Midsize muscle     

Discussions on the economy in corporate circles these days invariably revolve around whether and how the growth momentum can be sustained, the problems of employment generation, the health of banks, and how, despite the government’s initiatives to make the business environment easier, several challenges still remain. Many of these issues are particularly true and relevant for midsize and smaller companies, which continue to battle on and seek growth opportunities, despite the roadblocks.

In this context, the Fortune India Next 500, the definitive ranking of the country’s largest midsize companies, assumes special significance. Now in its fourth year, the Next 500 is our annual deep dive into all aspects of midsize firms as we slice and dice their revenue and profit figures, look at how the markets value them (if they are listed), and which among these companies have successfully created value over a period of time. The issue you hold is the result of months of painstaking number-crunching by associate editor and editor (lists) Rajiv Bhuva, who leaves no stone unturned to ensure we get you every dimension of the data at our disposal.

In the process, several trends emerge, which are significant pointers to not just the health of the companies but also the state of the economy. After all, it is the midsize companies that are known as major job creators and add significant heft to the country’s GDP. Their health status, therefore, is like taking a peek into the blood report of the economy.

Consider some key takeaways from this year’s Next 500, based on FY17 numbers, which follows our annual listing of the Fortune India 500 companies published in December last year. While the 500 and the Next 500 are connected, there are, however, wide variations between the two. The total revenue of the Next 500, at Rs 5,64,242 crore, is just 7.5% of the total revenue of the 500, whose FY17 total revenue stood at a hefty Rs 75,02,274 crore. The profits side presents an equally contrasting picture: The total profits of the Next 500, at Rs 16,127 crore, are only 3.6% of the total profits figure of Rs 4,53,218 crore of the country’s 500 largest companies. As Bhuva explains: “Midsize companies lack the economies, and the advantages, of scale which the larger companies enjoy.”

While the oil and gas behemoths command a major share of the revenue and profits of the 500 (19.7% and 21.9%, respectively), the Next 500 list is dominated by capital goods players; the 47 companies in this space contribute 9% of total revenue and 9.2% of profits. The auto ancillaries sector, with 42 companies, contributes 8.8% of total revenue, but has a higher profit share of 13.4%.

Life is not easy if you’re a midsize company in India. It’s a challenge to access funds, markets, and technology, and companies constantly try to overcome this. We hope that as the government continues its attempts to clear the roadblocks, the picture in the future will be more encouraging .

On the positive side, these companies have several interesting stories to tell. Here are a few of them, demonstrating the range of sectors this list covers. From luggage maker VIP Industries to middle India snacks firm Prataap Snacks and India’s secondmost valuable real estate player Oberoi Realty, there is enough muscle in many midsize companies to make it to the 500. That is the power of Indian enterprise.

(The Fortune India 15 June -14 Sept 2018 special issue is on stands. Subscribe here )