The Indian economy liberalised in 1991. This piece in the Mint uses comparative data on corporate assets and revenues to assess which business groups have risen in India over the last 30 years and which ones have faded away.
The biggest winner is – you guessed it – Reliance which accounts for 9.6% of India’s private corporates assets and 6.3% of overall private corporate sector revenues as per the CMIE ProwessIQ database. (Note: this dataset excludes government owned companies.)
The Tata’s have held their own over these 30 years. Tata Group companies account for 6% of corporate India’s assets and 5.2% of revenues.
Those who were active in India’s stockmarket ecosystem in the 1990s, won’t find it hard to recognise the most of top 5 business groups (in terms of assets) in 2023: Reliance, Tata, Aditya Birla, Adani and L&T. Adani is the only name in that list that old timers would be unfamiliar with.
In fact, if corporate power is measured by the % of the nation’s corporate assets that the top 10 groups control, then corporate power has clearly become more concentrated in 2023 compared to 1995 – the top 10 groups account for 31% of India’s private corporate assets in 2023 vs 22% in 1995.
At one level this is not surprising. Other Asian economies – Japan, Korea, Thailand – are utterly dominated by sprawling conglomerates. And in China, the Communist Party is basically the conglomerate that dominates everything. Even in the United States, at a corresponding stage of its development a century ago, dominated by large conglomerates created by legendary capitalists like JP Morgan and Andew Carnegie.
So, what is it about the early stages of economic development that favours conglomerates so much? The article in the Mint gives three reasons.
Firstly, success for conglomerates in the pre-1990s License Raj era obviously hinged on getting their political setting right in New Delhi and in the state capitals. By 1991, the big conglomerates had become experts at rent-seeking. Post-1991, they simply continued managing the ecosystem better than anybody else could.
Secondly, in a country like India where capital and talent are both scarce, the large conglomerates were able to procure both cheaper than their competitors. Banks were more willing to finance these conglomerates than their smaller competitors. And risk averse Indian graduates were more willing to work for well established corporate houses than for smaller, lesser know firms. [Note: a corollary to this is that as access to capital and talent becomes more democraticised, smaller companies will find it easier to grow. Indeed that’s exactly what has happened – see the final chapter of our new book “Behold the Leviathan: The Unusual Rise of Modern India”.)
Thirdly, the top 5 conglomerates from 2023 were those who were farsighted enough 30 years ago to set up new businesses in what were then fledgling industries eg. IT for TCS and L&T, telecom for Aditya Birla. Without these investments in sunrise industries, these conglomerates might have faded into obscurity as happened to many of the big conglomerates from the 1980s eg. the Lalbhais, the Mafatlals, the Dhoots.
A few companies under the Tata Group form a part of Marcellus’ portfolios and we as Marcellus, our immediate relatives and our clients may have interest and stakes in the mentioned stock. The stocks mentioned are for educational purposes only and not recommendatory.
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