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The Family Jewels

ETIG brings to you an exclusive list of India's 100 biggest and brightest Business Groups, and also tells you what keeps their adrenalin levels high

OLD may be gold, but new shines brighter. Nothing illustrates this better than the list of India's most valuable business houses. Though the contenders for the top two slots are obviously Mukesh Ambani and Tata, the old guard is now rapidly giving way to young turks. Bharti Airtel, India's largest mobile operator, is now the country's third most valuable business house, ahead of old bulls such as the Aditya Birla Group or Mahindra & Mahindra. Suzlon and Unitech are now more valuable than the house of Bajaj, Munjals or the TVS Group.

The composite ranking of various groups throws up a similar picture. To arrive at composite rankings, we assigned a 60% weightage to a group's market capitalisation rank and assigned a 40% weight to its net sales rank.

However, in terms of net sales, many old business houses such as the OP Jindal Group, Bajaj Auto, Aditya Group, Ruchi Group and Videocon Group are far higher than their rank in market capitalisation or composite ranks.

The message is clear. The stock market and investors now favour groups with new and emerging businesses. And what's more, the definition of new and emerging businesses is expanding with the growth in the Indian economy, technological shifts and changes in lifestyle. Till a few years ago, new economy meant information technology, now it encompasses telecom, real estate, retail and wind energy.

This also reflects in the portfolio of established business houses, which have been able to maintain their presence in the Top 10 business houses by market capitalisation. For example, take the Tata Group. More than half of the group's market capitalisation is accounted for by companies in new and emerging businesses such as TCS, VSNL, Tata Elxsi and Trent among others.

It's the same in the case of the Aditya Birla Group. Its telecom venture Idea Cellular is now the group's most valuable company with a market capitalisation of over Rs 30,000 crore or about a third of the group's total market cap. However, the company accounts for only about 8% of the group's turnover and 5% of its net profit in FY07.

The Mahindra & Mahindra group has also been successful in maintaining its status as one of the country's top business houses, thanks to its timely entry into the IT and real estate businesses. Its two new economy businesses --Tech Mahindra and Mahindra Gesco -- account for 49% of the group's market capitalisation. Old company businesses such as farm equipments, automotive and auto ancillaries continue to be its bread and butter, accounting for over 80% of the group's net sales and profits during FY07.

However, this doesn't imply that Old Economy no longer matters to the fortunes of businesses. Far from it, Old Economy continues to be the bread and butter for most business houses, accounting for an overwhelming majority of a group's turnover and profits. Companies such as Tata Steel, Tata Motors, Tata Chemicals and Tata Power accounted for three-fourth of Tata Group's turnover and more than a two-third of its net profit after tax during FY07.

What New Economy brings to the table is the money-raising capability due to its high market capitalisation and an equally high promoter stake. This enables promoters to fund the ambitions of their Old Economy companies by diluting a small stake in their fast-growing New Economy companies without risking any loss of control. This is an important source of strength during the capex boom.

However, not all toppers have taken the help of New Economy to reach the top. If managed well and scaled up to global standards, even old economy businesses can propel a group to the top, as demonstrated by RIL's Mukesh Ambani and Sterlite's Anil Agarwal.

Click here to view ETIG Top 100 Business Houses