1. february 2010
INDIA’S FINEST COMPANIES

3. CONTENTS
I N S I D E T H E L E A D E R S
Editorial
Riding out the global recession Reliance Industries
Page 4
Focussing on
RANK 1
Overall Performance
Topline growth sustained
by corporates strong execution
Page 6-10
Page 12
Methodology,
Caveats & Limitations
How we did it ONGC NTPC
RANK 2
RANK 3
Page 32-33 Taking the diversi- Building a broader
fied approach power base
The FE-500
How India’s top 500 companies Page 14 Page 16
fared in 2008-09 in terms of
composite rankings, net sales, total IOC SAIL
RANK 4
RANK 5
assets, gross profit, net worth, Widening its Expanding
market capitalisation, return
on net worth, return on assets, operational reach operations
and return on sales
Page 18 Page 20
Page 34 - 61
Bharti Airtel Tata Steel
Retrospective
RANK 6
RANK 7
A detailed look at how leading
Connections Strategic intent—
companies fared over the across the globe fit for the future
past decade
Page 62-65 Page 22 Page 23
The Industry League
BHEL L&T
RANK 8
RANK 9
A comparison of India’s top Benefit from power Creating advantages
performing companies grouped by sector thrust out of adversity
industry. The section contains total
income, net profit, retained profit, Page 24 Page 25
forex earnings, forex expenditure,
and debt-equity ratios RCOM Infosys
RANK 10
RANK 11
Page 66 - 89 Recreating rules Maintaining clients
of engagement and margins
Profits & Profitability
Taking a hit on the profitability front Page 26 Page 27
Page 90-91
Wipro TCS
RANK 12
RANK 13
Ranks in Alphabetical Order Continuously On the collaboration
Page 92-101
reinventing itself and learning path
Nine Months Page 28 Page 29
Performance of Top 100
Page 102-103 GAIL Tata Motors
RANK 14
RANK 15
Advantage Forging ahead with
expanding market global ambitions
Page 30 Page 31
2 | THE FINANCIAL EXPRESS | FEBRUARY 2010

5. EDITORIAL
A FINANCIAL EXPRESS
RESEARCH BUREAU PROJECT
february 2010 read to lead
Riding out the
INDIA’S FINEST COMPANIES
global recession
CHAIRMAN OF THE BOARD
Viveck Goenka
GROUP EDITOR-IN-CHIEF
F OR corporate India, financial year 2008-09 was like a trial by fire. The global
credit freeze in September 2008 and the negative GDP growth across the
developed world proved a great challenge. All past assumptions in the market place
Shekhar Gupta
turned on their head. Indian companies, by and large, met the challenge of global
MANAGING EDITOR headwinds with a resoluteness not seen before. At the end of it all, India Inc seemed
M K Venu
to have passed the test by not only staying afloat but also by growing their top lines
PROJECT CO-ORDINATOR impressively The leading FE 500 companies’ list, ranked mainly by sales growth,
.
Akash Joshi
shows that the toplines grew at a relatively high pace of 19.35% even though
RESEARCH EDITOR profitability declined across the board. However, bigger companies used their sheer
Pradip Kumar Dey
scale to some advantage and managed to preserve bottomline growth too. We now feel
EDITORIAL doubly vindicated that our methodology in ranking the top 500 companies was
Rishi Raj, Noor Mohammad
changed some years ago, giving maximum weight to topline growth and
DESK substantially reducing the weightage accorded to market capitalisation. This may
Ayesha Dominica Singh
have stood us in good stead because in 2008-09 the stocks of most FE 500 rankers had
RESEARCH TEAM crashed dramatically only to quickly recover within months after March 2009. So
Sujith Pillai, Sandeep Nalge, Tara Boi
market cap becomes a somewhat fickle indicator, especially when global finance
COVER DESIGN itself is going through a prolonged phase of volatility .
Manoj Bhramar
We are convinced that topline growth will truly reflect the aspirations and
DESIGN TEAM performance of Indian entrepreneurs who are currently in the process of growing
P L Santosh, M P Singh,
Rohnit Phore, Gopakumar Warrier their companies to global scale. Indeed, it is corporate India’s topline growth over the
years that would truly measure the gradual shift of economic power towards India in
MARKETING CO-ORDINATORS
The Express Group particular and Asia in general. In this context, it is interesting to note that the top 15
Space Marketing Team among the FE 500 companies profiled this year will have two new entrants — TCS and
Tata Motors — both of which are poised to build global scale in the next 5-10 years.
Among the top 15 rankers by sales, profitability, asset size and market cap are IOC,
RIL, ONGC, SAIL, Bharti Airtel, Tata Steel and RCOM. This year we also decided to
plot the ten-year topline growth trend for the leading 100 among the FE 500 to give an
idea of how these companies have fared over the past decade. The result was quite
PRODUCTION interesting: the top 100 companies have shown nearly 18% compounded annual
B R Tipnis & Team growth in sales over the last decade. This means these companies have more than
Printed for the proprietors, doubled in size every five years. If the trend continues for another two decades,
THE INDIAN EXPRESS LIMITED, India may well dominate the list of global MNCs.
by Ms Vaidehi Thakar at
The Indian Express Press, Plot No. EL-208,
TTC Industrial Area, Mahape, Navi Mumbai
400 710 and published from Express Towers,
Nariman Point, Mumbai 400 021.
■ Copyright: The Indian Express Limited.
All rights reserved. Reproduction in any manner,
electronic or otherwise, in whole or in part, without
prior written permission is prohibited. M K VENU
4 | THE FINANCIAL EXPRESS | FEBRUARY 2010

7. OVERALL PERFORMANCE
Sustaining revenue
growth in difficult times
Sales of FE 500 registered a 19% surge in 2008-09, beating estimates
Pradip Kumar Dey Bharti Airtel lost the position from fifth were DLF (-48.89%), Unitech (-34.67%),
to the sixth. Tata Steel, Bhel and Larsen Hindustan Zinc (-27.95%), Housing De-
A
FTER a dull performance in & Toubro moved up from 8th to 7th, 9th velopment & Infrastructure (-27.76%),
2007-08, the Indian corporate to 8th and 11th to 9th respectively . Ashok Leyland (-22.80%), Indian Hotels
sector showed some bright mo- Reliance Communications lost ground (-13.06%) and Tata Motors (-10.77%).
ment in their top line performance dur- and declined, from the 7th to the 10th. Some eight companies in the first
ing 2008-09. The FE 500 have been clubbed into group of 100 recorded more than 50%
Sales of FE 500 were pitched high. five groups-the first 100, the second 100, increase in net sales in 2008-09. The sec-
Speeding ahead at a rate of 19.35%, the the third 100, fourth 100 and the rest ond set of 100 companies grew at 22.88%,
FE 500’s net sales reached the high of Rs were neck to neck. So, the comparisons, higher than the FE 500’s average. Their
23.14 lakh crore. Though, in compari- if any, have to be made within the FE- combined net sales increased from Rs
son with 2007-08, the sales growth was 500. As against an overall sales growth 2.32 lakh crore (on an annualised basis)
slightly high. The FE 500’s sales growth rate of 19.35% for the 500 as a group, the in 2007-08 to Rs 2.85 lakh crore in 2008-09.
was 17.69% in the year 2007-08. sub-groups of 100 each recorded The second set saw many changes, but
The increase in the cost of raw mate- growth rates of 19.18, 22.88, 17.88, 17.30 the more noteworthy among them were
rials and energy, however, presented and 15.93% respectively during 2008-09. the 16 new entrants from the lower ranks
some hurdles in their profit growth. The top 100 group (according to com- in 2008-09. The highest rate of rise in net
The top ten, in terms of composite posite rankings) saw five new compa- sales was recorded by Shree Renuka
ranks, seemed slightly slower than the nies making an entry in 2008-09. The Sugars (148.30%), followed by Zuari
FE 500 as a whole. Their sales growth, highest rate of rise in net sales in the Industries (132.65%) and Engineers
at 14.63%, was actually slightly lower first set was recorded by Lanco Infra- India (112.09%).
than the FE 500, which recorded a col- tech (190.68%), Coromandel Interna- Among the poor performers in this
lective growth of 19.35%. In absolute tional (149.32%), Tata Chemicals group was Parsvnath Developers (-
terms also, the top ten ended 2008-09 (107.18%), Ambuja Cements (65.65%), 57.5%). Compared to the first two, the
with a lower record: their aggregate United Phosphorus (62.53%) and RCF third group of 100 companies did not
sales as a percentage of the total FE 500 (62.20%). The laggards in the top 100 perform well in terms of net sales
actually saw a marginal decrease growth. Aggregate net sales of the
from 30.93% in the year before to set increased by 17.88% from Rs 1.20
29.71% in 2008-09. lakh crore in 2007-08 to Rs 1.41 lakh
Barring BPCL, all the other nine crore in 2008-09. In terms of individ-
who graced the super league in 2007- ual performance, 14 companies
08, also showed up in the same starry recorded declines in the third set. Of
league the next year. BPCL, the top them, Omaxe recorded the highest (-
tenner of 2007-08, was edged out by 60.90%), followed by Lakshmi Ma-
the Larsen & Toubro in 2008-09. chine Works (-39.28%), Amtek India
In 2008-09, at the top spot was (-26.20%) and Ansal Properties &
Reliance Industries. In the slot just Infrastructure (-22.0%). Kingfisher
behind it was stable mate ONGC; the Airlines (174.17%), Fertilisers &
third runner-up was NTPC. And the Chemicals Travancore (143.56%),
fourth runner-up was Indian Oil Rain Commodities (80.39%), Icsa
Corp. The other six top tenners, in (64.07%), Peninsula Land (56.88%),
descending order of their compos- AIA Engineering (55.51%) and
ite ranks were SAIL, Bharti Airtel, Binani Cement (55.40%) were
Tata Steel, Bhel, Larsen & Toubro among those registering significant
and Reliance Communications. sales growth.
Within the top ten group, some There were 23 new members in
shifting of positions had taken the set in 2008-09. Not all the new
place. Thus, SAIL, sixth in 2007-08, members, however have cause for
moved up to the fifth position and jubilation. As many as 11 of them
6 | THE FINANCIAL EXPRESS | FEBRUARY 2010

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9. OVERALL PERFORMANCE
are rejects from the second set, includ- second, third and fourth hundred software-converts, transport-airlines/
ing such big names like Ballarpur In- groups and their combined net sales travel agencies, construction, sugar,
dustries, Castrol India, Omaxe, Varun increased from Rs 62,428 crore in 2007- pesticides/agrichemical-Indian and
Shipping Company and ITI. 08 to Rs 72,373 crore in 2008-09. steel-sponge iron. The slowest growing
Twelve others, which were in fourth Looking at the FE 500 on a whole, it industries were pharmaceuticals-
set in 2007-08, entered the third set is obvious that individual performance multinational, mining/minerals/met-
of companies in 2008-09. Mention may was substantially determined by the als, steel-pig iron, domestic appliances,
be made of Bharati Shipyard, Jai Neco fortunes of the industry in which they auto ancillaries, electrodes-graphites,
Industries, Rain Commodities, AIA En- operated. The fastest growing indus- automobiles-motor cycles/ mopeds,
gineering, Madhucon Projects, Bajaj tries in 2008-09 were fertilizers, chlor- electronics- components, bearings and
Electricals, Balkrishna Industries, and alkali/soda ash, cement products, ship castings and forgings.
Amara Raja Batteries. breaking and repairing, computer Given the perky overall growth rate
The fourth set of 100 companies of 19.35% for the FE 500, asset
registered the lowest growth in growth was significantly higher
sales compared to the first, second than the sales growth. The com-
and third set, indicating that at the bined total assets of the FE 500
bottom of the corporate heap there (according to sales) rose by 24.28%
is a lack of enterprise. The fourth from Rs 22.09 lakh crore in 2007-08 to
group of companies grew at 17.30%, Rs 27.46 lakh crore in 2008-09.
and their combined net sales While building assets, the FE 500
increased from Rs 87,518 crore (on took a beating on the profitability
an annualised basis) in 2007-08 to Rs front. Gross profits decreased mar-
1.02 lakh crore in 2008-09. The high- ginally during the study period. The
est rate of rise in net sales was total gross profits of the FE 500
recorded by Sujana Metal Products decreased from Rs 3.41 lakh crore
(101.58%), followed by Jindal Dril- (on an annualised basis) in 2007-08 to
ling & Industries (88.45%), Ushdev Rs 3.17 lakh crore in 2008-09, a 7.11%
International (83.62%), Dish TV In- decline. The top 10 of the FE 500
dia (78.48%), McNally Bharat Engg accounted for a major share of the
(77.47%), Aarti Industries (60.02%) booty (Rs 1.27 lakh crore), leaving Rs
and Visa Steel (54.53%). The most 1.90 lakh crore to be divided up
interesting part of FE 500 is the sales among the remaining 490.
growth of fifth set of 100 companies. ONGC, the number one profit-
The fifth group of companies grew maker of the year, notched up gross
at 15.93%, which is lower than first, profits of Rs 36,419 crore, a 2.93%
8 | THE FINANCIAL EXPRESS | FEBRUARY 2010

11. OVERALL PERFORMANCE
increase from Rs 35,381 crore in the pre- worth in absolute terms. hnologies (584.68%), Hindustan Cop-
vious year. The other nine companies As for market capitalisation, per- per (571.12%), Tata Motors (514.69%),
in the top 10 list in terms of gross prof- formance was good, the aggregate Micro Inks (491.73%), Madhucon
its were Reliance Industries (Rs 23,571 market capitalisation of the FE 500 Projects (474.51%), Unity Infra Projects
crore), NTPC (Rs 13,548 crore), Bharti corporates increased by 103.9% from (470.98%), Alok Industries (436.34%)
Airtel (Rs 11,471 crore), SAIL (Rs 10,692 Rs 21.92 lakh crore as on January 29, and Century Enka (426.72%).
crore), Tata Steel (Rs 8,273 crore), 2009 to Rs 44.71 lakh crore as on January In contrast, five companies showed
Infosys Technologies (Rs 7,408 crore), 29, 2010. The highest increase in market a decrease in market capitalisation
Indian Oil (Rs 7,166 crore), Reliance capitalisation among the FE 500 com- during the study period. Mention may
Communications (Rs 6,736 crore) and panies was witnessed in the case of be made of Tata Communications
TCS (Rs 5,957 crore). Piramal Glass (756.70%), McNally (-29.81%), Madras Cements (-14.87%),
Reliance Industries topped in terms Bharat Engg Co (648.74%), Sterlite Tec- Koutons Retail (-14.23%), Hindustan
of net worth during 2008-09. The net- Unilever (-4.77%) and Bharti Airtel
worth grew to Rs 1.26 lakh crore, a (-2.37%).
58.34% rise from Rs 79,766 crore in The top 10 in terms of market
the previous year. The other compa- capitalisation in 2008-09 were
nies in the Top 10 list in terms of net Reliance Industries (Rs 3,42,221
worth were ONGC (Rs 78,735 crore), crore), ONGC (Rs 2,35,233 crore),
NTPC (Rs 57,370 crore), Reliance NMDC (Rs 1,97,204 crore), NTPC (Rs
Communications (Rs 51,690 crore), 1,76,659 crore), MMTC (Rs 1,69,456
Indian Oil (Rs 43,976 crore), Tata crore), TCS (Rs 1,43,942 crore),
Steel (Rs 29,704 crore), SAIL (Rs Infosys Technologies (Rs 1,42,162
27,984 crore), Bharti Airtel (Rs crore), Bhel (Rs 1,17,800 crore),
27,643 crore), Hindalco (Rs 23,758 Bharti Airtel (Rs 1,16,376 crore) and
crore) and Infosys Technologies (Rs ITC (Rs 95,095 crore).
17,809 crore). The market capitalisation of the
The aggregate net worth of the top 10 companies (in terms of com-
FE 500 increased by 20.46% from Rs posite rank) increased by 55.63% to
10.21 lakh crore in 2007-08 to Rs 12.30 Rs 13.21 lakh crore on January 29,
lakh crore in 2008-09. Eight compa- 2010 from Rs 8.85 lakh crore on
nies, namely Kingfisher Airlines, January 29, 2009. The share of the
Tata Teleservices (Maha), ITI, Spice top 10 in the FE 500 in market capi-
Communications, Dish TV Lloyd , talisation decreased from 38.72% on
Steel Indus- tries, Spice Jet and January 29, 2009 to 29.54% on
Balaji Distilleries had a negative net January 29, 2010.
10 | THE FINANCIAL EXPRESS | FEBRUARY 2010

13. PROFILE
RIL Focussing on strong
RANK 1
execution
COMPOSITE
NET SALES RANK 2
OIL & GAS RANK 2 FE Bureau And above all, concentrating on flaw-
less execution and commissioning of the
A
MONGST the various achieve- oil and gas and petroleum refining pro-
ments of the Indian corporate jug- jects. “Execution, as they say, is the test
gernaut, execution clearly stands of intent.Reliance learnt this dictum
off as the best. Within years, the company from its very inception. Not only has
has built the largest refining capacity at Reliance become world-class over the
any single location. It is also the largest years in project execution, but it has also
producer of Polyester Fibre and Yarn and been constantly raising the bar for itself,”
has ranks amongst the top in the world in says Ambani.
many other operational aspects. “We invested for growth when most
In the year 2008-09 saw the commer- major global companies were reducing
cialisation of two initiatives. The new capital expenditure,” he adds. In a diffi-
petroleum refinery at Jamnagar and the cult times, Reliance spent close to
deep-sea oil and gas production system in Rs 24,713 crore on capital expenditure.
the Bay of Bengal, were the two. With a current cash balance of nearly
According to Mukesh Ambani, chair- Rs 19,421 crore, Reliance is among the
man Reliance Industries (RIL), “A global financially strongest companies in
transformation initiative to leverage emerging markets. Net debt is now at less
Reliance’s financial and technical skills, than 21 months of cash flow.
open new vistas for our enterprise and for In the quarter ended December 2009,
our energetic talent to create new value the company has reported revenues
globally, as the world resets to a new fun- worth Rs 58,848, up 92.7% over the same
“Execution is the test of damental economic reality .” period of the previous year . For the same
intent. Reliance learnt However, financial year 2008-09 was period, operating profit grew by 38.5% to
also a tough one for the company as oil touch Rs 8,351 crore and net profit by
this dictum from its prices slumped and so did gross refining 15.8% at Rs 4,008 crore.
very inception. Reliance margins. And while net revenues grew by Reliance is the largest polyester pro-
6.2%, over the previous year, to touch ducer in the world, with a manufacturing
has become world- Rs 146,328 crore operating profit capacity of 2.5 million tonnes per annum.
class over the years in remained stagnant at Rs 25,374 crore and This has been strengthened with the com-
the net profit declined by 21% to touch missioning of the 900,000 tonnes per year
project execution.” Rs 15,309 crore. And since Reliance polypropylene plant at Jamnagar makes
MUKESH AMBANI Petroleum was amalgamated with RIL, it the fourth largest polypropylene pro-
CMD, RIL these numbers might not be exactly com- ducer in the world. The gas production
parable. However, despite this the com- levels have crossed six billion cubic
pany had a highest ever dividend outflow metres and the field is slated for plateau
of Rs 1,897 crore and maintained a return production by the second half of the year
on capital employed of over 20%. 2010. 200 days of gas production has been
Speaking about the turmoil, Ambani completed with 100% uptime. Oil produc-
said, “Export markets for petroleum tion from the D26 field has 2.8 million bar-
products, petrochemicals and polyester rels with daily peak production expected
were impacted. In such a milieu, Reliance by the end of the year.
proactively addressed these challenges Today, the Reliance Retail initiative
and took several decisive actions to keep serves over five million loyal customers
ahead of the curve.” in 86 cities and 14 states. This is done
These actions include conserving and through nearly 1,000 stores. And despite
re-deploying capital to petroleum refin- scaling down of plans the management is
ing and oil and gas projects for early com- confident to deliver on the promise of
pletion of projects. Prioritising expen- developing an ecosystem capable of
diture to operationally critical areas and enhancing shareholder wealth and also
controlling working capital, particularly prosperity for marginal farmers, small
on inventories and receivables. transporters and vendors.
12 | THE FINANCIAL EXPRESS | FEBRUARY 2010

15. PROFILE
ONGC Taking the diversified
RANK 2
approach
COMPOSITE
NET SALES RANK 5
OIL & GAS RANK 5 Noor Mohammad taining production levels.
The company reported a 23.4% rise in
I
NDIA’S largest upstream hydro- its net profit for the third quarter of the
carbon player ONGC is diversifying current financial year because of
into downstream business like refin- favourable factors like higher price reali-
ing and petrochemicals as also into sation from its crude sale and a lower sub-
power generation to become a fully inte- sidy burden.But ONGC might have to fork
grated energy company . out a higher amount a higher amount in
ONGC produced 52.45 million tonnes the last quarter to cover the shortfall of
of oil and oil equivalent (mtoe) in the past the third quarter. The company’s net
financial year. The company is expected profit in the latest quarter is Rs 3,054 crore
to benefit from rising international compared with Rs 2,475 crore in the corre-
crude oil prices. However, it is required to sponding period of the previous fiscal.
share public sector oil marketing compa- The company reported a turnover of Rs
nies (OMCs) under-recoveries from the 15,337 crore compared with Rs 10,865
below cost sale of petrol and diesel, which crore for the same period last year.
poses a downside risk to the company’s The average price for crude oil sold by
profitability . the company during October-December
According to chairman RS Sharma, 2009 stood at Rs $76.66 a barrel as against
“Sustaining supplies remains the first $58.87 a barrel in the corresponding
priority for the industry; not only from period of the previous fiscal. The com-
the present assets, but even from all the pany paid price discount of $18.97 a bar-
plays which attracted attention in high- rel, compared with $ 25.03 a barrel in the
“Sustaining supplies price regime like, deepwater, ultra-deep- same quarter of the previous year. The
remains the first prio- water and oil sands.” company paid out Rs 3,497 crore in price
“Commitment, investment and tech- discount on crude sale to the public sector
rity for the industry; not nology will play a major role in tapping oil marketing companies toward sharing
only from the present this large pool of located and yet-to-be- their under-recoveries on sale of petrol
discovered resources or from new and and diesel for the third quarter.
assets, but even from all alternate sources of energy Industry will
. ONGC made seven new discoveries
the plays which have to eschew volatility which requires during the latest quarter and two more in
paradigm shift in policy framework; not January 2010. ONGC Videsh (OVL),
attracted attention.” only from producers and consumers but ONGC’s subsidiary for acquiring oil and
R S SHARMA even at the commodity exchanges,” gas assets abroad, has participating
CMD, ONGC Sharma added. In the financial year interests in 39 blocks spread across 15
2008-09, ONGC’s in-place hydrocarbon countries.
volume was estimated at 284.81 mtoe Of these, 23 are under exploration, 6
while its ultimate reserves stood at 68.90 under development and the rest are in
mtoe. The company’s total reserves were production. OVL, in association with
1,593.53 mtoe as April 1, 2009. Hinduja Group and Petronet LNG,
Sharma mentions, “The second stra- recently entered into two broad enabling
tegic pursuit for ONGC has been ‘improv- agreements with Iranian authorities on
ing recovery factor’. It has systematically for participation in development of gas
been implementing Improved Oil Re- fields and liquification facilities in Iran,
covery (IOR) and Enhanced Oil Recovery in return for assured minimum 6 million
(EOR) projects in 15 major fields since tonne LNG per annum (mmtpa) on long
2001.” The IOR/EOR schemes helped in term basis.
improving recovery factor of fifteen Managalore Refinery and Petroche-
major fields from 27.5% in 2000-01 to 33.1% micals Ltd (MRPL), ONGC’s subsidiary
in 2008-09.At the same time,these schemes for refining business, achieved 130%
along with other measures helped in throughput in the past fiscal. ONGC is set-
arresting natural decline in these mature ting a petrochemical complex in Dahej,
fields (of 25-30 years vintage) and in main- Gujarat under the joint venture route.
14 | THE FINANCIAL EXPRESS | FEBRUARY 2010

17. PROFILE
NTPC Building a broader
3
power base
COMPOSITE RANK
NET SALES RANK 7
POWER GENERATION Noor Mohammad expanding carbon footprint.
& SUPPLY RANK 1 As of now, NTPC has an installed
W
ITH the Union power ministry power generation capacity of 30,644 mw,
envisaging an ambitious capac- about 82% of which is fired by coal and
ity addition programme under the rest by gas. The company has no
the 11th and 12th Plan to overcome the hydropower generation capacity But it
.
country’s growing power shortage, has taken up three hydropower projects
India’s largest generator NTPC is set to of about 2,000-mw capacity for imple-
gain in a big way The company is
. mentation under the Eleventh plan, even
expected to increase its market share as it is adding about 2,500-mw capacity
from 19% to 21% by 2014. The company’s based on natural gas.
recent further public offer (FPO) was The utility expects to reduce the share
oversubscribed by 1.2 times. The govern- of coal-fired power generation in its
ment has further diluted its stake in capacity mix to 80% from the existing
NTPC by 5% to 84.5% through the FPO. 82%. By 2017, the company expects to
NTPC will be required to compete bring down the share of coal-fired gener-
for power projects under tariff bidding ation capacity to 70%. It has targeted to
route post Jan 2011. The company is raise the hydropower share to 12% by
utilising the interim to secure invest- adding 9,000-mw capacity during the
ment approvals for as many projects same period. Besides, it has also envis-
as possible. aged adding 2,000 mw in nuclear power
NTPC plans to foray into nuclear generation and 1,000-mw capacity from
power generation business in partner- renewable sources like wind, solar and
ship with Nuclear Power Corporation geothermal.
“All our efforts are (NPCIL). The two companies have signed The company’s current debt to equity
geared towards a memorandum of understanding ratio is 0.60. “The low gearing ratio
(MoU). The planned joint venture is ensures favoured borrower status for
maximising expected to take off by March. NTPC among the lenders. The robust
shareholders’ wealth According to RS Sharma, chairman debt service coverage ratio of 3.67 and
& managing director NTPC, “Ultimately, interest service coverage ratio of 10.19
in line with the best all our efforts are geared towards also helps it in resource mobilization,”
corporate governance maximising shareholders’ wealth in says Sharma.
line with the best corporate governance NTPC is not only adding capacity but
practices.” practices, including sensitivity to the also running its existing power plants
R S SHARMA environment and the society Opti- . efficiently The plant load factor (PLF) of
.
CMD, NTPC misation of cost should be integral to NTPC’s power plants worked out to 91.1%
our working.” in 2008-09, compared with the Indian
The company is expected to gain from average of 77.2%. What is more, the com-
its backward integration moves to secure pany achieved this without compromis-
fuel supplies for its power plants. The ing on the scheduled maintenance of its
company is mining coal and exploring oil power plants.
and gas blocks. Apart from tapping India’s electricity demand has out-
opportunities in India, NTPC is also paced supply in recent years. Serious
hunting for acquisition of oil and gas constraints in getting timely delivery
assets abroad. of equipment from suppliers often
Meanwhile, the thermal power gener- lead to delays in the commissioning
ator is also trying to reduce its depen- schedule of power projects. That, in turn,
dence on fossil fuels by diversifying into adversely affects profitability of the
non-conventional energy areas like projects. To overcome equipment short-
hydro, nuclear and generation from age for its power plants, NTPC has
renewable sources such as wind, solar, decided to develop manufacturing
geo-thermal and biomass. That will also facility for power equipment in collabo-
help the company to reduce its fast- ration with Bhel.
16 | THE FINANCIAL EXPRESS | FEBRUARY 2010

19. PROFILE
IOC Widening its
RANK 4
operational reach
COMPOSITE
NET SALES RANK 1
OIL & GAS RANK 1 Noor Mohammad power and fertilizer sectors gradually
shifting to natural gas, IOC will have
I
NDIA’S largest public sector petro- more and more surplus naphtha from its
leum refiner Indian Oil Corporation refineries in coming years. Meanwhile, it
(IOC) is diversifying fast to become an is a setting up a 15 million tonnes per
integrated energy company IOC has. annum (mmtpa) petrochemical complex
entered the upstream oil and gas explo- at Paradeep, Orissa.
ration business even as it is trading in IOC would benefit if the government
natural gas. IOC is also raising its pres- implements the recommendations of the
ence in the petrochemicals business. Kirit Parikh committee on petroleum
Meanwhile, the company also plans to pricing. The committee has suggested
foray into nuclear power generation busi- maintaining the current methodology of
ness in partnership with Nuclear Power calculating OMCs’ under-recoveries on
Corporation (NCPIL). retail sale of household LPG and PDS
The two sides have already signed kerosene on the import parity basis. That
a memorandum of understanding means the OMCs will continue to enjoy
(MoU) in this regard. IOC plans to invest the possibility of reaping windfall gains
Rs 14,000 crore every year to grow. The in international as prices of these prod-
company celebrated its Golden Jubilee ucts rise proportionately more than
year in 2009. crude oil prices.
“During these five decades, IOC has The committee has also recom-
grown to emerge as the country’s largest mended that the government should
commercial enterprise and India’s high- reimburse the OMCs’ under-recoveries
“For downstream oil est ranked company in the prestigious in cash and not through issuance of oil
companies like IOC, Fortune Global 500’ listing, at 105th bonds. The government has decided to
position,” mentioned Sarthak Behuria, compensate the OMCs’ under-recoveries
managing the day-to- chairman, IOC. from the current fiscal in cash
day operations in an The company has kept ready war Behuria mentioned in his speech,
chest of $ 1 billion to finance acquisition “For downstream oil companies like IOC,
environment of high of oil and gas assets abroad. Acquiring managing the day-to-day operations in an
volatility in crude oil oil equity abroad makes sense for IOC as environment of high volatility in crude
it would help the company to hedge its oil prices was a daunting task. During
prices was a crude oil purchase cost in the face of 2008-09 in particular, the peaking of
daunting task.” volatility in the world oil market. The crude oil prices and the sudden switch to
company imports more than 50 million a low-price regime dramatically affected
SARTHAK BEHURIA tonnes of crude oil a year for its the economics of the industry across the
Chairman, IOC refineries. value chain.”
During the year, IOC maintained its Company’s net profit for the period of
dominance in the market place and nine months ended December 2009 was
clocked the highest ever sales of over 66 Rs 4,664 crore as against loss of Rs 3,673
million tonnes of petroleum products, crore for the same period last year. The
registering a growth of 5.67% over the gross turnover was lower by 12.13 % to
previous year, added Behuria. Rs 1,99,207 crore during the period
IOC is very bullish on petrochemicals April–December 2009 from Rs 2,26,717
business. The company has been success- crore for the corresponding period of the
fully marketing Linear Alkyl Benzene previous year. The company sold 52.19
(LAB) manufactured in its Gujarat million tonnes of products, including
refinery, in the domestic as well as over- exports, during the nine-month period
seas market. Now it plans to raise its ending December 2009. The throughput
profile in the sector. of its refineries and pipelines network
The company plans to use surplus was 37.412 million tonnes and 47.516 mil-
naphtha from its refineries as feedstock lion tonnes respectively for the nine-
for the petrochemicals business. With month period.
18 | THE FINANCIAL EXPRESS | FEBRUARY 2010

21. PROFILE
SAIL Expanding operations
RANK 5
and market share
COMPOSITE
NET SALES RANK 6
STEEL-LARGE RANK 1 Rishi Raj dividend paid last year.
Under the company’s modernisation
S
TEEL Authority of India Ltd (SAIL) and expansion schemes, capital expendi-
is the largest steel producing com- ture at Rs 2,793 crore in the December 2009
pany in the country and the 17th quarter was nearly 114% higher than Rs
largest in the world with a turnover of 1,306 crore in the same period last year.
over Rs 32,000 crore. At present, the com- During April-December of 2009-10, it
pany’s market share in the domestic mar- touched Rs 7,713 crore —over 138% that of
ket is about 30% and it plans to grow by corresponding period last year (Rs 3,231
70-75% by the end of this year by mainly crore). Modernisation and expansion
improving its capacity utilisation. projects at Salem Steel Plant which
Modernisation and expansion plans involve installation of new steel making
at its five integrated plants at Burnpur, facilities and a new cold rolling mill are
Bokaro, Bhilai, Durgapur and Rourkela nearing completion.
have been approved by the board involv- The company’s net turnover during
ing a capital expenditure of about Rs the quarter ended December 2009 at Rs
40,000 crore spread till 2010. By then, its 9,697 crore as compared to Rs 8724 crore
output would increase from 14.5 million (year-on-year) has been 11% higher. In
tonnes at present to 25 million tonnes. volume terms, sales at 2.9 million tonne
For the first nine months (April- during the quarter were 24.5% higher
December) of the financial year 2009-10 than same period of the previous year.
the company’s net profit stood at Rs The lower growth in turnover as com-
4,669.5 crore – almost at par, 0.4% lower pared to volume growth was primarily
“We remained focused than the corresponding period of last due to 12% lower sales realisation during
year. Profit before tax for the period stood the same period of the previous year.
on our fundamentals at Rs 7,065.2 crore, lower by 0.7% than the Apart from lower cost of imported
during the recent corresponding period of last year. In coal and growth in sales, increase in pro-
spite of sales growth by 14% in volume duction of value-added steel by 25%,
downturn and through terms during April-December 2009, net improved techno-economic parameters
relentless pursuit by the turnover at Rs 28,596 crore was lower by and several cost efficiency measures,
about 9% as compared to the same period helped doubling of profits.
SAIL collective, last year, primarily on account of lower Bharat Refractories Limited was
significant successes realisations. merged with SAIL in July 2009 and
SAIL chairman S K Roongta said, renamed as SAIL Refractory Unit (SRU).
came our way.” “We remained focused on our fundamen- Better management of facilities of the
S K ROONGTA tals during the recent downturn and unit led to substantial increase of 21% in
Chairman, SAIL through relentless pursuit by the SAIL production during the quarter.
collective, significant successes came Towards raw material security with
our way SAIL is gearing itself up to face
. respect to iron ore, significant progress
the impending challenges relating to has been made during December 2009
inputs and other cost increases, intensi- quarter. For Rowghat mine at Chhattis-
fying competition and those relating to garh, after the statutory clearances, a
raw material security, while making lease deed agreement was signed on
best efforts to seize the immediate October 21, 2009, an issue which had been
opportunities, with increased demand pending for more than two decades. This
for steel in the country”. will provide iron ore security to Bhilai
For the quarter ended December 2009 Steel Plant for around the next 30 years.
SAIL posted a net profit of Rs 1,675.55 Regarding Chiria/Gua mines, during
crore, an improvement of 99% over the the December 2009 quarter, Jharkhand
corresponding period last year. The com- government recommended the forest
pany also paid an interim dividend at clearance proposal of Budhaburu lease,
16% of its paid-up capital, amounting to which has a reserve of about 810 million
Rs 660 crore as against 13% interim tonne of iron ore.
20 | THE FINANCIAL EXPRESS | FEBRUARY 2010

23. PROFILE
Bharti Airtel Building connections
RANK 6
across the globe
COMPOSITE
NET SALES RANK 12
TELECOMMUNICATIONS- Rishi Raj mobile services operator and sixth
SERVICE PROVIDER RANK 2 largest in-country integrated telecom
B
HARTI AIRTEL is one of Asia’s operator in the world.
leading providers of telecommu- The company is currently engaged in
nication services with presence negotiations for taking over the African
in all the 22 licensed jurisdictions (also operations of Kuwaiti telecom group,
known as telecom circles) in India, Zain Telecom. Should the acquisition
Srilanka, and Bangladesh. The company materialize Bharti combined revenue
served an aggregate of 121,852,576 base would grow to around $12 billion
customers as of December 31, 2009, in with over 165 million subscribers and
India; of whom 118,864,031 subscribe to operations across 20 countries.
GSM mobile services and 2,988,545 use Mittal says, “As a first step towards
telemedia services either for voice pursuing our international aspirations,
and/or broadband access delivered we commenced operations in Sri Lanka.
through DSL. The runaway success of the launch has
Bharti Airtel is the largest wireless justified our conviction that the Airtel
service provider in the country, based business model can be effectively and
on the number of customers as of profitably replicated in other countries.
December 31, 2009. It offers an integrated We are determined to pursue our inter-
suite of telecom solutions to enterprise national strategy going forward.”
customers, in addition to providing long The company is divided into various
distance connectivity both nationally business divisions. Some of the key are:
and internationally It also offers DTH
. Mobile Services: Bharti Airtel has a
and IPTV Services. “The past year was, customer market share of 22.7% of
“Our focus on without doubt, transformational in India’s wireless market, as on December
spreading the benefits many respects. Our focus on spreading 31, 2009. Its wireless network is present in
the benefits of telecommunications in 5,078 census towns and 433,851non-cen-
of telecommunications rural India has yielded particularly grat- sus towns and villages in India, thus cov-
in rural India has ifying results” said Sunil Bharti Mittal, ering approximately 83.6% of the
chairman and managing director, Bharti country’s population. Airtel Sri Lanka
yielded particularly Airtel. is amongst the fastest growing launches
gratifying results.” All these services are rendered in the world with a base of over
under a unified brand “Airtel”. The com- 1 million customers within six months
SUNIL BHARTI MITTAL pany also deploys, owns and manages of launch.
CMD, Bharti Airtel passive infrastructure pertaining to tele- Telemedia Services: The strategy
com operations under its subsidiary of Bharti Airtel’s Telemedia business
Bharti Infratel Ltd. Bharti Infratel is to focus on cities with high revenue
owns 42% of Indus Towers Ltd. Bharti potential. Currently, the company
Infratel and Indus Towers are the two offers services in 95 cities across India.
top providers of passive infrastructure Product offerings in this segment
services in India. For the nine month include installation of fixed-line tele-
ended December 31, 2009 the company’s phones providing local, national and
total revenues stood at Rs 29,559 crore international long distance voice con-
with a net income of Rs 7,048 crore and nectivity and broadband Internet access
and Ebitda margin at 41.3% . through DSL.
Though the most profitable telecom Enterprise Services: Airtel is
company in the country, of late its rate of India’s leading provider of communica-
growth has slowed down due to the ongo- tions services to large Enterprise and
ing tariff wars in the country leading to Carrier customers. It offers long distance
rates as low as half a rupee. wholesale voice and data services to
The company has already crossed the over 400 carrier customers, as well as
100-million subscriber mark, which to the Mobility and Telemedia business
makes it the third largest single country units of Airtel.
22 | THE FINANCIAL EXPRESS | FEBRUARY 2010

24. Strategic intent—fit Tata Steel
RANK 7
for the future
COMPOSITE
NET SALES RANK 16
FE Bureau 71 days at the end of December 2008.The STEEL-LARGE RANK 2
company bettered the specific energy
I
N the steel industry, when the pricing consumption record set last year by
cycle turns, operators have to go in for achieving a new record of 6.594 GCal per
aggressive cost cutting and rationali- tonne of crude steel in 2008-2009. An
sation of processes to overcome the prof- across-the-board cost-cutting initiative
itability issue. Tata Steel, with its strong targeted and achieved 15% reduction in
expertise of over 100 years was able to general administrative expenses.
overcome the strife and come out In the 2008-09, the company commis-
unscathed. sioned the 1.8 million tonnes of crude
The effects of the world economic steel making capacity at Jamshedpur
downturn seriously impacted the com- which will be further augmented by 3 mil-
pany’s global operations in the second lion tonnes through ongoing brownfield
half of the year under review. The expansion by 2011. This will increase the
demand for steel declined by 26% in the Jamshedpur plant’s crude steel making
UK and Europe in the third quarter com- capacity from 6.8 mtpa to 9.7 mtpa, at an
pared to a year earlier and after a further estimated cost of Rs 13,900 crore.
contraction in the fourth quarter, This will also enable Tata Steel to
demand had fallen by 57% in the UK and strengthen its market share in the flat pro-
44% in Europe compared with a year ago. ducts segment and simultaneously re-
Its standalone revenues however grew duce operating costs over a large volume
marginally by 2% in the financial year of production. Raw material self-suffi-
2008-09, over the previous year, to touch Rs ciency for the consolidated entity is at 25%
20,024 crore from Rs 19,480 crore. Its net post the Corus acquisition. The manage-
“Tata Steel has taken
earnings also managed to show a positive ment intends to increase self-sufficiency aggressive steps to
trend of 3.5% year on year growth to touch of raw materials to 50% in the medium to
Rs 7,315.61 crore in 2008-09. However, mar- long term and has been actively looking at
meet the challenges
gins declined from 41.93% to 38.83% in acquiring mines overseas. It has already of these difficult times
2008-09, while the return on equity was at acquired mines in Indonesia.
18.33% as against 20.53% in the previous And, with the revival in the steel cycle
through cost reduction,
year. Things could have been worse but as the global demand uptick, revenues in process improvement
steps to ensure that they were not. the quarter ended December 2009 have
According to Ratan Tata, chairman Tata grown at a rapid clip with steel sales
and production
Steel, “Tata Steel has taken aggressive growing at 48.9%, over the same period rationalisation.”
steps to meet the challenges of these diffi- of the previous year, to touch 1.59 million
cult times through major initiatives in tonnes and net sales grew at 39% to RATAN TATA
cost reduction, process improvement and touch Rs 6,307 crore. Buoyed by the other Chairman, Tata Group
production rationalisation.” income factor net earnings more than
“The highest priority is being given to doubled, and stood at Rs1,742 crore, for
expanding steel producing capacity in the quarter ended December 2009.
Jamshedpur, and ensuring raw material Amongst the new initiatives, the com-
security for the European operations pany would be looking at rationalising
which do not have captive iron-ore and the Corus operations and also creating
coal resources”, he added. Production marketing alliances. The Tata Steel
rationalisation is also being undertaken Board has approved a framework for a
in Europe and the UK to right-size manu- joint venture between the company and
facturing facilities to be in sync with the and Nippon Steel Corporation (NSC) for
lower off-take by the market. The same the production and sales of automotive
approach is also being taken in the com- cold-rolled flat products at Jamshedpur.
pany’s Asian subsidiaries. Clearly, the management seems to be
Inventories were liquidated to release working on getting its near term focus on
cash. Steel stock was brought down to 28 the implementation of the “Fit for
days by the end of March 2009 as against Future” initiative.
FEBRUARY 2010 | THE FINANCIAL EXPRESS | 23

25. PROFILE
BHEL Benefits from power
RANK 8
sector thrust
COMPOSITE
NET SALES RANK 14
ELECTRIC Noor Mohammad Rs 11 per share after its board meeting.
EQUIPMENT RANK 1 The company’s profit before interest
P
UBLIC sector power equipment and tax in the quarter works out to Rs
supplier Bhel continues to domi- 1,713 crore. Of this, Rs 1,308 crore came
nate the Indian market even as it is from the power sector and the rest from
expanding its operations abroad. The the industry Meanwhile, the company’s
.
company is set to augment its manufac- total income increased to Rs 7,422 crore
turing capacity from the existing 10,000 from Rs 6,328 crore in the corresponding
mw level to 15,000 mw by the end of the period of the past year, an increase of
current fiscal. 17%. Of the company’s total income in
The company hopes to benefit from the quarter, Rs 5,708 crore came from
tender issued by NTPC and Damodar the power sector. The rest was from
Valley Corporation (DVC) for bulk pro- the industry The company’s operating
.
curement fo supercritical units for their profit margins rose 319 basis points in the
envisaged Twelfth plan projects. “Bhel third quarter over the same period of the
has a natural advantage over the com- preceding fiscal. Bhel’s earning per
petitors, being in existance for last 40-45 share (EPS) in the latest quarter rose by
years that is one point. The next point is 35.6% to Rs 21.91 from the same period of
that Bhel’s product profile if you look at, the past fiscal.
the entire chain of equipments, our Rao adds, “Bhel has got and estab-
power plants are made in Bhel in various lished over a period, all over the country
units and number of technologies have we can reach any customer within no
been implemented by this company” said time. Recent example is Srisailam
“Bhel has a natural B Prasada Rao, chairman and managing hydropower station which was under
advantage over the director of Bhel. water since October 2. We started attaind-
Meanwhile, the company had booked ing to that unit from 6th of October and all
competitors, being in orders worth Rs 36,000 crore upto the the units have been commissioned in the
existance for last third quarter against its Rs 55,000 crore last 6 weeks. This was a record. So, this is
target for the current financial year. Of a kind of service capability which Bhel
40-45 years.” this, orders worth Rs 16,000 crore came in has established.”
B PRASADA RAO the third quarter. The company’s total The company has seen declining mar-
CMD, BHEL order books stood at Rs 1,34,000 crore at ket share in recent years because of com-
the end of the third quarter. The company petition from cheaper Chinese imports. It
hopes the pace of order inflows to further has been making representation to the
accelerate in the last quarter. government for a level playing against
The company bagged orders for sup- Chinese suppliers. It seems that the gov-
ply of equipment to 12,479 mw capacity ernment has taken seriously the threat to
in the current financial year upto the Bhel from imports.
third quarter from the power sector. To keep the Chinese threat at bay, the
Meanwhile, the company booked orders government has already put up condi-
for equipment supply to captive power tions for having a manufacturing facility
projects worth 1,965 mw. Bhel also in India and participating in bidding for
received orders worth Rs 967 crore for bulk supply of supercritical equipment
export of power equipment. The Union to projects envisaged by NTPC and
power ministry has envisaged 100 gw Damodar Valley Corporation. Bhel hopes
power generation capacity under the to benefit from that.
coming Twelfth plan. Orders for 33,000 Meanwhile, the government also
mw have been placed by developers. 55% plans to bar developers of ultra mega
of the orders have gone to Bhel. power projects from importing equip-
Bhel’s net profit rose 35% to Rs 1,072 ment by putting in conditions of having a
crore in the third quarter from the same manufacturing facility in India. This
period of the previous fiscal. The com- should also help Bhel regain its market
pany announced an interim dividend of share in the medium term.
24 | THE FINANCIAL EXPRESS | FEBRUARY 2010

26. Creating advantages L&T
RANK 9
out of adversity
COMPOSITE
NET SALES RANK 12
FE Bureau pany’s advantage in enabling it to posi- ENGINEERING RANK 1
tion itself as a stable career destination.
W
ITH capacity expansion plans Going ahead, the company would be
on hold and government spend- looking at several initiatives. The man-
ing taking a backseat due to agement sees the hydrocarbon business
election code of conduct, Larsen & as a strong opportunity—both in the
Toubro (L&T) started to feel the heat on upstream oil and gas exploration/ex-
the execution side. traction and in midstream refineries.
However, this can be seen a minor blip Increased capacity in the Middle East is
for the company that actually saw its hig- likely to yield some growth in this sector
hest revenue, operating profits and even in years to come, adds Naik.
net profit being recorded. Net sales for Road projects have started receiving
financial year 2008-09 stood at Rs 33,647 focused government attention and are
crore, on a standalone basis. And operat- likely to witness increased awards on
ing profit at Rs 4425 crore and the net build operate and transfer (BOT) basis.
profit was at Rs 3,482. Key ratios however Naik reckons, “This is an area where we
dipped, with the operating margin dip- can leverage past record, scale, design
ping from 13% level 2007-08 to 12.8% in strength and execution capability as and
2008-09, similarly the return on equity when tenders are floated as a first step
also slipped from 20.58% to 17.55%. towards final award of these projects.”
According to chairman A M Naik, The company would also be looking at
“The company performed well despite leveraging its strong track record in the
the adverse scenario in 2008-09. Order area of evacuation, storage, treatment
inflows grew by 23% over 2007-08, and in and transmission of bulk water to exploit
“The new structure
line with our efforts to diversify the geo- emerging opportunities in states that are opens up opportunities
graphical spread of our businesses, water-deficit. “Our power equipment
international orders constituted 15% of manufacturing venture is an integral
for leadership
the total order inflows. The Middle East part of our efforts to grow this business development, provides
continues to be a focus area for us and we in years to come and we have started
have enhanced our footprint in the GCC receiving large orders in this space,” says
a platform for nurturing
Region. The order book position stood at Naik. He also points out towards nuclear internal resources.”
Rs 70,300 crore at the end of financial power generation, which is slated to grow
year 2008-09, giving us some revenue visi- by an order of magnitude over the next A M NAIK
bility going forward.” decade and more, can spell major growth CMD, Larsen & Toubro
Moreover, this was a year when L&T, a opportunities for L&T in the long term.
professionally managed company, saw an And then there is the Indian Railways
internal reorganisation where comple- and the defense sector, when privatised,
mentary business units have been organ- offers large business potential and this is
ised under vertically integrated busines- an area where L&T is well positioned.
ses termed ‘Operating Companies’ (OCs). In the December 2009 quarter, the com-
These OCs have their own internal boards pany managed to grow its order inflow by
and embedded shared service functions 22%, over the corresponding period of
such as HR, resource support and finance the previous year, gross revenues during
& accounts to enable self-sufficiency.Naik the period dipped to Rs8139 crore lower by
strongly believes, “The new structure 6%. However better execution saw its
opens up opportunities for leadership operating pofit margins grow from 11.2%
development, provides a platform for nur- to 12.5%. And, the company’s order book
turing internal resources and is expected as on 31st December, 2009 has attained a
to provide focus to businesses within each significant size of Rs91104 crore.
OC. The structure aims to enhance share- So as the economic activity picks
holder value creation.” up and execution of projects gets better
Moreover, adverse economic condi- L&T would be in a position to take
tions seem to have worked to the com- maximum advantage.
FEBRUARY 2010 | THE FINANCIAL EXPRESS | 25

27. PROFILE
RCOM Recreating rules of
RANK 10
engagement
COMPOSITE
NET SALES RANK 27
TELECOMMUNICATIONS- FE Bureau other companies, is poised at the cusp of
SERVICE PROVIDER RANK 2 significant opportunities for growth,”
R
ELIANCE Communications In line with the company’s objective of
(RCOM) the flagship company of profitable growth, margins in the wire-
Reliance Anil Dhirubhai Ambani less business remained amongst the
Group, has been at the forefront of the highest in the industry at 37% in finan-
transformation of the Indian telecom cial year 2009. This was despite the sig-
space and continues to do so. nificant capital expenditure committed
And despite the slowdown in the to the business over the last two years.
Indian economy in financial year 2009 “With the unique advantages avail-
where corporate buying remained sub- able to our business, we are now at the
dued, the company managed to grow its forefront of the next wave of growth in
total income by 20.34%, over the previous the Indian infrastructure,” mentions
year taking the amount to Rs 22,948 Ambani.
crore. For the same period, its net earn- The year has marked the launch of its
ings touched Rs 6,045 crore against Rs GSM business and the company deliv-
5,401 crore the previous financial year. ered the highest wireless subscriber
The company has managed to maintain a acquisition in the world at 5 million in the
29% compounded growth rate in its rev- first month of the GSM launch.
enues over the past four financial years Following the launch of the nationwide
and a compounded growth rate of 55% in GSM network, the company captured
its operating profits and a strong 139% in more than 25% share of net additions in a
net earnings. market that already has seven to eight
Anil D Ambani, chairman of RCOM telecom operators on a network that
“With the unique while speaking about the performance in extends seamless coverage to over 1 bil-
advantages available testing time said, “It is therefore com- lion Indians across 24,000 towns and
mendable that the year saw us making 600,000 villages.
to our business, we are important strides forward in our mission And the growth numbers continue as
now at the forefront of to become one of the world’s leading inte- the company acquired nearly 34 million
grated service providers across the subscribers between January and
the next wave of entire value chain of telecom busi- December 2009. That makes RCOM the
growth in the Indian nesses.” And while it has managed to cap- fourth largest, single country wireless
ture almost all elements of the telecom operator globally with nearly 94
infrastructure.” telecommunication sector value chain, million subscribers.
ANIL AMBANI the company would also be restructuring The company has been receiving flak
Chairman, RCOM its businesses. “We are alive to the needs for starting off a tariff war in the telecom
of changing industry trends and eco- sector. And this is not the first occasion
nomic environment,” says Ambani . The where the company was accused of
vertical businesses are being restruc- changing industry dynamics.
tured and realigned to make them meet However, some impact of this was felt
the requirements of enterprise and indi- on the financials in the December 2009
vidual customers. quarter as consolidated revenues were
The demerger of the Optic Fiber down 6.9% to Rs 5,309.8 crore, from Rs
Network to Reliance Infratel, the telecom 5,702.6 crore of the previous quarter of
infrastructure subsidiary of RCOM, will the same year. For the same period, the
enhance the company’s value proposi- operating profit shrunk by 9.3% to touch
tion in the telecom infrastructure seg- Rs 4,476.1 crore. The management how-
ment and, at the same time, create a ever remains confident that the tariff
simple and transparent structure. war in the sector would consolidate in the
Ambani believes, “Each of the busi- days to come.
nesses operated by the Company, either In the current fiscal year, the manage-
by itself or through subsidiaries, affiliate ment expects to invest upto Rs 4,500 crore
companies or strategic investments in towards capital expenditure.
26 | THE FINANCIAL EXPRESS | FEBRUARY 2010

28. Maintaining clients Infosys
RANK 11
and margins
COMPOSITE
NET SALES RANK 21
FE Bureau “If we look at on the drivers for mar- COMPUTER-
gins—onsite-offshore ratio, utilisation, SOFTWARE-MEGA RANK 2
G
IVE me a lever and I can move the the business mix we have, some service
world,” said Archimedes, the lines have a better margin than some
Greek genius. In the context of the other service lines, some geographies,
Indian corporate world Infosys Techno- some customers. So it is a portfolio
logies seems to have several levers that approach and that is why we have been
keep its profitability moving. able to manage this better than anybody
So even when times were tough, espe- else,” said Gopalakrishnan in a call.
cially in financial year 2008-09, the com- Moreover, the company has been
pany managed to move its revenues by experimenting on different pricing mod-
30%, over the previous year to take it to Rs els. As Gopalakrishnan pointed out, “We
21,693 crore. And, during the same are experimenting with ticket-based
period, the net earnings were up by 28.8% pricing in maintenance where we have a
to Rs 5,988 crore. Interestingly operating history from the client, we know the data
profit margins grew to 34% levels from on how many tickers are expected etc. In
the 32% levels recorded in the previous development projects, of course fixed
year, and the return on capital remained price is the way t o go. We are also experi-
strong at 42% levels. menting with outcome-based pricing
“Our goal is to have the best margins which means that the (in consulting we
in the industry and we have demon- are doing this) we will give them a fixed
strated time and again that we have price and an upside, a bonus if the out-
probably the best set of levers or the best come was achieved”
way of controlling our margins,” said A mix of all this and an improvement
“Our goal is to have
S Gopalakrishnan, CEO and MD in an in the business outlook saw the December the best margins in the
analyst call recently In a letter to share-
. 2009 quarter report strong numbers.Total
holders, Gopalakrishnan and SD income at Rs 5,741 crore was 2.8% higher
industry and we have
Shibulal, CFO and director, mention that than the September 2009 quarter. And demonstrated that we
they continued to grow their business operating profit was at Rs 2,038 crore, up
despite lower velocity They attribute to
. 6%, sequentially and for the same period
have probably the best
the growth in business to their model the net profit was at Rs 1,582 crore, up set of levers or the best
which is built on enduring relationships 2.7%. Around 32 clients were added dur-
and this has enabled their clients to ing the December 2009 quarter and there
way of controlling
remain with them despite the upheavals. were 4,429 net additions to the team dur- our margins.”
They have built relationships and are ing the quarter. There are now around
now leveraging them to generate revenue 1,09,582 employees with the company and S GOPALAKRISHNAN
growth. But this too comes through some its plans more additions. CEO and MD, Infosys
innovative thinking and commitment “Global economic recovery seems to
towards clients. be led b the US and the financial ser-
The management has rolled out sev- vices,” said Gopalakrishnan, while an-
eral engagement models that bundle up nouncing the December 2009 results. He
the services and products from their sta- also mentions, “Even though IT budgets
ble to serve clients. The new engagement are expected to be fat in 2010, offshore out-
models offer the client greater pricing sourcing is expected to benefit from this
flexibility and also more operational con- recovery At the moment, with the rupee
.”
trol. And then there is the tested global remaining volatile, Infosys margins
delivery model that has been tested in the could be under pressure. However, it still
market place. This enabled the company has a lever that could support margin
to grow its million dollar clients to 327 in steadiness. The employee utilisation in
2008-09 from 310 in the previous year. And, the December quarter was at 68.8%
after the December 2009 quarter there are (including trainees) and this could easily
now 336 million dollar plus clients. be increased and safeguard the margins,
Moreover, even the manner in which as the management aims.
FEBRUARY 2010 | THE FINANCIAL EXPRESS | 27