For a long time, there was only one Indian company (Indian Oil Corporation) featuring in the Fortune GLOBAL 500 list of the world’s 500 largest corporations. In this year’s list, published in the FORTUNE issue dated 23 July 2007, there are six (click here for the list). That’s good progress.
Given the breakneck speed at which it has been growing, the question that comes to mind is, when will the Indian IT industry produce a Fortune 500 corporation? With the largest Indian IT company’s revenue being less than 3 billion USD and the 500th company in the latest FortuneÂ 500 list (BOMBARDIER) boasting a revenue exceeding 14 billion USD, is there really any chance?
Surely yes, given that the Indian IT industry is growing at rates exceeding 30% whereas the Fortune 500 cutoff revenue has grown by less than 10%. That’s why the title of this blog post asks "when" and not "if".
Using an Excel model containing factual data though somewhat debatable assumptions about future growth rates, it would appear highly likely for an Indian IT company to enter the Fortune 500 list in 2015. Not too long considering that the Indian IT industry is less than 30 years old.
- F500 Cutoff Revenue is the revenue of the 500th company in the Fortune GLOBAL 500 list. This revenue would typically have been posted by this company in its previous year-end since the list is published a year later. For example, what is termed F500 Cutoff Revenue for year ending (say) 2009 in the above model (i.e. 18.70B USD) would actually be reported in the 2010 list. Conversely, a company can enter a particular year’s list only if its previous (not current) year-end’s revenue has exceeded that year’s F500 Cutoff Revenue.
- The 500th company in the Fortune GLOBAL 500 list in 2006 is NIKE, with a revenue of 13,787.7 million USD (Source: FORTUNE issue dated 24 July 2006). The 500th company in the Fortune GLOBAL 500 list in 2007 is BOMBARDIER, with a revenue of 14,880 million USD (Source: FORTUNE issue dated 23 July 2006). This amounts to a 7.92% growth in the F500 Cutoff Revenue.
- F500 Cutoff Revenues for the years ending 2007 and onwards have been calculated by applying this constant 7.92% growth rate on a consecutive basis, without regard for whether this is realistic or not. For example, given that the F500 Cutoff Revenue in the 2007 list is 14.88B USD, the F500 Cutoff Revenue for the 2008 list (for year ending 2007) has been calculated as 14.88 x 1.0792 = 16.06B USD.
- This model only includes the Top 4 Indian IT companies, reckoned by revenues for the year ended 2006. Since it is quite possible for an Indian IT company that has a lower revenue but a higher growth rate in 2006 to enter the Fortune GLOBAL 500 list earlier than any of these 4 included companies, this model is merely indicative and by no means exhaustive.
- Revenue figures for 2005 and 2006 for the Top 4 Indian IT companies have been sourced from respective company’s websites or from Yahoo! Finance where available:
TCS: Company website (http://www.tata.com/tcs/releases/20060419.htm)
Infosys: Yahoo! Finance (http://finance.yahoo.com/q/is?s=infy&annual)
Wipro: Yahoo! Finance (http://finance.yahoo.com/q/is?s=wit&annual). Includes non-IT revenues
Satyam: Yahoo! Finance (http://finance.yahoo.com/q/is?s=say&annual)
- Revenue figures for 2007 and onwards for the Top 4 Indian IT companies have been projected on the basis of the assumption (realistic or otherwise) that each company’s y-o-y revenue growth in future will be the same as its 2006 revenue growth over 2005. For example, given that the actual (year ending) 2006 revenue for INFOSYS is 2.15B USD, which is a y-o-y growth rate of 35.22% over (year ending) 2005, its projected revenue for (year ending) 2007 has been calculated as 2.15B x 1.3522 = 2.91B USD.