The Mega Churn

Seven changes in Top 10 and 19 in Top 25 mark the latest edition of BT500 rankings as markets punished the reckless. After a difficult year, India Inc can expect a sunnier 2016/17.

- Rajeev Dubey

FOR EVERY ACTION, there is an equal and opposite reaction.” Far from physics, Newton’s third law of motion was in action in economics in 2015/16 as India Inc. braced for the combined onslaught of a global slowdown, two successive years of drought, a mountain of corporate debt and bad assets, high inflation, and a slow-to-revive domestic economy.

Take the case of crude oil, which fuels transportation and impacts every possible industry on earth. As global crude oil prices remained subdued right through the fiscal, the top line of domestic refining majors, some of India’s largest corporates, shrank. This reduced the total income of BT500 companies (non-finance) by 5 percent in 2015/16. And that triggered ‘reactions’ across India Inc. First, the overall valuation of the Top 500 companies fell 1.5 percent. “It’s not a function of value creation. Rather, of how much uptick they see from here,” says Shashank Tripathi, Partner, Strategy&, and Leader, PWC India.

Lower oil and commodity prices had an opposite reaction on downstream industries, which benefited from lower input costs, expanding the total net profit of BT 500 firms by nearly 11 percent. Better profits meant companies, in general, didn’t have to halt asset creation, which grew nearly 9 percent. Profits also made businesses viable enough to service loans, increasing BT500 companies’ debt by nearly 8 percent.

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