Anniversaries are important. They record milestones, achievements, or even the simple joy of existence. That is why we celebrate birthdays and anniversaries, to celebrate the one achievement common to all human beings — of having been around for another year. That’s also why a silver or a golden wedding anniversary is a remarkable event in most cultures, given the increasing pressures on modern families and relationships and their increasing fragility.
Shorter half-lives
But such occasions are equally important for institutions. Globally, technology is causing existence-threatening disruptions for most companies. In 1935, a company finding a place in the U.S. S&P Index could have confidently expected to be in business for the next 90 years. Today, the life expectancy of an S&P 500 company is under 20 years. The average life expectancy of a business is down to 12.5 years in Europe and Japan. According to a McKinsey study, a company disappears from the system every 12 weeks in the U.S. In Turkey, eight out of 10 businesses don’t last beyond five years.
It is all the more remarkable, therefore, that this year sees the silver jubilee of several remarkable institutions in India. Some are public institutions, some private, but all bear testimony to the enduring success of liberalisation and economic reforms in India, which provided fertile soil for these seeds to grow into mighty trees. It is a certificate to the acumen, adaptability and, above all, tenacity of the individuals who steered these institutions during this long (in business-age terms) time period.
They have all had their ups and downs and some are currently having a particularly tough time right now. But given their track records and their sheer ability to hold their own during times of adversity, I am pretty sure they will be around for some time to come.
Take the National Stock Exchange (NSE). Earlier this week, on August 8, the NSE celebrated 25 years of starting business as a stock exchange. Fittingly, former Prime Minister Manmohan Singh, who had mooted the need for such an exchange as Finance Minister, and subsequently inaugurated it as Prime Minister, was on hand to join the celebrations.
The NSE is currently under the cloud of the so-called ‘co-location scam’, which has already led to a management shakeout and a deferment of what should have been the crowning achievement of its 25 years — its IPO and listing as a traded security on stock exchanges. Nevertheless, over its quarter century of existence, it has had a transformational impact on Indian capital markets.
The stock market of 25 years ago would be unrecognisable to the investor of today. The equity culture was limited to a few pockets in a few cities, stock exchanges were both owned and managed by brokerages, leading to rampant malpractices. Trading was an opaque affair, carried out with esoteric code words and exotic hand signals indecipherable to the common man. When defaults happened, traders and exchanges often colluded to minimise their losses and maximise the pass-through to the investors.
The NSE changed all that. As a demutualised exchange, it became the first exchange in India to separate ownership, trading and management functions. With electronic, screen-based trading, it facilitated instant price discovery and trade. It created its own communication network to spread trading terminals across the country. Today, the NSE has over 2.5 lakh trading terminals. It added 1.8 million new investors last year, of which 40% came from outside India’s 100 largest cities and towns.
Above all, it has led in evangelising equity investing. India today has 2.5 crore retail investors in equities. This is still just 2% of the population directly in equity markets but a respectable 37% of taxpayers (the figure for the U.S. is 40%).
The Infosys story
They have all gained from the ‘equity premium’ of higher returns against the higher risk of investing in equities. In fact, nothing illustrates this better than another silver jubilee celebrant — Infosys, which listed on the stock exchanges 25 years ago. Hundred Infosys shares bought in the IPO would have grown to over 17,000 shares today on account of splits and bonuses. The original ₹10,000 invested would be worth over ₹2.5 crore today. But even this pales before what Infosys has done for India’s IT services sector and the emergence of India as a technology superpower on the global stage.
Another 25-year-old has played an equally significant role in another sector: aviation. Jet Airways started in May 1993 with just four aircraft. But it quickly revolutionised air travel in India, setting new standards for service and outliving disruptors at the low-cost end (Air Deccan) as well as the full-service end (Kingfisher). From four aircraft, its fleet has grown to 119 and 24 daily flights have expanded to 662. It has its share of troubles today, but remains a key player in its sector.
Clearly, a touch of silver in one’s hair is something to be proud of!
