Reforms necessitated by the balance-of-payment crisis in the early 1990s shaped the themes that dominate India Inc in the new millennium — thrust on private enterprise, companies with global footprints and a shift towards services from manufacturing.

Data for about 1,700 companies that have been listed on exchanges since BusinessLine was born show that their combined revenue has grown 14.8 per cent every year and their profits at 13.6 per cent. As of March 31, 1994, just 39 listed companies had managed a turnover of ₹1,000 crore. Today, that number has grown 20 times. The market cap of the stocks listed on the BSE has moved up from about ₹4 lakh-crore in 1994 to ₹143 lakh-crore now.

Less government

The winds of change that blew in the early 1990s sought to set right an ailing public sector suffering from over-capitalisation, low capacity utilisation, inefficiency and government interference in decision-making, by opening up these companies for private sector and general public participation.

The initial years until 2000-01 saw only sale of minority stake in entities such as VSNL, Indian Oil, BPCL, HPCL and GAIL. The disinvestment drive gained momentum in the early 2000s with strategic sales or offer for sale in Maruti Suzuki, Modern Foods, Hindustan Zinc, CMC, BALCO and ITDC.

The government has seen success in recent times, too, in divesting its stake in a basket of companies through the ETF (exchange-traded fund) route. Though the Centre has met or exceeded its disinvestment target in only five out of the last 28 years, it has so far divested its stake, in various forms, to the extent of about ₹4 lakh-crore.

Global footprint

As India opened up its markets to the world, large business groups such as the Tatas and the Birlas acquired global giants in industries such as metals (Corus, Novelis, Aleris), automobiles (Jaguar Land Rover) and FMCG ( Tetley). Others such as Motherson Sumi or Mahindratook up an acquisition-led strategy to grow, regularly scouting for companies on the block across the globe to augment their product line and diversify their geography mix.

This apart, Indian companies have consciously expanded their overseas presence. For instance, home-grown pharmaceutical firms such as Sun Pharmaceutical, Aurobindo Pharma and Dr Reddy’s Laboratories now derive a greater proportion of their revenues from global markets such as the US and Russia, than from India.

Global players have also found Indian companies an attractive buy due to the cost advantage and the huge addressable market in India. Besides, Indian firms have also consolidated among themselves to extend product offerings or simply benefit from economies of scale.

Bloomberg data show that about 6,343 M&A deals targeting Indian companies worth ₹21.9 lakh-crore have taken place since January 1994.

Services takeover

If the years of planned economic development since Independence were driven by a thrust on manufacturing, services have been showing the way since the turn of the century.

When BusinessLine was launched, the then recently listed Infosys had a turnover of just ₹29 crore for the year ended March 1994 and a minuscule profit of ₹8.1 crore. The software sector itself saw a turnover of only ₹623 crore and a profit of ₹37 crore for the same period. Today, the sector boasts of revenues of ₹4.34 lakh-crore and profits of ₹72,000 crore as of March 2018.

Banking and finance companies, too, have made it big, given the need for credit in one of the fastest-growing economies of the world. The next leg of growth in this space is being driven by insurance and financial services, where companies have recently started listing on the bourses. Thanks to this shift, software, banking, finance and telecom companies contribute 40-50 per cent to the index weight of the Sensex and the Nifty now.

What’s in store?

The path to growth has not been without thorns, and as BusinessLine turns 25, India Inc is facing near-term headwinds in the form of lacklustre private sector capital expenditure, slowing global growth and threats to the rural economy. But like in the past, this too shall pass.

Over the next two decades, India Inc will see a big jump in consumption demand driven by low penetration of big-ticket consumer items, improving rural affordability and increasing preference of urban Indians for premium products.

Another trend to watch out for is consolidation of companies across sectors, to create giant companies that emerge leaner and use scale to their advantage. The ongoing consolidation process in the banking and infrastructure sectors, as a result of bad loans and debt burden, is an example.

A GST-induced shift that leads to big, organised players buying small, unorganised ones, is also likely. Finally, increasing regulatory oversight and shareholder activism could take corporate governance a notch higher.