It turns 14 this year, yet the BT 500 has only just arrived. The listing, the first of its kind in the country, is many things. It is a measure of performance. It is a point-in-time assessment of a company's past, present and future (the last as measured by the expectations of investors). And it is an indicator of what's in, and what's out, in terms of businesses, even individual companies. The past listings, 13 of them, tried to be all that, but they were constrained by the pace of evolution of India Inc., and that of the country's stock markets. In the first half of the 1990s, the listing was biased heavily in favour of past performance. In the second, and in the first years of the 21st century, it showed itself susceptible to speculative forces (HFCL anyone?). Circa November 2005, the stock market (despite talk of an impending correction) is at a high; even a fall of 10 per cent from its current position will see the Bombay Stock Exchange's Sensex at around 7,500 (a number that everyone, including the bulls, will take happily); and companies are justifying their seemingly-high valuations with revenues and profits of a magnitude they haven't seen before and peg (price-earnings to growth) ratios less than or equal to 1. In an ideal market, the ratio of a company's price-earnings multiple and its earnings growth should be 1.

Any stock with a peg ratio of 1 is fairly valued; those with peg ratios less than 1 are undervalued. Bharti Tele-Ventures' peg ratio, for instance, is just around 0.3. And Glenmark Pharmaceuticals' less than 0.2. While the latest bull run has left even penny stocks looking respectable (even after the recent bloodbath in that category), the fundamental soundness of the valuations of companies in the higher reaches of the BT 500 (as evident in their low peg ratios) is indisputable. That is one reason why the BT 500 has arrived.

The other reason has to do with the listing itself. With the markets beginning to reflect a company's real worth, more and more organisations are beginning to tap it. This year's BT 500 is, thus, a far more accurate reflection of the diversity of India Inc than last year's. And next year's listing could be even more so.

In the top 50, for instance, are companies from sectors as diverse as software, fast moving consumer goods, banks and financial services, automotive (carmakers, two-wheeler manufacturers, even auto component firms), metals (steel as well as non-ferrous), pharmaceuticals, petrochemicals, energy, cement, infrastructure entertainment, even airlines.

The top 100 includes companies from all these sectors and then some. The first companies from a sector that decide to tap the stock markets will start with high valuations, the result of what analysts call 'scarcity premium', but over time, as more companies from the business make initial public offerings (IPOs), these (the valuations) will become realistic. Three years from now, the top 10 of the BT 500 could well have a retail chain, a biotech hotshop, an airline, and a media firm apart from usual suspects from sectors such as software, steel, and energy.

Behind The Numbers

The BT 500 isn't the only corporate listing around; there are several others. One includes information about closely held and unlisted companies, but the data is at least a year, some times two, old, immediately rendering it irrelevant. Others rank companies on sales alone, but this magazine has always believed that only a market capitalisation based listing can look at the future.

Still others opt for hybrid listings, marrying unrelated measures such as sales and assets. For the record, the BT 500 listing also ranks companies on the basis of sales and net profit, and while it does provide information on the total assets of a company, it does not believe in an asset-based ranking (simply because the utilisation of assets is far more important than the assets themselves).

A market value-based listing is prone to stock market aberrations, but these are temporary phenomenon. If averages won't weed out the kinks (the ranking is based on average market capitalisation in the period between April 1, 2005 and September 30, 2005), then a comparison with the previous year's listing will.

That integrity, and its inherent dynamism make the BT 500 a perfect trend-spotter.

It is like the old finance boom, and it isn't. Anil Ambani's Reliance Capital, for instance, has emerged the vehicle for his investments	As this magazine goes to press (November 11), Nandan Nilekani's Infosys has overtaken TCS to emerge #2	Just when everyone was begining to take Videocon for granted, Chairman Venugopal Dhoot struck aggressive deals with Thomson and Electrolux and unveiled a grandiose merger plan

Big Is Beautiful

Nine of the 10 companies that registered the highest increase in market capitalisation (between last year's listing and this year's) figure in the top 10. The only one that doesn't, HDFC Bank, comes in at #12. That shouldn't surprise anyone: these companies have posted revenue and net profit growth rates that are staggering or just short of it; four of these companies are in the top 10 in terms of sales, and the lowest rank (by sales) that any of these companies boasts is 35 (again, HDFC Bank).

At one level, this loops back to reinforce a growing belief, among analysts, fund managers, and just about anyone who has anything to do with the market that Sensex levels of 7,500-plus are reasonable. At another, it proves that there is something called economies of scale.

The three software companies in the listing, for instance, have broken away from the rest of the pack. Not only are they growing revenues and earnings faster than other companies in the business, their size is allowing them the luxury of trying new things.

Wipro, for instance, believes in the acquisition approach. Infosys has invested in a consulting subsidiary. It isn't just software; ICICI Bank and HDFC Bank have used scale to good effect, setting the retail banking industry on fire. As has Bharti Tele-Ventures, which has parlayed an all-India presence and around 15 million subscribers (as on October 31) into real money. And when the buzz on D-street hinted that Reliance would acquire a $15-billion (Rs 67,500-crore) us- firm, not many people were surprised by the magnitude of the amount involved or that RIL was considering something as audacious as this (never mind that the rumour proved baseless).

The New New Thing

A few years ago, this was media and entertainment. Then it was pharmaceuticals. Then retail. The most significant thing about this year's BT 500 is that there is no one new new thing.

On the basis of valuations, it is evident that analysts and investors are betting on several companies in a variety of sectors. They are hoping new banks on the block Kotak Mahindra and Yes will replicate, at least to some extent, the success of those who came before them, ICICI Bank and HDFC Bank.

They are betting that Jet Airways can scale up and become one of the largest airlines in this part of the world (and by virtue of being the only other airline company listed, SpiceJet comes in at #178 in the listing). They have seen Pantaloon's Kishore Biyani deliver, and expect him to deliver some more (Pantaloon enters the top 100 at #69 for the first time). And they are cautiously optimistic about the software company everyone is talking about, Sasken, which debuts in the listing at #172. Heightened investor interest in past new new things (such as software and pharmaceuticals) have boded well for these businesses. There are some 43 software companies in this year's listing and at least a handful of them are there simply because investors believe Indian it firms have what it takes too succeed.

The Ideal Top Ten

What would be an ideal (from the perspective of contributing to a GDP growth of around 8 per cent to 10 per cent a year) top 10, or top 20 in the BT 500? That's fairly straightforward. There would have to be a retail firm (maybe two) because as the US experience shows, retail is the lifeblood of the economy. One carmaker would have to feature in the top 10 (the automotive industry is a mixture of the best and the worst of old-world manufacturing). As would, for obvious reasons, one bank. A couple of energy firms (at the very top of the listing) is a must; there is a direct correlation between energy consumption and economic growth. A few software and pharmaceutical firms wouldn't hurt either. Nor would an infrastructure firm, one into engineering or construction. It would be nice to have a media firm too (then, we could be getting greedy).

Will 2010 see a listing such as this?

Banking: This Boom Won't Crash, Not Yet Retail is it, but banks are betting on SMEs and non-metros for growth.

Retail Ahoy: (Top to bottom) ICICI Bank's Chanda Kochhar, Yes Bank's Rana Kapoor and SBI's A.K. Purwar are all betting on the retail banking boom The retail lending boom shows few signs of letting up, with Indian banks flooding the market with cheap consumer finance. And even as the doomsayers crawl out of the woodwork, questioning the sustainability of the retail surge, bankers are taking various steps to ensure that the boom doesn't turn into a bubble. Some are spreading their risks by moving away from the big cities into smaller towns. Others are aggressively tying up with user companies (auto makers, for instance). At the same time, lending to small and medium enterprises (SMEs) is picking up, which gives banks another growth avenue to train their sights on. "The penetration of banking into rural and semi-rural areas is still very low, which offers plenty of scope for growth," says N. Mohan Raj, Chief Executive Officer, LIC Mutual Fund. Yet, it's clearly the homes, cars, credit cards and holidays you purchase that's keeping the banks' cash registers ringing, be it the oldest state-owned State Bank of India, the market savvy ICICI Bank and HDFC Bank, or the new kids on the block, Kotak Bank and Yes Bank. For instance, ICICI Bank, which is sitting on the largest retail portfolio of all, witnessed a 68 per cent jump in its retail assets to Rs 56,133 crore in March 2005. "The transformation of the erstwhile ICICI Ltd from a financial institution to a retail powerhouse has been phenomenal," says Asit Koticha, Managing Director, ASK Raymond James. Goliath SBI, with a balance sheet size of Rs 4,70,000 crore, has also successfully transformed itself from a typical state-owned bank to a powerhouse of financial services, especially housing, automobile and personal loans. According to SBI, its retail advances in the personal segment have grown by Rs 13,301 crore, with the outstanding retail portfolio being at Rs 46,451 crore. The bank is aggressively scouting for acquisitions both in the domestic as well as overseas market. In fact, SBI has already acquired banks in Indonesia, Mauritius and Kenya. The new entrants, too, are fighting for the retail pie. Leveraging the strengths of the 20-year-old Kotak Group, the two-and-a-half-year-old Kotak Bank's retail assets spurted by over 73 per cent from Rs 1,717 crore to Rs 3,159 crore in March 2005. Yes Bank, more focussed on sectors like food, infrastructure and healthcare, took its first steps into retail when it launched its gold and silver debit cards. Clearly, the Indian consumer can't be ignored. -Anand Adhikari

Retail: Great Expectations The potential for retail may just justify the skyrocketing valuations.

Boom time?: It's here for Pantaloon's Biyani and Shoppers' Stop's B.S. Nagesh It would only to be fair to say that the organised retail sector in India is yet to enter the growth phase. The reason for this is simple-only 3 per cent of the overall retail market comes from the organised segment. With the hope that FDI in the sector will be permitted at some point, the sector is expected to witness some of the highest levels of action. Today, the number of companies in the organised retail segment that are listed at the stock exchanges are also few in number-Pantaloon, Trent and Shoppers' Stop. The trigger for retail, apart from FDI being allowed, is the real emergence of new demographics, rising incomes and the ability and willingness of the average Indian to spend. Investors, for their part, are clearly impressed by the retail story waiting to play out. Pantaloon Retail India's Managing Director, Kishore Biyani agrees that the demographics are looking good. "There is no fear to consume," he states, terming the new phenomenon as the "arrival of the Indian consumer" which he attributes to factors such as more exposure and the greater availability of goods and services. "Modern formats have greatly helped in the fact that more spending is taking place" he adds. The Indian economy is in the midst of an optimistic growth phase and this has resulted in higher levels of consumer spend. If FDI is eventually permitted, one is certain to see some large global retailers making a bid for a share of the consumer wallet here. -Krishna Gopalan

Telecom: Happening! Just ask the foreign telcos waiting to get in.

Bharti's Sunil Mittal: With a market cap of Rs 64,723 crore he can smile As an article elsewhere in this magazine explains (see India, connecting Partners on page 220) a slew of multinational telecommunication majors are waiting to enter the country. It helps that the government has notified that it is raising the ceiling on foreign direct investment (FDI) in telcos operating in the country to 74 per cent. And it helps that India happens to be the second-most happening (if not the most happening) telecom market in the world. Much of the growth has come (and will continue to come) from mobile telephony operators (on either one of two rival platforms GSM or CDMA). Already, mobile tariffs in India are the lowest in the world and both telcos and equipment providers such as Nokia and Ericsson are working on ways to take them lower still. With a teledensity that is already into the double figures (and which is several times PC penetration), it is likely that an entire generation of Indians will first access the net through their mobiles. The financial success of companies such as Bharti Tele-Ventures (as this magazine goes to press, the company has risen to #4 in the market capitalisation rankings, with a market cap of Rs 64,723 crore) has proved that it is possible to be big, offer low rates and still make money, irrespective of what analysts have to say about the low ARPUs (average revenues per user) for most telcos, just around Rs 400, less than $10 a month. With more telcos lined up for listing, next year's top 10 could see at least one more.