Down, but not out

The trials of the past year have been captured well in the 18th listing of India’s Most Valuable Companies, with the top 500 showing a 7.32 per cent decline in average market capitalisation between April 1 and September 30, 2009 over the previous year’s corresponding period. For the bottom half—companies ranked between 501 and 1,000—the going has been rougher, with average market value dipping by almost 30 per cent.

Clearly, the smaller companies found themselves more vulnerable to the global meltdown and, more specifically, more adversely impacted by the crisis of liquidity. In sharp contrast, the big—the elite businesses at the top of the heap—continued to get bigger: The market value of the top 10 in this year’s BT 500 actually climbed up, by 4.3 per cent. Within this big league, Reliance Industries Ltd (RIL) continued to enjoy top dog status in the private sector, for the seventh year in a row. This year, it succeeded in widening the gap between itself and the rest of the pack by merging group refining company Reliance Petroleum Ltd (RPL),

The biggest, and pleasant, surprise is the performance of the public sector pack, with the market value of the top 50 public sector undertakings value rising by 12.4 per cent. Now that showing won’t be lost on Finance Minister Pranab Mukherjee at a time when he is getting ready to offer shares to investors in some of the most valuable state-run companies.

As far as sector-wise performance goes, there were surprises galore. Those that were expected to be dragged down by the downturn succeeded in bucking the slowdown in style. A case in point: Automobiles. The biggest surprise came from the world’s largest motorcycle maker Hero Honda, whose market cap jumped by 83 per cent (or Rs 12,877 crore). Its rival Bajaj Auto, too, had a jump in market cap by 91 per cent (or Rs 7,129 crore) and car maker Maruti Suzuki was up 69 per cent (by Rs 13,753 crore). Another sector which was almost written off by the analyst community in the first quarter of 2009 was software, but companies like Infosys Technologies, TCS and Wipro subsequently came out with better-than-expected results. As a result, value erosion was minimal in the top tier of Indian IT services.

The sector that was hit the hardest was real estate, thanks to the double whammy of falling property prices and ballooning debt. All the leading realty companies like DLF, Unitech, and Indiabulls Real Estate were down from their previous year’s high. Some smaller property companies, however, emerged from the wreck—Jay Bharat Textile & Real Estate, for instance, became the third-most valuable real estate company after DLF and Unitech in the BT 500 list. Now that's one benefit of a downturn: A shakeout that brings new leaders to the fore.