MUMBAI -- In April, Indian Prime Minister Narendra Modi visited France, Germany and Canada together with around 800 business leaders and held meetings with CEOs in each country to promote his "Make in India" campaign. The government has pledged to support its businesses and carry out sweeping economic reforms and has fueled expectations for the growth of Indian companies. As a result, the country's benchmark Sensex stock index has surged close to 30% over the past year and at one point in March crossed the 30,000 mark for the first time.
"The stock market will be in a good time for the next 10 to 20 years," said Ashishkumar Chauhan, CEO of the Bombay Stock Exchange. In February, market capitalization of BSE-listed companies reached $1.69 trillion, rising to fifth largest in the Asia-Pacific region, now surpassing Seoul and Sydney.
In April, global rating agency Moody's Investors Service raised India's rating outlook to "positive" from "stable." Hopes for businesses in India are suddenly ascendant. The number of companies with market capitalization of more than $10 billion has risen from 25 a year ago to 34 now.
A look at the companies in the India 40 shows that many of them are large conglomerates with long histories. The Indian government until 1991 exercised considerable control over the private sector as it pursued a socialist economic policy. Because of this, many companies in the energy sector are state-owned.
A new breed of high-tech and pharmaceutical companies began expanding rapidly starting in the second half of the 1990s, helping to drive the country's growth. Drug and information technology businesses, being multinational corporations, generate much of their sales abroad.
Indian industry can be broadly divided into three categories -- conglomerates, state-run enterprises, and drug and IT services companies. India's three major conglomerates are Tata, Reliance and Birla. Many of their group companies rank among those with top market capitalizations. Although conglomerates from time to time are critically viewed as a stumbling block to new entries due to its sheer size, they have been acting as the main engine of growth making use of its deep pockets and leadership capabilities.
Tata Group, founded in 1868, boasts consolidated sales of more than $100 billion, accounting for more than 5% of India's gross domestic product. Group Chairman Cyrus Mistry, who assumed the office in 2012, laid out the company roadmap in "Vision 2025." It predicts that Tata will be among the 25 most admired brands globally.
IT industry leader Tata Consultancy Services has an $80 billion market capitalization, the biggest in India. The company has a workforce of over 300,000 in more than 40 countries.
TCS, which has grown by developing software for U.S. and European companies and undertaking other tech operations, is further upgrading its services. It is now building its presence in areas such as social media, cloud services and "big data" analytics. "We will boost the turnover of these new businesses to several billion dollars in three to five years," said CEO Natarajan Chandrasekaran. Besides TCS, Tata group companies such as Tata Motors and Tata Steelalso rank among companies with top market shares.
Reliance Industries is a core unit of the Reliance conglomerate. The company is led by Mukesh Ambani, the eldest son of its founder, Dhirubhai Ambani, and ranks second in terms of market capitalization. Its consolidated sales are the highest among private-sector companies.
Reliance Industries engages in a wide array of businesses including oil refining, petrochemicals, gas, apparel, supermarkets and other retail outlets. It has an extensive customer base of middle-class Indians.
After the Modi government took powers, Reliance Industries immediately announced a plan to invest $30 billion in businesses over the next three years and is devoting resources to the fourth-generation mobile telephone service and online retail businesses. Reliance, founded after World War II, is a relatively young entity compared with other venerable conglomerates, but has grown rapidly and is now a strong rival of Tata.
Aditya Birla Group, the biggest branch of the Birla family conglomerate that has a long history dating from the British colonial era, is strong in textile, nonferrous metals and telecommunications businesses. Group flagship Grasim Industries is the world's top producer of viscose staple fiber, a material for clothing, and presides over UltraTech Cement, which boasts a sizable market capitalization.
India's No. 3 mobile phone carrier, Idea Cellular, which is signing up new subscribers at the fastest pace in the country, is also a member company of Aditya Birla Group.
Besides the three giants -- Tata, Reliance and Birla -- India has numerous other notable conglomerates, including Mahindra, Godrej, Adani and Bajaj. Of the 44 companies in the India 40, 30% are group companies of family owned business.
There are many state-run entities in the energy sector. Indian Oil Corp., which boasts the highest consolidated sales among Indian corporations, controls a majority share of the country's oil product market. Oil and Natural Gas Corp. ranks third in terms of market capitalization, and Coal India is another state-run company, which controls over 70% of India's coal production.
Conglomerates and state-run companies have been dominant on India's industrial scene since the country's independence in 1947, and IT and pharmaceutical companies came onto the scene much later.
TCS, Infosys, Wipro and HCLTechnologies are India's major IT services companies. India's Big Four in generic drugs include Sun Pharmaceutical Industries, Lupin, Cipla and Dr. Reddy's Laboratories. Indian IT and pharmaceutical companies have turned into global entities as they take advantage of the low-cost business climate in India. They are characterized by high levels of overseas sales and wide profit margins. The overseas sales of the seven companies, excluding Cipla, make up more than 70% of the total. They are also competitive in the North American market.
The so-called smokestack industries include few leading companies, as manufacturers account for a paltry 15% of the nation's GDP.
Of the 40 companies with the highest market capitalizations, manufacturers, excluding drugmakers, account for around 20%. If you set aside Hindustan Unilever, Bosch and Nestle India, all group companies of the European giants, and Asian Paints, India's largest paint producer, the rest are mostly automotive companies.
Aside from automotive businesses, there are few manufacturers of, for example, machinery, home electronics and parts. Companies in such sectors are lagging behind IT services and drug companies in entering overseas markets, pointing to weaknesses in India's export industry. This is precisely why the Modi government is prioritizing the development of manufacturing.
Major retailers and civil aviation businesses do not top the list of market capitalization because the leading companies are not public. Restrictions on entry by foreign companies into these sectors were relaxed in 2012. Still, both domestic and foreign companies continue to face a host of regulations.