Life is tough for a midsize company. We at Fortune India have been emphasising this fact for some time, particularly in the context of The Next 500 listing of companies, the only such list in India. Now in its fifth year, the Fortune India Next 500 takes a close, hard look at several aspects of the midsize companies space, and its findings have always led to significant takeaways about the health of corporate India.

This year is particularly significant, since there is a sharp fall in the cumulative profit of the Next 500 companies—a steep 65% drop from the previous year’s figure. For a space which is critical to the economy in terms of its contribution to employment generation and economic growth, this decline in profits is distressing. The chief reason for this fall is the over-leveraged situation of some of the Next 500 constituents. A closer look at the list shows that just 65 companies have ratcheted up losses to the tune of a staggering ₹32,700 crore, while the cumulative profits of the remaining 435 companies add up to ₹38,320 crore, leaving a positive of just ₹5,620 crore.

Equally alarming is the situation on the debt side. Tata Teleservices (Maharashtra) saw its debt stand at ₹15,314 crore, while the next most over-leveraged company, Aban Offshore, stands at ₹13,740 crore. What’s more, just six companies account for as much as 60% of the total losses of the Next 500 companies this year, as Rajiv Bhuva, Fortune India’s editor (lists) points out.

The struggles of the midsize companies—access to technology, funding, and policy changes—notwithstanding, these firms are a shining example of the resilience and entrepreneurial spirit in India. There are enough success stories in the midsize space to demonstrate that though the going may be tough for many of these companies for now, there’s enough firepower to keep the smart and nimble-footed going. Take, for instance, the story of Symphony, the makers of the world’s largest selling brand of air coolers. Achal Bakeri, the chairman of Symphony, was able to do a serious course correction mid-way in his journey, after an unsuccessful diversification strategy saw the company landing up at the Board for Industrial and Financial Reconstruction. The result is a fascinating turnaround case study.

Equally interesting is how Ujjivan Financial Services, led by former Citibanker Samit Ghosh, transitioned to a small finance bank from being a microfinance lender. S. Chand And Co., one of the country’s oldest educational publishers, on the other hand, is busy putting in place a strategy where it will leverage the power of digital to spread its reach and pursue the next stage of growth. That’s a good example of a legacy organisation embracing change and doing it seamlessly.

This was originally published in the March 15 - June 14, 2019 special issue of the magazine.

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