MNC 500: Why India is a growth paradox for multinationals

IN JANUARY 2022, over an earnings call, Netflix co-founder Reed Hastings commented: “The great news is in every single major market, we’ve got the flywheel spinning. The thing that frustrates us is why we haven’t been as successful in India. But we’re definitely leaning in there.” “Frustrating” and “leaning in there” in some sense are symptomatic of how, despite being the fourth-largest economy with over 1.4 billion people, India has proved to be a tough hunting ground for multinationals. Cut to 2026, the California-based streaming major is raising a toast on completing a decade in a market that it entered in 2016, ending FY25 with ₹3,842 crore ($418 million) in revenue and ₹85 crore ($9.2 million) in profits, finally cracking the code of finding the right balance between high-class premium content and a pricing tier that caters to a wide swathe of audience. While India is still a fraction of the streaming giant’s $45 billion global revenue, it is digging deep to play for the long haul. Bela Bajaria, chief content officer, Netflix, tells Fortune India, “You definitely cannot entertain the world without having incredible local stories from India and in multiple Indian languages.” Vocal-for-local is not just a clarion call for Netflix but for multinationals in general. India is increasingly becoming a market that MNCs can’t do without, especially with the U.S. Trump-eting its way to a new world order where tariffs are not just altering political equations, but also realigning capital allocations and growth priorities for companies that thrived in a free-trade global order. The signing of the EU-India free trade agreement (FTA), post the 15-50% tariffs slapped by the U.S. on EU imports, just goes on to underscore that companies from Europe now want a meaningful access to a market with a per capita income of $2,700. Against such a backdrop, this year’s listing — the second year running — of the 500 biggest MNCs operating in India, reveals that the universe collectively clocks business worth ₹40 lakh crore ($435 billion), generating a cumulative profit pool of ₹2.48 lakh crore ($27 billion). No surprises that Suzuki Motor Corporation continues to be the leading multinational in the country, thanks to its continued dominance in the passenger vehicle segment with 40% market share, followed by Hyundai Motor Corporation, Walmart, Nayara, Samsung Group, BBK Electronics, Hon Hai Technology Group, Toyota Motor Co Group, Apple India and Wilmar International making up the top 10. They account for 29% (₹11.65 lakh crore) of the total revenue, and 34% (₹84,994 crore) of the total profit pool. Interestingly, when we look at the cohort of 102 listed MNCs, the picture is one of extreme concentration. Maruti Suzuki India, Hyundai Motor India, Hindustan Unilever, AWL Agri Business and LG Electronics India are the Top 5 companies in the list. Of the listed MNCs’ total revenue pool of ₹7.57 lakh crore and ₹77,456 crore of cumulative profits, the Top 5 account for 50.74%/₹3.8 lakh crore of revenue and 47%/₹36,377 crore of net profit; the Top 10 corner 62.29%/₹4.72 lakh crore, and 60.13%/₹46,571 crore, respectively. Big — small, smaller, smallest Interestingly, within the listed MNC space, the revenue distribution tells a stark story. At the top sits Maruti Suzuki with ₹1.5 lakh crore in turnover, followed by Hyundai Motor at ₹69,193 crore. Then comes a precipitous drop: Hindustan Unilever (HUL) at ₹63,121 crore, followed by companies clustered in the ₹10,000–25,000 crore range, before the long tail begins its descent through ₹9,000 crore, ₹2,000 crore, and down to companies barely clocking ₹50-100 crore. This concentration is overwhelming in consumption-driven sectors: automobiles and FMCG dominate the landscape, with capital goods players such as Siemens and Bosch forming the secondary tier. But what’s conspicuously missing is the middle — the fast-growing companies between ₹5,000 crore and ₹50,000 crore — which signals a healthy, dynamic ecosystem. Karthikraj Lakshmanan, senior vice president and fund manager, equity at UTI AMC, offers a compelling explanation: “Most of these are listed for a large number of years. So, either they are winners and are at the top, or they have kind of lost focus and are at the bottom. That’s where the middle [poses] a kind of a gap.” The absence isn’t about India’s growth story being broken, he emphasises, but because of their own lack of focus, or because, in some sectors, these MNCs have not been able to make inroads as much as a domestic company would have made. Why India is a tough territory The path to scaling in India presents unique challenges that even global giants struggle to navigate. Harsha Upadhyaya, chief investment officer, equity and president, Kotak Mahindra Asset Management Co Ltd, points to the country’s fundamental complexity: “Geographically we are large. In terms of tastes and preferences, it is diverse. So, to that extent for any company which comes into India for the first time, for them to understand consumer preferences, have the distribution network capable of catering to the entire pan-India market, takes time.” The vintage factor matters enormously. Companies that entered in the 1990s or earlier had the advantage of building distribution networks before competition intensified. Those that came later faced not just the challenge of pan-India distribution, but also increasingly sophisticated domestic competitors who understand local nuances better and move faster. Industry selection compounds these challenges. While Coca-Cola and PepsiCo have operated in India for decades, hitting even a billion dollars in revenue (excluding bottling operations) remains elusive. The rupee’s depreciation adds another layer of complexity. As Upadhyaya notes, “Looking at it purely from the currency [standpoint], it takes out probably 3-4% CAGR every year. But if you look at it in rupee terms, they would’ve grown.” The fund manager’s dilemma For fund managers running MNC-themed portfolios, the universe is far more constrained than it appears. Lakshmanan reveals the practical reality: “Free float and the daily traded volumes are low in many of these companies. The top few companies would account for probably 70-80% of all the listed market cap of pure-playMNCs.” The math is brutal. With most MNC parents holding 75% stakes, only 25% floats remain for trading. And within that float, institutional investors often hold large blocks for years, leaving minimal daily liquidity. This explains why a handful of MNC funds, despite the market cap of the total listed universe exceeding ₹40 lakh crore, manage only about ₹10,000 crore in assets. The investible universe, when filtered through liquidity lenses, shrinks dramatically to perhaps 30-40 names that fund managers can meaningfully deploy capital into. Also, recent regulatory changes by the Securities and Exchange Board of India (Sebi) have broadened the definition of MNCs beyond the simple 51% foreign promoter holding rule. The new framework includes exporters, companies with international operations, and companies listed abroad. This expansion dramatically increases the investible universe for MNC funds. The valuation question India’s premium valuations have become a double-edged sword. The listed MNC universe trades at an average trailing P/E of around 47 times, expensive by any measure, but reflective of growth expectations and the quality premium investors assign to MNC parentage. Lakshmanan provides context: “The discovery of MNC companies, which was not there probably even 10, 15 years back, has happened leading to PE rerating. So that also contributed to MNC index returns.” The re-rating has been spectacular. Once-ignored MNCs have become institutional darlings, driving returns that mix business growth with multiple expansions. But this creates vulnerability. As Lakshmanan observes, “Are valuations in India slightly expensive compared to our own average or compared to many of the other emerging markets or even developed markets? The answer is yes.” This premium has created a temptation for parent companies. Recent listings — Hyundai, LG Electronics, and others — suggest MNC parents are capitalising on India’s valuation arbitrage. When Whirlpool’s parent sold a significant stake, they explicitly cited India’s “rich valuation” as a key trigger. The consumption conundrum The flag bearers of India’s MNC story: Hindustan Unilever, Nestlé, Maruti Suzuki and the like —face an uncomfortable reality: their growth trajectories are flattening when their valuations remain elevated. Upadhyaya’s analysis cuts to the heart of the issue: “Whenever per capita income grows from $1,000 to $2,000, that is when you see consumption of basic necessities really taking off. We have already witnessed that growth, maybe for the last 10, 15 years. Now, we have moved past that per capita income threshold.” As India moves towards $3,000 per capita income, consumption patterns shift. “We are not going to brush four times a day. We are not going to drink more Coke,” Upadhyaya notes. “We may buy premium products within that FMCG basket. But by and large, mass market consumption products have reached certain penetration levels,” he adds. The implications are stark. Upadhyaya’s outlook for FY26 and FY27 is sobering: “The pressure that we have witnessed for the last couple of years will continue on some of these businesses... This [FMCG] basket is unlikely to provide anything better than the market’s expected 15% earnings growth.” His fund has been underweight on FMCG for years, a positioning that has paid off as these stocks have delivered anaemic 1-2% CAGRs despite maintaining their premium valuations. The rise of home-grown D2C brands further pressures traditional FMCG MNCs. The unorganised sector that was once a threat in high inflation periods has been replaced by nimble, digitally native Indian brands that understand local tastes and move faster. Where the real opportunities lie Both fund managers see the future tilting towards manufacturing and industrial plays. Upadhyaya is direct: “Manufacturing and digital businesses will be the ones where you’ll have more opportunities.” The rationale ties to India’s economic evolution. “With higher income growth, you will see certain other categories probably seeing a higher growth compared to FMCG... electronics, manufacturing and engineering will be in play.” The geopolitical backdrop reinforces this shift. Upadhyaya explains how the reversal of globalisation changes the calculus: “Earlier, probably, you could have set up a factory or a plant in some region or country, or may be in your home country, and you could still look at catering to multiple geographies through exports. Now, we don’t know. Maybe many of the MNCs will also look to set up establishments in countries they want to operate in, since that reduces the kind of friction that you see because of changing trade rules.” Lakshmanan frames the manufacturing opportunity within India’s demographic imperative: “Around 5-10 million people are getting added to the job market every year. While services can contribute a lot to exports, but for a large mass of the population to be incrementally employed, you need to have manufacturing and infrastructure, which could create a lot of jobs.” The government’s production-linked incentive scheme, tax incentives and infrastructure push are providing tailwinds, but Lakshmanan cautions about the scale of competition: “Countries such as China have verylarge-scale and established manufacturing setup where there is scale benefits and the cost of capital is far lower as well.” Against such a backdrop, the PLI incentive should help. The weakness of the rupee will also turn into an advantage. For companies exploring options of investing in India, currency depreciation will be positive as capital costs for setting up manufacturing operations drop in dollar terms, making India more attractive for FDI. “As a corollary, if there are enough jobs created because of manufacturing, consumption will get a boost,” says Lakshmanan. The structural reality The MNC landscape in India reflects both opportunity and constraint. The opportunity is huge: India’s $4.1 trillion economy is growing at 6-7% annually, a scale that few markets can match. The constraint comes with execution complexity, competitive intensity and the reality that India rewards those who understand it is a tiered market with pricing sensitivities and cultural nuances. For consumption giants that built India’s MNC story, the future does look challenging: even the leader of the MNC 500 pack, Maruti, has seen its market share erode from a peak of 58% in 2020. Market maturity, rising domestic consumption and premium valuations are creating a hostile mix. Though Lakshmanan’s assessment is measured: “Has consumption peaked out? It doesn’t seem to be the case. We still have 60% as private consumption in our GDP, but the composition within the consumption basket could change.” For manufacturing and industrial MNCs, the moment appears more favourable. Government policy, current dynamics and geopolitical trends align. But success isn’t guaranteed. As both managers emphasise, individual company strategies and execution matter more than broad sector positioning. Those in the long tail face a different challenge. Many operate in B2B niches where scale has limits. Others arrived too late or committed insufficient resources to compete with domestic players who understand India better. For some, India remains a small, low-priority market in the global portfolio. The extreme concentration of revenues isn’t just about market size or which companies “got it right”; it’s about which companies continue to align with India’s economic transformation and consumption patterns. That’s the challenge and the opportunity for MNCs seeking to make it big in India — finding the balance between “frustration” and “leaning in”.

MNC 500: Why India is a growth paradox for multinationals

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