When the going gets tough, the tough get going, is how the adage goes. But the fiscal that went by proved to be too harsh for India Inc, with GDP growth slowing down to 5% — the lowest in a decade. That’s some comedown for the world’s third-largest economy that had expanded as fast as 9.6% in FY07.
Against such a backdrop, it’s not surprising that just 11 companies from our maiden list of the ‘Fastest 40’ (May 26, 2012) managed to grow as they did in the past while the remaining 29 were left behind. While the outcome is a telling commentary on the state of business in the country, it was also partly influenced by a tweak in our eligibility criteria.
Although we maintained the status quo with our filters of 25% CAGR in sales and profits over the past five years and debt/equity ratio of less than two, unlike last time, we sought out companies that have delivered return on capital employed of over 15% every year over the past five years. In doing so, only 19 companies made the cut from the combined universe of BSE-NSE 500 stocks. That prompted us to run the screen on the entire listed universe with a turnover cut-off of ₹50 crore.
So, what we have in this issue is an interesting mix of 30 fastest growing companies engaged in businesses as unorganised as leather, as complex as specialty chemicals and as tasty as pizza. And yes, we have a handful from the beleaguered infra sector, too. Read through our detailed features on five companies from diverse sectors that have managed robust growth even in these tough times.
A note of caution, though. While the five-year performances look stellar, on a year-on-year basis, slowdown is showing up in the numbers of some companies. What is especially worrisome is that the bastion of India’s growth story — the consumer sector — too, is facing the heat.
While the worst is far from over, it’s conversely true that companies with robust management and sound financials weather the storm well. The same goes for investing. A crisis often throws up good investment opportunities and in extreme pessimism, you sometimes discover hidden gems with attractive valuations. This time around, too, we think we have found a few. Check them out.
