They have evolved with changing industry dynamics, adopted new technology, and made prudent financial decisions
Illustration: Chaitanya Dinesh Surpur
Forbes India’s annual Super 50 list aims to identify Indian companies that have consistently exhibited strong growth in sales, high profitability and significant shareholder returns.
The year gone by has been an interesting one as India witnessed the biggest change in its taxation system since Independence, in the form of the Goods and Services Tax (GST). Despite the teething issues, along with the effects of demonetisation, companies across sectors handled this transformation well. As a result, India’s GDP grew at 7.7 percent in the fourth quarter of FY18. While India Inc has rejoiced in this triumph, a few companies have overshadowed others with their astute business strategies and sound decision-making. We have observed some commonalities in the direction these companies have taken, which earned them a spot in this year’s Super 50 list.
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Inorganic growth
Charles Darwin said: “It is not the strongest or the most intelligent who will survive, but those who can best manage change.” In today’s dynamic business environment, companies that have the agility to manoeuver their course of action are the ones that survive and prosper, while those that fail to innovate and future-proof their businesses are left behind. Nearly 42 percent of companies on last year’s Super 50 list have not made it to this year’s list.
While most companies chart a linear growth path, some take the inorganic route to fast-track their reach. The majority of the Super 50 companies this year have exhibited this trait, with more than 50 percent of them entering mergers and acquisitions in the last three years.
While the rationales behind these deals vary for each company, they were carried out to fulfil three broad objectives: 1) Expansion: Foraying into new geographies, expanding product portfolio, entering new sectors, and increasing market share; 2) Margin improvement: Increasing operating efficiency, reducing cost through synergies, and hiving off low-margin, non-core and less innovative assets; and 3) Capability enhancement: Accessing new technology or production capability. Of these three, business expansion took the top spot among the Super 50 companies, followed by margin improvement.
Nearly two-thirds of the companies that made acquisitions have done so overseas, to expand their share in the global market, as well as to leverage on foreign technology to manufacture products domestically and offer an enhanced product portfolio to Indian consumers.
(This story appears in the 31 August, 2018 issue of Forbes India. To visit our Archives, click here.)