Big 4 get bigger: Combined revenues of EY, KPMG, Deloitte and PwC cross Rs 32,700 crore
Mumbai, Oct 13, 2023
Synopsis
For these firms, auditing services now account for less than 15% of total revenue from a disproportionate majority only a decade and a half ago, with EY, Deloitte and PwC not actively trying to expand this service line due to associated risks. Another traditional service, taxation advisory, has been a steady money spinner for the firms.
India Inc’s increasing eagerness to professionalize decision making and invest in moat-widening technologies was manifest in the record $4 billion annual revenue haul for the Big Four locally, marking a deepening of their corporate relationships beyond audits and taxation support through a period that saw EY outrun its peers with a topline of about Rs 11,500 crore.
Combined revenues of EY, KPMG, Deloitte and PwC crossed Rs 32,700 crore last year, highlighting the expansion in the scope of services being offered by the Big 4 in a country that ranks among the top three in the world on the number of listed firms.
Traditionally, the Big 4 firms have primarily been associated with audit and tax services, while the MBB (McKinsey, BCG and Bain) were the undisputed leaders in strategy consulting. Over the past few years, however, the Big 4 have quickly transformed into high-demand advisory and technology services firms, with consulting and technology emerging as the most rapidly expanding revenue streams in the post-Covid era.
As on date, more than half the revenue in the four firms comes from advisory services.
“Corporations, public and private, have been dealing with a significant amount of disruption over the last few years and this has given us an opportunity to be a part of their transformation journey to both create value and/or prevent value loss," said Sanjeev Krishan, Chairperson, PwC India. "At the same time, value creation is impossible without building trust and that continues to present a key opportunity for multi-disciplinary firms.”
Complexity & Consulting
As India Inc scales up operations, mid-level companies expand their reach, and new companies and startups raise growth capital for expansion, the Big Four firms are expected to play a pivotal role in providing critical financial and advisory support.
Romal Shetty, CEO, Deloitte South Asia, said that a multitude of factors are fuelling the demand for top professional services firms.
“The significant expansion of the Indian economy has led to an increased need for our expertise as Indian companies expand and diversify their operations. Moreover, the influx of multinational corporations (MNCs) into India, engaging in deals, establishing captives, and expanding their domestic operations, has further contributed to this demand," said Shetty. "The industry's substantial disruption has also created a need for digital transformation projects. The Big Four firms are actively supporting India Inc throughout their comprehensive transformation journey, spanning various stages.”
For these firms, auditing services now account for less than 15% of total revenue from a disproportionate majority only a decade and a half ago, with EY, Deloitte and PwC not actively trying to expand this service line due to associated risks.
KPMG is the only firm where nearly a quarter of the topline is generated from audits and associated services.
Another traditional service, taxation advisory, has been a steady money spinner for the firms. This service line doesn’t fluctuate as much as transactions or consulting businesses that mirror the economic cycle.
The combined tax revenues of the top four firms now are more than Rs 5,500 crore, with Sameer Gupta-led EY tax services crossing Rs 2,200 crore in FY 23.
Tax Benefits
“Tax has reached new levels of compliance with transparency fueled by increased disclosures and new taxes like Pillar 2 and carbon taxes. This is supplemented by the audits from tax authorities," said Sanjay Tolia, Tax leader, PwC India. "Businesses on the other hand, are keen to discharge their obligation of paying fair taxes by embracing use of technology and managed services to meet the enhanced compliance requirements and tax disputes. This has resulted in increased support from professional services firms.”
Post-Covid, the transactions sector has been active too with M&A and PE deals maintaining steady momentum, and that led to a lot of demand for all kinds of deal support services like tax, due diligence, structuring, and consulting.
“The deal space has been buzzing during the last two years. We are the largest provider of pre, mid and post deal and ESG diligence expertise in India Inc,” said Amit Khandelwal, Managing Partner, Strategy and Transactions, EY India. “Clients want to be sure that all risks are covered and the deal is value accretive.”
At EY, the stars of the show have been Rohan Sachdev, leader of Advisory Services, and Mahesh Makhija, head of Digital and Emerging Technologies, who have generated more than Rs 6,200 crore in revenue, surpassing the total revenue of the smallest Big Four firm, KPMG.
As the firms expand their diverse service offerings, conflict of interest has been a major concern for regulators. Deloitte, PwC, and reportedly now even KPMG in India have ceased taking non-audit work from audit clients, while EY continues to provide such services.
When asked about the next levers of growth for the firms, Shetty said he is betting on new technologies such as space and AI, emerging client segments like state, central government and startups, and evolving areas like captives. “We grow with India and advance with India,” said Shetty.
[The Economic Times]
