were in the fourth or fifth set in 2005-06, entered the third set of companies in 2006-07. Mention may be made of Era Constructions, Ashapura Minechem, Spicejet, Bombay Rayon, Shree Renuka Sugars, Adhunik Metaliks, Dhampur Sugar, Orient Paper & Inds, Firstsource Solutions, Jaibala Ind, Tulip IT Services, and Prism Cement.

The fourth set of 100 companies registered the lowest growth in sales compared to first second and third set, indicating that at the bottom of the corporate heap there is a lack of enterprise. The fourth group of companies grew at 25.57%, and their combined net sales increased from Rs 58,562 crore (on an annualised basis) in 2005-06 to Rs 73,535 crore in 2006-07. The highest rate of rise in net sales was recorded by Emami (135.75%), followed by Praj Industries (126.28%), Subhash Projects (121.84%), Spentex Inds (112%), Vishal Retail (108.93%), KEI Inds (100.58%), Spanco Telesys & Solutions (99.68%), and Avaya Global Connect (92.22%). The most interesting part of FE 500 is the sales growth of the fifth set of 100 companies.

The fifth group of companies grew at 21.45%, which is the lowest among the groups and their combined net sales increased from Rs 42,171 crore in 2005-06 to Rs 51,218 crore in 2006-07.

Looking at 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 2006-07 were aluminium and products, bearings, computers-hardware, computers-software-converts, construction, electronics consumer, mining/minerals/metals, pharmaceuticals-Indian-formulations, retailing and textiles silk electric equipment, entertainment/electronic media.

The slowest growing industries were couriers, cycles and accessories, pharmaceuticals-multinational, shipping, domestic appliances, fertilizers, FMCG, chemical, and petrochemicals.

Given the perky overall growth rate of 28.02% for FE 500, assets growth showed marginally lower than the sales growth.

The combined total assets of FE 500 (according to sales) rose by 25.54% from Rs 13,26,272 crore in 2005-06 to Rs 16,65,025 crore in 2006-07.

While building assets, FE 500 was more concerned about profits. Gross profits growing higher than sales and assets. The total gross profits of FE 500 rose from Rs 2,07,298 crore (on an annualised basis) in 2005-06 to Rs 2,77,510 crore in 2006-07 - a 33.87% jump. The Top 10 of FE 500 accounted for a major share of the booty (Rs 1,10,097 crore), leaving Rs 1,67,414 crore to be divided up among the remaining 490. ONGC, the No1 profit-maker of the year, notched up gross profits of Rs 33,083 crore, a 10.31% increase from Rs 29,992 crore in the previous year. The other nine companies in the Top 10 list in terms of gross profits were Reliance Industries (Rs 19,295 crore), Indian Oil ( Rs 13,036 crore), SAIL (Rs 10,641 crore), NTPC (Rs 9,263 crore), Tata Steel ( Rs 7,065 crore), Bharti Airtel (Rs 6,948 crore), Hindustan Zinc (Rs 6,633 crore), Infosys Technologies (Rs 4,604 crore), and TCS (Rs 4,496 crore). Reliance Industries topped in terms of net worth during 2006-07, it raised net worth to Rs 63,967 crore, a 28.44% rise from Rs 49,804 crore in the previous year. The other companies in the Top 10 list in terms of net worth were ONGC (Rs 61,924 crore), NTPC (Rs 48,597 crore), Indian Oil Corp (Rs 34,833 crore), SAIL (Rs 17,313 crore), Tata Steel (Rs 13,949 crore), Hindalco Inds (Rs12,418 crore), MTNL (Rs 11,629 crore), Bharti Airtel (Rs 11,443 crore) and Gail(I) (Rs 11,393 crore). The aggregate net worth of FE 500 increased by 24.34% from Rs 6,14,775 crore in 2005-06 to Rs 7,64,400 crore in 2006-07. Five companies namely Tata Teleservices (Mah), Lloyds Steel, Balaji Distilleries, Hindustan Organic Chemicals, and Gujarat Sidhee Cement had a negative net worth in absolute terms. As for market capitalisation, performance was impressive, the aggregate market capitalisation of FE 500 corporates increased by 44.35% from Rs 28,03,049 crore as on January 31, 2007 to Rs 40,46,115 crore, as on January 31, 2008. The highest rate of rise in market capitalisation among FE 500 companies was witnessed in the case of Gujarat NRE Coke (970.28%), MMTC (906.96%), EIH (730.82%), Steel Exchange (721.62%), Prakash Inds (584.57%), Welspun-Guj Stahl Rohren (424.74%), Jindal Steel & Power (397.10%), Essar Shipping (372.19%), Sterlite Inds (363.71%), and Reliance Energy (328.71%). In contrast, Colgate Palmolive (I) (-88.1%) witnessed the sharpest decline among FE 500 companies, followed by Shah Alloys (-68.53%), Aurobindo Pharma (-58.70%), and iFlex Solutions (-48.71%). The Top 10 in terms of market capitalisation in 2006-07 were Reliance Industries (Rs 3,60,519 crore), ONGC (Rs 2,11,406 crore), Bharti Airtel (Rs 1,64,060 crore), NTPC (Rs 1,63,178 crore), NMDC (Rs 1,41,252 crore), DLF (Rs 1,38,519 crore), MMTC (Rs 1,20,601 crore), Larsen & Toubro (Rs 1,07,411 crore), BHEL (Rs 1,01,042), and SAIL (Rs 88,473 crore).

The M-cap of the Top 10 companies (in terms of composite rank) increased by 39.04% to Rs 13,84,094 crore on January 31, 2008 from Rs 9,95,469 crore on January 31, 2007. The share of the Top 10 market capitalisation in FE 500 decreased from 35.51% on January 31, 2007 to 34.21% on January 31, 2008.