Not enough of a market, but plenty of market cap

Though top line didn’t rise by much, India Inc soldiered on, paring debt where it could by selling assets, But Not by much. some used the opportunity to buy

Between Sun Pharma scooping up Ranbaxy, Bajaj Auto grappling with labour troubles, and Maruti Suzuki incurring the displeasure of minority shareholders, 2014 was an eventful year for corporate India. Looking back, the time wasn’t perhaps as productive as corporates might have wished, and business was dull and didn’t look like it would get better soon.

But there wasn’t a dull moment, with M&A transactions ticking on, small investors clamouring for a bigger say, retailers reeling under the onslaught of e-commerce upstarts, and promoters getting the rough end of the stick from banks. And, of course, the excitement of Vishal Sikka coming in as the chief of Infosys even as the founders of the firm took a back seat.

If the $4 billion-Sun-Ranbaxy deal, in early April, created a stir, catapulting the former into a new league, the possibility that Kalanithi Maran’s SpiceJet could be grounded dampened the Yuletide spirit. In a disturbing occurrence, Tata Motors found it could not pay senior employees the compensation it wanted because small shareholders wouldn’t allow it to; fortunately, the role of small investors has been somewhat reduced after the Companies Act was amended. In another instance, DLF found itself facing flak from the capital markets regulator which alleged it had made inadequate disclosures at the time of the IPO.

Corporate India’s happiest moments would have to be in May when it celebrated the election of a strong government at the Centre. Having suffered badly from the policy paralysis and inaction of the UPA government—to the extent that several top industrialists had considered shifting base from India—India Inc was hopeful a decisive and proactive administration would usher in reforms to put the economy back on track.

Some of that came true. The NDA government did make all the right noises—gas prices were raised, environment clearances eased and attempts were made to push through some legislation to boost FDI in insurance, for instance, albeit via Ordinances. Unfortunately, some sections of industry paid for poor policies of the earlier regime; the allocation of more than 200 captive coal blocks was cancelled by the Supreme Court depriving several power, steel and metal firms of a source of fuel they believed was theirs.

Meanwhile, companies hunkered down, waiting for demand to pick up, holding leaner inventories, managing cash more effectively and selling any business they needed to in order to deleverage their balance sheets. Across business houses, there was a move to re-look strategies; debt-laden business houses such as Jaiprakash Associates offloaded cement and power plants to pare debt while firms like Indian Hotels discarded properties they felt were unviable. The AV Birla Group cashed in on the opportunity to buy up assets at attractive valuations: the group picked up a couple of cement plants. By and large, companies concentrated on their core competencies, it was clearly not a time to stray into unchartered territory.

Much of the merriment was in the markets. India’s market capitalisation at the start of the year was R70.55 lakh crore; by year-end it was close to  R100 lakh crore. Going by that terrific performance one would have thought most companies would be in robust health but the reality was somewhat different, with only a handful of firms doing really well and most others finding the going tough—for perspective, factory output between April and October averaged 1.2%, contracting 4.2% in October. And in the three months to September, India Inc’s top line rose by just 3% yoy while the operating profits rose 7.25% year-on-year. In sum, 2014 may not have been the most rewarding of times but at the end of it there was a lot to look forward to.

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