Of India Inc's top 20 firms, in 2019 seven were state-owned, down from 13 in 2004
can fund itself more cheaply than India’s government. So is their level of debt—a blessing given that India Inc pays average interest of 9.25% on credit, three times as much as a typical American firm.Companies in the second group are unusually lucrative for less deserving reasons. They include state-controlled remnants of Nehruvian socialism. They can count on cheap loans from state-owned banks and, often, cosy monopolies .
The last bucket blends the other two. These are huge private companies with mediocre returns but a knack for navigating both India’s labyrinthine bureaucracy and its corridors of power. They operate in heavily regulated industries: Larsen & Toubro, an engineering group, builds roads; Hindustan Zinc, a subsidiary of London-listed Vedanta Resources, is a big miner.
The canonical example is Reliance Industries. Its net income last year of $5.2bn made it India’s most profitable firm—and accounted for 13% of the country’s corporate profits. Its businesses range from a core refining operation to the disruptive Jio mobile network. Despite negative cashflow and a meagre 7% return on capital, investors cannot seem to get enough of it.
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