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Business News/ Companies / News/  From Tata to Ambani, investments by Indian conglomerates are on the wane
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From Tata to Ambani, investments by Indian conglomerates are on the wane

The top 20 business conglomerates in India contributed less than one-third to overall private sector investments in the three years from 2015-16 to 2017-18, data shows


Mumbai: India’s largest conglomerates are investing far less in the country than they used to. The top 20 conglomerates, based on aggregate turnover, contributed less than a third to overall private sector investments in the three years from fiscal years 2015-16 to 2017-18.

These companies accounted for more than half of all new project announcements at the turn of the century, a Mint analysis of capital expenditure (capex) data shows.

The data for the analysis is based on figures for new project announcements from the capex-tracking database of the Centre for Monitoring Indian Economy (CMIE). The categorization of business groups by CMIE is largely based on the 1966 R.K. Hazari Committee report.

The analysis is based on data from FY98 till FY18 and—given the lumpy nature of capex spending—considers investments in each three-year period. Data for business houses that have split in the period under consideration (including the Ambanis, the Jindals, and the Bajajs) have been merged to ensure comparability across the time period.

The data pertains only to domestic investments and does not take into account outward foreign investments by these groups. Although growth in fresh investments recovered in the last three years after hitting a record low in 2013-15, the improvement is largely due to the low base and the growth rate is still much lower than what it was in the early 2000s.

The 2012-15 period actually saw negative growth for this set of conglomerates, primarily because several of the large conglomerates were deep in debt during that period.

According to a 2015 report by Credit Suisse titled Still in the Woods, total debt at 10 of the biggest business groups climbed seven times in the eight years leading up to that year, adding up to 12% of the loans in the banking system and 27% of corporate loans. The Essar Group, Larsen and Toubro (L&T) and Godrej saw the sharpest declines in new investments during this period. L&T also witnessed the sharpest improvement in the subsequent three years, from FY2016-2018.

Other groups that led investment recovery in this period were companies under the former KK Birla Group, TVS and the Rajan Raheja group. The Ambanis (aggregate of firms owned by Mukesh and Anil Ambani), Bharti Telecom, and the Tatas witnessed the most sluggish investment activity in the same period.

Interestingly, over the last two decades, the three biggest business groups—Ambanis, Tatas and Jindals—have lost significant share in terms of their contribution to new investment projects.

In the financial years 1997-2000, the combined share of these three groups in new private sector investments was 33%. This has fallen to about 10% in recent years.

Even so, among the top 20, Jindals and Ambanis remained the biggest contributors to fresh investments in India. In fact, a comparison of the performance of new conglomerates (founded after 1970), such as Vedanta, Adani and the Ambani group, with older conglomerates (those founded before 1970), including the Tatas, Jindals and Godrej, shows that the contribution of the older conglomerates has fallen more in recent years.

The analysis also shows that manufacturing investments by the top conglomerates have been far more volatile than investments in services, which have been led by groups such as Larsen and Toubro, the Jindals, and the Ambanis (See chart 4).

An earlier Plain Facts column had highlighted how investments are now spread more equally among states. This analysis suggests that investments among firms are a bit more equal than they used to be.

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Updated: 12 Mar 2019, 08:16 AM IST
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