THUS GOES THE old saying. The young and the old are often seen as contradictory elements, but when the smartness of youth gels with the wisdom of age, the results can often be sparkling. If you are not convinced, take a look at India Inc in the recent past. Corporate India is a great combination of old and new companies - companies much older than independent India at one end, and the children of the post-liberalisation era at the other.

In this year's ET500, we decided to compare the performance of companies in both these categories to understand how the old and the new have contributed to India's rise as an economic superpower.

There are 87 companies in ET500 which have seen it all - right from the country's struggle for independence, the post-partition woes, the 'license raj' era, to the ultimate opening up of the economy and the dawn of the information era. These are the companies which were incorporated before independence. The oldest on this list are Allahabad Bank (incorporated in 1865) and Punjab National Bank (incorporated in 1895). In 1991, Indian industry ushered in the era of economic liberalisation. During 1991-05, 98 companies were incorporated. This period saw the emergence of new sectors, including IT and mobile telephony. One out of every three companies that was incorporated in the first two years of this period was an IT company. So, how do companies in these two categories fare when it comes to performance? The post-1991 companies enjoy better valuation on the bourses since their collective market capitalisation (m-cap) is higher, but their sales are lower vis-à-vis pre-independence companies. Today, the pre-1948 companies in ET500 claim a combined m-cap of about Rs 7 lakh crore, compared to Rs 9.5 lakh crore for the post-1991 companies. Companies in both these categories together account for a little less than half of the total m-cap of ET500 companies (Rs 39.7 lakh crore).

The pre-independence companies, though fewer in number, earn more revenue collectively. In FY07, they reported Rs 3.7 lakh crore in sales, compared with sales of Rs 2.5 lakh crore recorded by the post-1991 companies. ET500 companies from the pre-independence era include banks, automobile makers, capital goods manufacturers, cement makers, FMCG, pharmaceutical and textile companies.

These companies have seen and weathered the economic transition in the country. It is interesting to compare the performance of these companies with their younger counterparts operating in the same industry.

We discovered that while many of the new-age companies grew at a faster rate, the old-age companies were nimble and agile enough to sustain this competition. Also, the behaviour of companies varied from sector to sector. In the banking sector, as many as 24 banks in ET500 belong to the pre-independence era. But all of them have been outpaced in terms of size and m-cap by ICICI Bank, which was incorporated in 1994.

Within a very short span, ICICI has become the second-biggest bank in the country, second only to State Bank of India (SBI). ICICI reported the fastest growth in topline among these banks in FY07. Clearly, it enjoyed the second mover advantage by adopting state-of-the-art technology to run its business. It used technology efficiently to challenge the old dictum of the banking business - increase the number of branches to grow business. ICICI Bank relied heavily on ATMs to increase its reach.

This strategy worked well as its business volume grew without adding substantially to the cost of running branches. ICICI's older peers, mostly PSU banks, took a while to notice and accept the paradigm shift in growth strategies.

In sectors such as cement, FMCG and capital goods, however, old is still gold. The old-age companies have been able to survive and thrive even in the face of changing times. Despite its 100-year history, Tata Steel is still the largest private sector steel company in the country. L&T is still the largest capital goods company in ET500, while no new-age company in the FMCG sector has yet displaced ITC and Hindustan Unilever from their leadership positions. These companies have shown dynamism in business strategies, which is required to keep growing year after year.

For instance, ITC has shown a strong commitment to transform itself as per the changing scenario. It has gone beyond its yesteryear's identity as the largest cigarette company in the country to expand into paper, hotels and retail segments.

The scenario is, by and large, same for most old-age companies in ET500, barring banks.

The new-age companies in sunrise sectors like IT and telecom have shown robust growth so far. The question is, are these companies agile enough to remain there for decades, like their old-age counterparts? The ability to prioritise challenges, agility to adapt to new paradigms and gusto to march into unknown territories will make all the difference…

TOP