BT 500: INDIA Most Valuable Companies
Cover Story
Rocked by the meltdown
Virendra Verma
After years of rollicking appreciation, companies that make up the BT 500 are going through one of their toughest phases in a long, long time. As stocks get mercilessly hammered, this may just be the time when the men are separated from the boys. Virendra Verma reports.
Realty pains
No depression, just growth
End of the Indian outbound story?
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Last year, around the same time, the mood on the street was bullish, with the bull run showing few signs of petering of, and the Sensex rampaging into 20,000-plus territory. Although the subprime crisis had erupted in the US, few expected it to impact the great India story in the way it has now. Yet, there was always a fear lurking in the nooks and crannies of Dalal Street and stocks in pockets had raced way ahead of fundamentals. Concern over fundamentals of Indian companies were severe in the last two months (September-October) when the BSE Sensex fell by almost 38 per cent.Those concerns were doubtless valid, what with price-earning ratios (P-Es) in overheated sectors like real estate climbing to as high as over 100 times. But when the equities did come tumbling down, few expected the markets to crash with such ferocity. Blame it on the US subprime crisis, greedy investment bankers or slack regulation on Wall Street or the resultant tightening of liquidity globally, but back home, a slowdown in the economy as well as in corporate earnings was only beginning to make its presence felt at the beginning of the year.
When that slowdown finally revealed itself—now manifest in lower GDP projections and single-digit earnings growth for India Inc. in the second quarter of 2008-09—the writing was on the wall. The boom has got busted. The benchmark BSE Sensex is down by half, real estate is down in the dumps, manufacturers across sectors are cutting jobs and production, and yesterday’s outbound M&A adventurists are scurrying for funds needed to pay up for multi-billion dollar acquisitions made when valuations were near peak levels.Amidst such gloomy conditions, the BT 500—where the rankings are based on average market capitalisation for the April-October period—serves as a handy barometer of India Inc.’s performance in tough times. Encouragingly, there are quite a few companies who were able to minimise the impact of the global meltdown, and actually show an increase in market value over the previous year’s corresponding period.
For the sixth year in a row, Mukesh Ambani’s Reliance Industries (RIL) grabbed the top slot of India’s most valuable company. Despite the carnage on Dalal Street, its average market cap increased by a handsome Rs 32,400 crore. Younger brother Anil, who took another company to the stock exchanges this year, Reliance Power, wasn’t so lucky, in taking over his elder brother in terms of market cap. The Reliance Power listing was expected to polevault Anil into a bigger league, but that didn’t quite happen. The biggest surprise, however, came courtesy the public sector pack, where the overall market cap for the 50 companies in the list increased by almost Rs 1 lakh crore; in percentage terms that works out to a 10 per cent increase. The biggest contributors to the massive rise in the value of the state-run companies were NMDC and MMTC, whose combined market cap increased by over Rs 1.3 lakh crore. Although the floating stock of these companies is less than 2 per cent, the increase in their share price shows that the market sees value in them (considering there is hardly any operator-driven activity in state-run companies). Marketmen point out that the government should take a cue from the massive rise and offload some more of its holdings in such companies; this will help release some pressure on government finances and improve market sentiment.
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Source: Business Today.
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