indias most valueable companies 2010

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BT 500: India's most valuablecompaniesSource: BT – November 13, 2011. By Rajiv Bhuva,

Click here for complete list of BT 500:

http://businesstoday.intoday.in/story/indias-most-valuable-companies-the-first-

500/1/19553.html

The buzz is back - and the upswing in valuations is the best indicator of the

turnaround in not just sentiment on the street but

also of fortunes of corporate India. As theeconomy leaves most of the world behind and

gets set to clock 8.5 per cent growth in the current

financial year, India Inc. is riding a boom in

increased domestic consumption even as it slowly

but surely conquers new markets overseas.

Investors, primarily of the foreign institutional

variety, have sensed the upside. The overseas

moneybags have pumped all of $23.5 billion intoIndian equities in 2010. That is reflected in the

growth in market capitalisation in the first half of

the current financial year - which is what Business

Today considers for its rankings.

The overall market value of the BT 500

companies is up smartly by 42 per cent; the 500

to 1,000 pack has made investors richer by 74 per

cent, and the 50 companies in the public sector

undertaking listing are more valuable by 23 per

cent than a year ago. That's a smart recovery

from the downturn of the previous study in 2009,

when the top 500 lost 7.32 per cent in value and

http://businesstoday.intoday.in/story/indias-most-valuable-companies-the-first-500/1/19553.html







the second half of the list had 30 per cent of their wealth eroded.

Leading that resurgence are good old blue chips like Tata Steel, Tata Motors,

Hindalco and Sterlite, which have benefited from robust growth in sales (of autos, for

instance), and an upturn in prices of commodities like steel, aluminium and copper.

Hindalco and Tata Steel also gained because investors are once again seeing

brighter prospects for the big-ticket acquisitions made a few years ago - of Novelis in

Canada and Corus, now renamed Tata Steel Europe, respectively. Tata Motors is

also reaping the benefits of a pretty sensational turnaround in the performance of

Jaguar and Land Rover, the two brands it had acquired from Ford Motor. Lower

down the charts, relatively new-age sectors like aviation and organised retailing

have kept investors busy, with SpiceJet and Shopper's Stop returning to the black.

The disappointments? Perhaps the biggest one is at the top of the heap: Mukesh

Ambani's Reliance Industries, which has traditionally been an investor favourite, has

underperformed as investors are not confident about its ambitious expansion plans.

Ditto with the companies in Anil Ambani's stable, which have to convince the street

that they can execute mega-projects . The telecom pack, too, has come under

pressure after nearly eight years of rahrah growth. That's reflected in another top-

level shuffle, where Bharti Airtel has lost 24 per cent in value, and is down two

places to No. 4, and the rest of our BT 500 features for more.



When the twain metBT500: Private firms and PSUs' merger units into one listing unlocks a

treasure trove of value

Twenty years ago, when Business Today was born, private companies and

government-owned companies (or public-sector units, PSUs) would marry well with

Kipling's immortal line. Finance Minister Manmohan Singh had just announced the

onset of nation-changing economic reforms, but their impact would be visible only

later.

India, an agrarian nation subject to extreme red-tapism, was growing at sluggish

'Hindu' growth rates of around 3.5 per cent.

PSUs enjoyed monopoly - through regulation - in their sectors. More importantly

from BT's perspective, most of the big listed PSUs had very low public float and

were almost completely owned by the government.

So, when the first BT500 listing of India's most valuable companies was

published in 1992, only those PSUs were ranked that had low government

ownership. Needless to say, they were very few. It was only a few years later that

PSUs were put together and ranked in a separate list.

In these 20 years, the country has transformed. 'New India' is one of the world's

fastest growing economies, driven by sectors like software services, telecom,

pharmaceuticals, retail, real estate and automobiles. Global investors have taken

note, and both FII (foreign institutional investor) and FDI (foreign direct investment)

have become buzz-words.

Thousands of multinational corporations have set

up shop, even as thousands of Indian companieshave made a beeline to foreign shores.

That last set - surprise - also includes leading

PSUs; they are almost unrecognisable today

compared to 20 years ago. They are acquiring both companies as well as assets

abroad; they have become leaner, more efficient, more competitive.

There are four PSUs in the top 10

of BT500, and eight in the top 20

The Top 10 in the metals & miningsector outshone their counterpartsin other sectors with a 47 per cent growth in Mcap

http://businesstoday.intoday.in/bt500/






More importantly, their

ownership is not as

dominated by government

shareholding, thanks to the

disinvestment process, whichalso brought into the stock

markets a variety of

government companies in

various sectors.

And so, 20 years after the

BT500 rankings began, there remains no case for PSUs and private companies to

be ranked separately. The 2011 edition of the BT500, therefore, offers just one

listing.

The most comprehensive ranking of 'India's Most Valuable Companies' just got more

comprehensive. The change reflects a new world where investors reward, or punish,

companies in proportion to the value (shareholder wealth) they create or destroy;

ownership is incidental.

Change is in the air

In the merged list, one outcome remains unchanged. Reliance Industries,traditionally the No. 1 private company, retains its top billing in the combined list as

well. But traditional PSU No. 1, ONGC, does not take the No. 2 slot. That goes to

new hot stock Coal India, a PSU that listed on November 4, 2010 to an

overwhelming response.

Kumar Mangalam Birla's UltraTech Cement gained more market value than it

did last year

There are four PSUs in the top 10, and eight in the top 20.

These are all strong companies in their own right, and capable

of challenging the big private entrepreneurs and their

enterprises.

To ensure better comparability, we also combined last year's private and PSU

rankings. All last year ranks mentioned here reflect that. This year, two of the



biggest value creators have added more value than last year, a significant

achievement in a volatile, even sliding, market.

Helped by its Rs 10,000-crore capital outlay plan

over the next three years, UltraTech Cement postedan 88.85 per cent growth in its market cap this year

(April-September, the period taken into account for

BT500 rankings), compared to 74.18 per cent last

year. Also significant is Bharti Airtel's performance in

the light of its strong foray into African markets.

MUST READ: PSUs that have done very well

Last year, the telecom major's market cap had declined24.13 per cent; but this year, it has grown 27.7 per cent. But

many other big companies saw the dice roll the other way.

Three of Reliance-ADAG's companies lost significant market

value.

Reliance Communications, thanks to mounting debt, saw a

decline of 46 per cent in market value in 2011, following a 37.97 per cent fall in

2010. Reliance Infrastructure and Reliance Capital's market caps have fallen 45.6

per cent and 31.8 per cent, respectively.

N. Chandrasekaran's TCS bests Infosys to the top of the IT rankings after three years

Four PSU companies - Hindustan Copper, MMTC, Neyveli Lignite Corporation and

Steel Authority of India - recorded erosion in their 2011 market value compared to

growth posted in 2010, due to a decline in global commodity prices.

In terms of sectors, information technology, or IT, put up a relatively better show this

year. A 1.6 per cent slide in Infosys's market cap and a 37 per cent growth in TCS's

market cap propelled the latter into No. 1 rank in IT after three years.

TCS leveraged its broad-based services offerings and delivery capabilities, even as

Infosys focused on pricing and margins. The change in guard at Infosys also created

some uncertainty.

http://businesstoday.intoday.in/story/psus-that-that-have-done-very-well/1/17574.html






A stable rupee for the larger part of financial year

2010/11 propped up the IT companies, which found

many takers for their services in the cost-conscious,

recession-hit Western economies. On the other

hand, the real estate sector has seen the maximumdamage.

DLF's market cap has fallen 28 per cent, and

Unitech's, 56 per cent. While DLF's rank slid by 10 slots, Unitech fell from No. 69

last year to No. 123 this year. Their beleaguered situation reflects the state of the

industry.

Rising interest rates and scarcity of working capital have increased their cost of

funds; and buyers are sitting on the fence owing to higher prices and increased

home loan rates. Experts feel high prices and low volumes cannot co-exist for long,

particularly in a tight liquidity environment.

So, unless interest rates go down and make borrowing and buying affordable, price

correction is the only immediate source of respite.

That interest rates are unlikely to go down in a hurry is evident from the high inflation

levels, despite hikes in interest rates by the banking regulator - Reserve Bank ofIndia - becoming a way of life. The rate hikes have percolated into the deposit and

lending rates of banks, increasing the cost of funds for banks and the borrowing

costs for its customers.

"Banking stocks have been marred by the perception of high credit costs," says

Raamdeo Agrawal, Joint Managing Director of Motilal Oswal Financial Services.

Agrawal feels rate hikes have crossed their peak, and banking will be a much bigger

opportunity when the hikes are reversed. However, the rising interest rate scenario

coupled with a slowing economy could spell trouble for the banking sector with thelikelihood of rising non-performing assets.

Rising inflation and interest rates have hit companies hard, but there are other

worries, too: higher input costs (including raw materials), fuel costs and salary costs.

The net result is stress on profitability and compression in margins. The uncertain

global economic climate, especially in Europe, has led to bouts of volatility in the



capital markets. While equity capital raising has been at a near standstill, higher

interest rates have made debt capital expensive too. Companies have little choice

but to pass on much of these costs to customers.

Happily, consumer demand has been unrelenting,leading to healthy top-line growth (read The Slow,

Great Squeeze, page 76). What has added to the

gloom is the slowdown in FII inflows. A comparison

of BT500 data with FII inflows over the past five

years reveals interesting details. In 2007, the top 500

companies (including the public sector) had a

healthy 25 per cent growth in their April-September

average market capitalisation; FII inflows in the same

period surged by $10.98 billion. In 2008 and 2009,the BT500 market capitalisation declined by 0.68 and 1.75 per cent, respectively. In

2008, FIIs recorded an outflow of $5.77 billion in the first six

months.

But in April-September 2009, with India's improving domestic

prospects and lack of better investment opportunities

elsewhere, FIIs registered a net inflow of $13.37 billion. That

improved further in April-September 2010, when the FII inflow

of $13.83 billion was matched by a 36 per cent growth in theBT500 market cap. This April-September, though, the top 500

companies' market cap has inched up by 2.71 per cent; FII

inflows have been just $0.66 billion.

Finally, even as we made the landmark decision to merge

private companies and PSUs into a unified ranking, we also

looked at two sides of a certain coin. On one side, we examined companies that

have slipped out of the top 25 over the past 19 years (read Fallen Leaves, page 70)

and what lessons their slide holds. On the other, we looked at companies that have

inexorably risen through the ranks over the past five years. One of them, Adani

Enterprises, ranks at No.19. Read about Adani, and the six other companies in this

league in Chartbusters, on page 62. Twenty years later, these companies might be

the big boys, with other challengers hot on their heels. But let us leave that for

another day.

indias most valueable companies 2010

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