Liberalisation and appetite to grow have helped private companies to outpace their public counterparts in the last 10 years, by raising contribution in net sales by 20 percentage points to 68.55 per cent and in net profit, by 24 percentage points to 63.86 per cent.
In other words, net sales of the private sector rose at a compound annual growth rate (CAGR) of 23.48 per cent and net profit at 33.47 per cent, while public sector entities grew at a CAGR of 12.65 per cent in terms of net sales and at 19.3 per cent by net profit.
Information technology (IT), capital goods, metals, telecom, automobiles, construction, infrastructure, pharmaceutical and realty sectors led the private sector growth, while banks and capital goods helped public sector to show double-digit CAGR in sales and profit. The public sector companies were more or less hamstrung by the government control on oil prices and inability to push reform agenda on lack of support from bureaucrats. The government’s failure to list the profitable entities also limited the public sector share in India Inc’s sales and profit.
The private sector entities were fast forward to come out of the control-ridden years to increase and upgrade manufacturing facility, by tapping the capital market through public issues. They also approached banks for endless flow of cheap credit and re-invested profits for future growth.
Reliance Industries integrated itself to become the country’s largest and the world’s most integrated petrochemical company, while Tata Steel, Tata Motors, Hindalco and top pharmaceutical companies enter world map through overseas acquisitions.
The multinational companies (MNC) operating in fast moving consumer goods, capital goods and pharmaceuticals sectors did well, and posted CAGR of 19.55 per cent in sales and 25.43 per cent in net profit.
Hindustan Unilever was the biggest disappointment of the decade. It grew at a CAGR of six-eight per cent in sales and profit. ITC, despite ridden by endless rise in excise duty, registered a CAGR of 18 per cent in sales and profit.
The private sector edged out the public sector, with the number of companies, with net profit of Rs 1,000 crore, growing from one, namely Reliance Industries, in 2000-01 to 37.
The profit buoyancy saw eight private companies become billion dollar profit companies. They were TCS, Infosys Technologies, Wipro, Bharti Airtel and Reliance Communications. ITC and Hindustan Unilever continued to be the two most profitable companies among MNCs. Thanks to 14 state-owned banks, the number of Rs 1,000-crore plus net profit companies in the public sector increased from seven to 31.
The state-owned oil companies continued to dominate the list by sales, occupying four of the top six positions.
The private sector companies, with overseas acquisitions, increased their presence in the top 10 from two to four. Tata Steel joined the Rs 100,000-crore sales leagues on the back of its acquisitions of Corus. Tata Motors doubled its sales after acquiring Jaguar-Land Rover, while Hindalco improved its sales fivefold in two years after acquiring aluminium giant Novelis.
The information technology (IT) sector, which tilted the balance in favour of services sector, has grown manifold in the last 10 years. Now, the top three IT companies together rake in export revenue worth Rs 80,000 crore from Rs 8,000 crore 10 years ago.
Bharti Airtel, an unlisted entity till 2001, now ranks among India’s top 15 companies, with net sales of Rs 42,000 crore. Bharti Airtel is also the fifth largest profitable company in India, with a net profit of Rs 9,163 crore.
Return to profitability hinges on its ability to secure higher proportion of low-cost domestic coal and lower interest costs