The India moment in the $100-billion club
The shift in geo-economics opens up the possibility of an Indo-US tech partnership
After the announcement of its results in October, Tata Consultancy Services (TCS)’s market valuation rose to $144.7 billion, pipping Accenture at $142.4 billion and IBM at $110.5 billion. All at once, TCS has become globally the most-valued company in its market segment, IT services. What does the achievement mean? Who are the global market leaders in other sectors? How big is the $100-billion-dollar market capitalisation club? And how has it evolved in the last two decades?
In 2000, the most-valued company in the world was General Electric with a market cap of over $500 billion. At that time, there were 43 companies globally with a market cap of over $100 billion. The total market capitalisation of all these companies together was almost $9 trillion. Among the companies, 21 were from the United States (US), seven from Brazil, four from the United Kingdom (UK), three from Japan and the others were from the rest of Europe. There was a full spread of sectors represented by these companies, with media and telecom being the most significant — 12 of the 43 companies belonged to this sector. However, companies represented other sectors too — industrials, energy, consumer and retail, health care, big tech, IT services and financial services. If one evaluated the discrete segments, the segment leaders came from the US or Brazil.
By 2010, after the Global Financial Crisis (GFC), the standings in the club changed, the impact of the Asian century had started to take effect, but as it were, only for China. Globally, the number of $100-billion companies had risen to 51, but the impact of GFC brought down total market capitalisation of all these companies put together, to around $8.2 trillion. Country representation had also changed. While the US still had nearly 50% of the companies on the list, China’s share had grown to the second-highest at 14%. A few other countries such as Brazil, UK, Australia and Switzerland also had companies in the club. It was financial services and energy (specifically oil and gas) companies that dominated the list, and Exxon Mobil was the world’s most valuable company. Sector leaders were relatively spread across countries — big tech from the US (Apple), banking from China (ICBC), commodities from Australia (BHP), consumer and retail from Switzerland (Nestle). India did not have any companies in the club, though China had ICBC at that time.
By 2020, the world has seen the emergence of the trillion-dollar market cap companies. This is a new phenomenon with five trillion-dollar behemoths. Apple, Amazon, Microsoft and Alphabet (Google’s parent) are all from Silicon Valley; the one exception being Saudi Aramco in this top set. Each of these companies can consume the entire Gross Domestic Product (GDP) of all but 16 countries (that have a GDP of over $1 trillion) in the world. The membership of the $100-billion club has grown to over 100 companies, with 60 of them coming from the US. The total market capitalisation of these 106 firms is over $26 trillion, with 35% of this coming from big tech. Banks and energy companies seem to be past their prime — taking only around 10% share each. China’s share has remained relatively unchanged since 2010 at 14%, with its banks being replaced by China’s big tech companies, such as Alibaba and Tencent. Countries such as Brazil and the UK have all but disappeared.
The silver lining in all of this is that India has entered this club with the entry of two of its companies — Reliance Industries and TCS. The bulk of the segment leaders come from the US — Apple (big tech, at over $2 trillion), Walmart (consumer and retail, beating Proctor & Gamble), Berkshire Hathaway (financials, beating Visa), Johnson & Johnson (health care, beating United Health Group), Tesla (industrials and electronics, beating Taiwan Semiconductors), Verizon (media and telecom, beating Disney), UPS (logistics) and then we have Saudi Aramco from Saudi Arabia in energy and TCS from India in IT services. Chinese big tech firms have very high market valuations but are not segment leaders, being pipped by the US big tech firms out of Silicon Valley. In fact, no Chinese company currently is a global segment leader. Interestingly, two of the four trillion-dollar Silicon Valley market cap companies are led by CEOs of Indian origin.
It is worthwhile to appreciate the full achievement of TCS. In 2000, TCS was not a listed company. It was not even the segment leader in India. By 2010, its market cap had grown to a creditable $25 billion and it had become the segment leader in India. In the next 10 years, it has managed to enter the $100 billion club, and today, it has become a global segment leader. India, therefore, is the only Asian country that can currently boast of a global segment leader. It is worth noting that the segment that TCS operates in is ruthlessly competitive. It is global and of late has suffered from the changes in US policy on immigration that has adversely affected Indian talent. Unlike big tech in China, TCS has got no protection or specific support from the Indian government in its path to leadership. In fact, most of its revenues are global.
This terrific achievement opens a fundamental geopolitical business opportunity. Can we make 2020 the “US’ India decade” with a partnership in technology, just like 2000 was the “US’ China decade”, which propelled China to global dominance in manufacturing? It will require a determined effort, but the talent is there, and the underlying national governance is based on democratic values, much-needed in developing global standards in data protection and privacy, distinct from the values espoused by China. To think Microsoft and Google are run by CEOs of Indian origin is just an indicator of the potential. Will we take it?