THE SECOND EDITION OF THE FORTUNE INDIA THE NEXT 500 shows a major churn from last year’s list. While 50 companies from last year have moved up to the revenue bracket that qualifies them for a place in the Fortune India 500, 131 companies have disappeared from the list, mostly because they were unlisted and data related to their financial performance wasn’t available within the deadline for our exercise. While this opened up the list to a large number of newcomers, the data-dark nature of India Inc.’s midsize segment remains as real as ever. A regular, comprehensive survey of the health of these companies—the aim with which we started the Next 500—is crucial to change this. We hope year on year, the exercise will help build a culture of transparency in this section of businesses universally regarded as the real moving force of the economy.

This year, aircraft component manufacturer Dynamatic Technologies tops the list with a revenue of Rs 1693.6 crore (last year’s topper Redington India is now part of the Fortune India 500), while basic materials company Camlin Fine Sciences brings up the rear, with Rs 558.8 crore. A familiar lament among the Next 500 is that their small purses hamstring them from making big bets. But winners find their own way. Praj Industries (which has moved up to 234 on the list this year from 300 last year; see story on page 82) and Tata Elxsi (321 from 442; page 90) are classic examples of how size is irrelevant if you can spot the right opportunities and persevere. Praj is leading India’s clean-fuel push with a new technology to produce ethanol from agri-waste, while Elxsi has overcome a tumultous history to become one of the street’s most astonishing outperformers. They are great role models for the rest of the list.

And role models are in demand. Across sectors, highly leveraged balance sheets remain a drag on performance. Among the 438 privately held companies on the list, revenues increased by a paltry 5% over last year, while profits fell by more than 48%. While 338 of them made a combined profit of over Rs 22,000 crore, the other 100 companies’ losses wiped off close to 80% of that. The 27 government-owned companies on the list also lost 3% of their revenues while growing profit by less than 2%. Foreign-owned companies (35 in all) put up a much better show: Revenues rose 14.07%, while profits jumped 31.3%.

Predictably, the manufacturing sector dominates the list, with 413 companies accounting for over 83% of the total revenues. But the year-on-year increase in their revenues was a meagre 3.6%. Meanwhile, services companies, with 16.5% share of the Next 500 revenue, saw their top line grow 15.72%.

In terms of revenue clusters, 55 companies with revenues exceeding Rs 1,501 crore registered a 17.05% annual growth, compared to 65 companies recording 19% growth last year. The Rs 1,001 crore-Rs 1,250 crore cluster with 104 companies saw revenue growth of 22.73% this year. Last year, 142 companies in the same cluster witnessed a 29% revenue growth.

Shareholders of the Next 500 companies had some reason to cheer, as average dividend increased by over 27%. But a closer look reveals a different picture. Private companies, with a 79% share of the total dividend, saw a decline of 24.6% compared to last year. Foreign companies also paid out 20% less dividend, while government-owned companies remained stable with a marginal, 0.62% decline. Beyond the top wealth creators over three years and five years, this year we have separately listed the 50 companies among the Next 500 that registered maximum increase in revenue, operating profit, net profit, and dividend—all over a five-year horizon. If you are an investor, keeping these outliers in your portfolio can help you earn multi-bagger returns in the coming years.