Which businesses will define the current decade?
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This decade—we are three years from its end—will be different from the 1990s and 2000s in India. Both those decades saw the economy expand sharply in the middle years, before slowing towards the end. That mid-decade bump has, unfortunately, been absent in the 2010s. There are good reasons why that did not happen—some have to do with India, some with the rest of the world—but for the purpose of this column it is adequate to just say that it did not happen.
The 2010s have been different in another way as well. Each of the two preceding decades saw an industry, maybe two, perhaps even three, emerge and grow. Many of these were relatively new industries that were around at the beginning of the decade but really came into their own during it.
In the 1990s, it was the turn of IT services and pharmaceuticals. India’s IT services companies, Wipro Ltd, Infosys Ltd and Tata Consultancy Services Ltd, all came into their own in the 1990s. They grew in that decade, and grew faster in the decade that followed, creating shareholder value, wealth, and jobs.
India’s copycat drugs or generics industry, again, took off in the 1990s, although it had been around for some time. Ranbaxy Laboratories Ltd, Dr Reddy’s Laboratories Ltd and Cipla Ltd rode the wave in the 1990s and part of the 2000s.
Interestingly, both businesses are under stress now. Still, they did end the 1990s, even the 2000s on a high.
In the 2000s, it was the turn of telecom and private banking.
India’s telecom firms grew rapidly after the government announced a move to a new revenue-sharing policy, and away from the previous licence fee regime, in 1999. Bharti Airtel Ltd and Vodafone India Ltd (which spent part of the decade in earlier avatar as Hutchison Essar) were the companies at the forefront of the telecom boom. They engendered the mobile boom that, apart from creating wealth and jobs, also spawned allied industries. Today’s fintech biggie, Paytm, was then a so-called Value Added Services provider, offering cricket scores and other content through phone messages on demand.
Private banks had been around for some time, but the 2000s saw them grow rapidly. HDFC Bank Ltd and ICICI Bank Ltd drove this growth.
Both businesses are at the crossroads now. Incumbent telecom firms are under financial pressure after being disrupted by an aggressive and well-funded new entrant which itself will not be making money anytime soon. The banks, similarly, face disruption by fintech firms, some of which have morphed into a new kind of bank (Paytm has now become a payments bank) even as they cope with the larger stress of bad loans that could cripple the Indian banking system.
Still, both businesses, telecom and private banking, did end the 2000s on a high.
A minor digression would be in order here. The 2000s also saw the rise of India’s infrastructure companies, many, coincidentally, based in Hyderabad. Then, it also saw their decline. Thus, entities such as IVRCL Ltd and GVK Industries Ltd that were labelled companies to watch at the beginning of the decade ended the decade with the same label, but for entirely different reasons.
You know where I am going with this, Constant Reader.
Which are the businesses that have defined this decade, and, more importantly, will end it on a high? We are looking for businesses that have grown rapidly through the decade, created lots of jobs, and that will, by the end of the decade, be highly profitable. By then, they should have also created shareholder wealth.
With two-and-half years to go, we have candidates, yes, but no strong ones. By this time in the corresponding decades, it was easy to pick the businesses. In June 1997, eight people out of 10 would have picked IT and pharma. In June 2007, 10 out of 10 would have picked telecom and private banking.
E-commerce is the only obvious candidate, but is still unprofitable, and given the economics of the business, unlikely to turn profitable anytime soon.
We are still looking—and that is just another problem with the 2010s.