What a difference a year can make! The second edition of Outlook Business’ special annual issue, profiling the country’s fastest growing companies, aptly mirrors the turbulence that India Inc went through in the fiscal just gone by.
To begin with, unlike the maiden issue (May 26, 2012) that featured 40 fastest growing companies, this year’s list has shrunk to 30 — this despite extending our universe beyond the BSE and NSE 500. Here’s how the exercise began. Initially, we stuck to our universe of 586 companies, obtained by combining the BSE and NSE 500 stocks. Banks and financial companies were eliminated. So were companies that had debt twice their equity since that impairs their ability to invest and grow, and those that had incurred a loss in any of the years under consideration.
The companies that made the cut were subject to a growth filter of 25% compounded for sales and profits for the past five years (FY08 to FY13), and should have also delivered return on capital employed of over 15% in every year over the same period. The result: just 19 companies made the grade. Of which, 11 companies from last year’s list managed to retain their place. But, curiosity got the better of us and we ran the same filters on the entire listed universe to see what the list would look like. Voila, we found 17 more names! The final list was then drawn up by a composite rank created by combining their sales and profit ranks.
The objective part done, we did get a bit subjective. Of the 36 companies, we knocked off pure-play jewellery companies (barring Titan), since a large part of their growth was a function of rising gold prices, and two other companies for business and management issues.
So, what we have here is an interesting mix of companies — split equally between the BSE-NSE 500 and small cap universe — from sectors as diverse as leather, medical, chemicals to infra and consumer. And, like last year, there are more consumer companies, albeit with a big difference. In a clear affirmation that India’s much-touted consumption engine is losing steam, the number of consumer companies has halved from last year’s count of 16 (see: Too hard to consume).
Too hard to consume
Though consumer companies still lead the tally,their count
has halved from last year
Surprisingly, the number of infra companies stayed constant at six. Of the 30 companies, seven managed to clock more than 40% topline growth over the past five years, while 11 managed to grow profits at the same pace (see: Slowdown showing). At the top of the league table is the Bengaluru-based Kaveri Seeds, followed by the pizza major Jubilant Foodworks and auto ancillary supplier Minda Corporation.
Only a handful of companies has managed to
grow topline and bottomline over 40%
While CAGR numbers are impressive, for a majority of the companies, Mr Slowdown is knocking on their doors. As of 9MFY13, five companies, including Ramky Infra and J Kumar, have shown single digit year-on-year growth, and one company (Liberty Phosphate) has seen revenue growth turn negative. The rest 24 managed to grow anywhere from 13% to as high as 93%. Of the lot, we have an interesting company, sanitaryware player Cera, which clocked revenue growth of 53% coupled with an impressive 44% growth in profits. As far as bottomline matters, eight companies have posted a decline in profit growth for the same period, while 17 managed to grow profits between 10% and 96%.
Just like the disclaimer goes that past performance is no guarantee for the future, we too aren’t sure how many companies from the list will continue to grow like they did in the past. But where there’s an interesting story to tell, we sure have dug deep. So, turn over to see what the fastest are all about.