Leading Companies in Sales, Market Cap: Big Churn at the Top

Dr. V K Vijayakumar

As an economy grows, it undergoes structural changes. An inevitable structural change is the shift in the sectoral composition of the GDP. The share of agriculture in GDP declines and the shares of industry and services increase. In fact, an essential requirement of economic development is the shift of labour from agriculture to industry and services. In the modern world, services dominate business.

The rate of growth in services businesses is far higher than in manufacturing. Among the world’s Big Five (in terms of market capitalisation) – FAAAM (Facebook, Amazon, Apple, Alphabet and Microsoft) – four are in services. Similar trend is visible in India too. In 1991, the top five in market cap (market capitalisation or value according to the market is calculated by multiplying the share price by the number of shares) were all from manufacturing; now, three are from services: TCS, HDFC Bank and HDFC. (See table below).

Company             Market cap (Rs crores) 1st Jan1991 | Company       Market cap (Rs. crores) 15th August 2017
TISCO                  3,193                                                   RIL                 5,11,572
TELCO                 1,685                                                   TCS               4,72,669
RIL                       1,483                                                    HDFC Bank   4,52,672
Hind Lever           1,347                                                    ITC                 3,30,152
Century Textiles      998                                                    HDFC             2,73,086

In 1991, the company with the highest market capitalisation was Tata Steel. Now TCS has a market cap which is several times that of Tata Steel. The emergence of services companies as top players is a trend that will gather further momentum, going forward.

When we take the leading companies in terms of sales turnover, other interesting trends emerge. The share of PSUs in the list of top companies is declining fast and correspondingly, the share of private players is accelerating. India’s top companies (excluding banks) by sales turnover underwent significant churn since 1991. (See table below).

Rank        Company           Revenue (Rs. crores)         Rank           Company             Revenue (Rs crores)
1              Indian Oil             18,663                                 1                 Indian Oil               3,59,536
2              SAIL                       8,071                                 2                 RIL                         2,85,945
3              HPCL                     7,217                                 3                 Tata Motors            2,76,542
4              BPCL                     6,909                                 4                 BPCL                     1,90,392
5              BHEL                     3,249                                 5                 HPCL                     1,88,736
6              NTPC                     2,510                                 6                 ONGC                   1,39,364
7              TELCO                   2,247                                 7                 Tata Steel              1,28,388
8              TISCO                    2,210                                 8                 TCS                       1,11,730
9              Madras Refinery    1,645                                 9                  L&T                       1,04,172
10            RIL                         1,509                                10                 Hindalco                1,01,257
11            Cochin Refinery     1,502                                 11                 Bharti Airtel              98,069
12            L&T                        1,451                                 12                 Coal India                83,780
13            IBP                         1,435                                 13                 NTPC                      79,950
14            MTNL                     1,318                                 14                 M&M                        78,561
15            HIND LEVER         1,243                                 15                 Vedanta                   68,887
Total 61,184 Total 22,95,316

There is big churn in the list of top companies. The dominance of public sector companies in top 15 in turnover has become history. Liberalisation and privatisation have unleashed big changes. The decision to allow private players in telecom (formerly owned 100 per cent by government) has facilitated the emergence of Bharti Airtel as a major company in India. In 2016 there are only 6 PSUs in the top 15 against 9 in 1991. In this group of 6 PSU behemoths, 4 are oil majors. Now, private sector companies, some of them of relatively recent origin, increasingly dominate the list of large companies in India. The entry of private players in airlines has transformed the industry beyond recognition. Private players now account for 80 per cent of the industry.

Services sector players will continue to dominate the business landscape, going forward. This trend, along with the retreat of PSUs, is inevitable and desirable.