If you thought business concentration was a western phenomenon, wait till you see this on India, from The Economist,
In America 20 companies capture roughly a quarter of all corporate profits. If you thought that was sobering news for budding American capitalists, spare a thought for their Indian counterparts. According to a study by Marcellus Investment Managers, a Mumbai-based firm, last year a score of companies accounted for nearly 70% of India Inc’s total earnings, up from 14% three decades ago (see chart). In a growing number of product categories—from paint and adhesives to biscuits and baby formula—monopolies or duopolies skim off 80% of profits.
In other words, just 20 companies took nearly 70% of profits of corporate India in 2019, up from just 14% three decades back, and compared to nearly 25% in the US!
Update 1 (08.08.2020)
From Arjun Srinivas in Livemint, on business concentration in India,
An analysis of 2035 listed companies across 298 industry groups shows that in up to 100, or 33% of all industry groups, there is one single company that controls over 50% of the net sales in the sector. Even with a stricter definition—at 70% of the net sales—there are still 50 or 17% of industries which have a dominant firm, according to data sourced from Capitaline... Data shows that while the number of industries or sectors with dominant firms has declined—as it often does in an expanding economy—the dominant firms’ market cap in their respective industries has increased correspondingly.
And it extends to the digital economy, as elsewhere,
... estimates indicate that Facebook and Google together mop up 68%of India’s digital ad market revenues, while Amazon and Flipkart serviced 90% of all e-commerce orders during the 2019 festival season period in October.
This balance sheet of the Competition Commission of India (CCI) should be a matter of concern,
Since its inception, till 31 March 2019, the CCI has noted 1008 instances of ‘anti-trust’ matters, meaning, instances of anti-competitive practices. Over 20% of these cases have been in the real estate sector, followed by automobiles at 10%. In the year 2018-19 alone, the CCI received 68 cases related to anti-competitive agreements and abuse of dominant position. It passed prima facie orders in 65 of these cases and completed investigation in 51 instances and imposed penalties to the tune of ₹357.85 crore. However, merely ₹1.41 crore was actually realized as on 31 March 2019. This is because most of the orders of the CCI are under appeal before the National Company Law Appellate Tribunal (NCLAT) or under challenge in the high courts or the Supreme Court.
Over the past 10 years, the CCI has imposed penalties amounting to ₹13,381 crore, but less than 1% of that amount (about ₹127 crore) has been actually realized (See chart 2). Shockingly, ₹66 crore, or over half of this fine amount, has been refunded to the offending parties. In August 2016, the CCI had imposed its largest-ever penalty of over ₹6,700 crore on 11 cement companies and their trade association, Cement Manufacturers Association, for cartelization and fixing prices. Even though this fine was upheld by the NCLAT, the Supreme Court in 2018 stayed this order, directing the companies to pay only 10% of the penalty amount.
Update 2 (28.08.2020)
More market concentration facts from Indian economy,
An analysis of Capitaline database of over 1,000 listed firms over the last five financial years till March 2020 across sectors show the share of top five players on the rise. Between FY16 and FY20, the top five cement players have added over 8 percentage points to their share of the sector’s total sales. For the comparable period, the gain for the top five was over 4 percentage points for banks (in terms of interest income), 3.5 percentage points for metal players, 3 percentage points for capital goods, 2 percentage points for oil & gas players. Even in an already consolidated industry like IT, the big five upped their share by over 2 percentage points. The only outliers were pharmaceuticals (loss of 3.5 percentage points), auto (1.6) and realty (1.4). Management consultant Bain & Company’s most recent India Mergers & Acquisition Report too points to the big getting bigger trend. In steel, the top five players increased their share of production by 7 percentage points between FY14 and FY19. For a comparable period, the top five power producers increased their share of installed capacity by 5 percentage points, and the top three telecom firms by almost 20 percentage points in terms of subscribers, according to the Bain report.
Update 3 (14.09.2020)
Business Standard has more market concentration facts,
India is “hyper-Pareto” with the largest 15 per cent of listed businesses generating over 90 per cent of revenue and profit. In Q1, 2020-21, for a sample of the 1,700 largest listed businesses, the top 30 firms by revenue generated over 53 per cent of all revenues and over 73 per cent of profits after tax. The top 100 firms generated 78 per cent of revenues and 72 per cent of profits. Further, the top 250 firms (encompassing all large-caps and mid-caps) generated 91 per cent of revenues and 96 per cent of net profits.
Update 4 (25.09.2021)
Livemint writes that just five companies alone took home 21% of all profits earned by 2863 listed companies across 20 broad industries in 2020-21, up from 17% six years back. In 11 out of 13 industries where top five firms made up 75% or more of market share, market concentration in terms of profits increased during the Covid year.
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