India’s most

profitable
companies

30 Wealth Insight June 2021

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2,@-03;,9:
Basic filters
z Market capitalisation of more
than `500 crore
z Should have a record for the last
10 years and profits in all of them
ROE filters
z Weighted average 10-year ROE
should be more than 15%
z ROE should be more than 15% in
at least six out of the last 10 years
z Current ROE should be equal to
or greater than 15
Subscription copy of [balaji.orange@gmail.com]. Redistribution prohibited.
By Danish Khanna & Rajan Gulati
T
he last one year has been
a particularly testing one
for the economy,
individuals and, of
course, companies. Due
to the outbreak of the pandemic –
the first wave last year and the
second wave this year – business
dynamics have changed like never
before. No wonder business
profitability has been impacted as
well. Many businesses, especially
those belonging to services, are still
struggling.
To be sure, there are many
outliers as well – companies that
actually gained during this phase.
Then there are those which
suffered due to the lockdown but
later bounced back sharply.
Further, there are some that were
unaffected. And what could have
captured all such names better
than our yearly Profit 100 coverage?
PROFIT 100 OR PROFIT 90?
When we started our search for
India’s 100 most profitable
companies based on not just
current numbers but also historical
data, well, we hoped we would find
Profit-growth filters
z Year-on-year profit growth
should be more than 8% in at least
six out of the last 10 years
z Weighted average 10-year profit
growth should be over 8%
Hygiene filters
z Positive cash flow from
operations in eight out of the last
10 years
z Debt-to-equity ratio of less than
two times in at least eight out of
100 names easily among the
companies that are more than `500
crore in market capitalisation. But
we soon realised, that won’t be the
case. In this list, you will find not
100 but only 90 names as only so
many companies were able to clear
our criteria.
This tells us a lot about the
damage caused by the pandemic,
which is not readily visible from
the financial performance of the
top companies. The last one year
has disrupted the business
dynamics so much that out of 985,
there aren’t even 100 companies
that could clear all our filters,
which assign more weight to the
latest numbers. That wasn’t so last
time when we did this story, though
that time our universe included
companies with a market cap of at
least `1,000 crore.
In some way, this is not very
surprising either. In good times,
maintaining profitability is not
difficult. It’s challenging times that
separate the men from the boys. So,
in these 90 companies, you will find
a rich universe to research further.
Do note that these companies are
not our recommendations.
the last 10 years
z Interest-coverage ratio of more
than three times in eight out of the
last 10 years
Final-rank calculation
z Based on weighted average profit
growth, consistency in profit
growth and weighted average ROE.
Equal weights were assigned to
these three parameters.
For detailed methodology, see
the subsequent pages.
June 2021 Wealth Insight 31
 (YYP]PUNH[[OL7YVÄ[
The methodology and the rationale for the filters used to find out India’s 100
most profitable companies
I
n order to pick the Profit 100
companies, we focused not just
on profitability but also on the
reliability and durability of those
profits. That required us to use a
number of filters. Here they are in
detail.
MARKET CAPITALISATION OF MORE
THAN `500 CRORE: Due to
fewer disclosures,
substandard corporate
governance standards and lack of
transparency of smaller companies,
we restricted our analysis to
companies that have a market cap
of at least `500 crore.
LONG-TERM HORIZON: To ensure
analytical strength, we
removed companies that
didn’t have a 10-year record.
However, we included those
companies which were listed within
the last 10 years but have a track
record.
PROFITABILITY: Profits – the
lifeline of our cover story –
were the most important
criterion for our analysis. We
took into consideration companies
that have earned profits in all of
the last 10 years. Further, we zeroed
in on only those companies that
have maintained constant growth
of at least at 8 per cent in their
profitability over the years. Using
this criterion, we removed those
companies which are unable to pass
on their costs. Also, a company
earning similar profits year after
year may not create wealth for its
shareholders in the long run. As
many companies are yet to declare
their FY21 results, we have taken
trailing 12-month (TTM) profit
32 Wealth Insight June 2021
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growth till December 2020 for the
latest year.
RETURN ON EQUITY (ROE): An
investor should prefer
investing in a company
with a high ROE as it shows
the company’s ability to deploy its
funds efficiently. To remove low-
ROE companies, we applied a
minimum threshold of ROE equal
to or more than 15 per cent. The
ROE for the current year has been
calculated by taking TTM earnings
as of December 2020 over total
equity as per the latest balance
sheet available.
EXCEPTIONALS: Many
companies report
exceptional incomes or
losses arising from asset
write-offs, litigation expenses or
disposal of assets. Some companies
report these items on a regular
basis. Such occurrences obscure the
true picture of a company’s
profitability. To avoid such cases, we
have removed companies which tend
to report huge exceptional items on
a regular basis. The companies
which had median exceptional items
of more than 10 per cent of their
profits in the last 10 years were not
covered in this list.
CONSISTENT PERFORMANCE:
Many companies are able to
deliver exceptional
performance in the short
term but cannot replicate it in the
long term and turn out to be wealth
destroyers for investors. To remove
companies with such exceptional
performance, we applied another
criterion: a minimum return on
equity of equal to or more than 15
per cent in at least six out of the
last 10 years. A similar criterion
was applied in the case of
profitability. Companies with year-
on-year profit growth of less than 8
per cent in six out of the 10 years
have been removed. However, we
gave a relaxation for four years to
adjust for cyclicality.
CASH FLOWS: In investing,
there is a popular saying:
turnover is vanity, profit
is sanity and cash is
reality. Many businesses have a
robust track record of profitability
but suffer from subdued operating
cash flows. Profits have no meaning
until they are converted into cash.
It is also considered a potential red
flag if a company earns handsome
profits but its cash flows are not in
order. We removed companies
having no positive cash flows in at
least eight years out of the last 10
years. We kept this criterion more
stringent than our return on equity
and profitability criteria, given the
fact that historically, the absence of
cash flows has translated into
potential corporate-governance
issues and subdued stock returns.
We excluded banking and financial
companies from these criteria as
cash flows are not relevant to them.
DEBT TO EQUITY: We removed
companies with debt-to-
equity of more than two
times in three or more
years over the last 10 years. Hence,
we filtered out companies which
are excessively dependent on
leverage for their healthy ROE or
profitability. We provided a
relaxation of two years to
incorporate companies which once
raised debt for heavy capital-
expenditure requirements but later
paid it off and generated wealth.
The debt-to-equity ratio for the
latest year has been calculated by
using the latest available balance
sheet. We also exempted financial
companies and those with financial
subsidiaries from this criterion.
INTEREST-COVERAGE RATIO:
Several companies have
low debts but still their
profits are not enough to
cover interest payments,
which leads to defaults,
specifically in a weak demand
environment. To overcome this
problem, we applied an additional
filter for interest-coverage ratio.
According to it, a company should
have an interest-coverage ratio of
over three times in at least eight
of the last 10 years.
*63<45:05;/,796-0;;()3,
M-CAP (` CR): The total market value
of the company. It is calculated by
multiplying the total outstanding
shares and the current market
price of the company.
WEIGHTED AVERAGE 10-YEAR PROFIT
GROWTH (%): Calculated by
multiplying the profit growth in
each year by the weightage
assigned to that particular year.
The sum of all these years is
considered to be the weighted
average profit growth.
WEIGHTED AVERAGE 10-YEAR ROE (%):
Calculated by multiplying the
return on equity of each year by
the weightage assigned to that
particular year. The sum of all
these years is considered to be the
weighted average ROE.
DEVIATION IN PROFIT GROWTH: It refers
to the difference in the profit
growth of the company from its
average profit growth of the last 10
years. The higher the standard
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DEVIATION IN PROFIT GROWTH:
After arriving at the final
list, we also evaluated
companies based on the
deviation of their profit growth
in comparison to the average
profit growth of the last 10 years.
We used the ‘coefficient of
variation’ as a measure to
calculate the deviation in profit
growth. It measures the standard
deviation (volatility) of the
company’s profit growth and
divides it with the average profit
growth. The lower the coefficient
of variation, the lower the
fluctuation in profits. Further, we
ranked the companies which
qualified our list based on this.
WEIGHTAGE: Companies may
have an extraordinary
phase of profitability,
which may last for some
deviation or difference in the
profits from the average, the higher
the deviation. To compare it, we
have divided the deviation in profit
growth with the average profit
growth.
CURRENT PROFIT GROWTH (%):
Percentage growth in the TTM
profits (as of December 2020) of the
company as compared to the
previous year.
ROE (%): It signifies a company’s net
profit as compared to the total
equity invested by the company. For
instance, if a company has earned
a profit of `150 on the equity capital
of `1,000, that translates into an
ROE of 15 per cent.
DEBT TO EQUITY: Total debt of the
company as compared to the total
equity capital of the company. The
lower this ratio is, the better.
INTEREST-COVERAGE RATIO: It shows
the number of times a company’s
earnings (before interest outgo)
years but may not sustain in the
long term. To weed out such
companies which may qualify
because of those extraordinary
years, we gave different weights to
all 10 years, with the recent years
carrying the more weights than
the older years. We then removed
companies with weighted average
profit growth and return on
equity of less than 15 per cent.
FINAL RANKING CRITERIA:
Then we ranked the list
of companies qualifying
all our criteria based on
three parameters: weighted
average profit growth, weighted
average ROE and coefficient of
variation of profit growth. Finally,
we ranked this list based on the
combined score of all three
parameters. And that’s how we
arrived at the Profit 100.
cover the total interest expense.
The higher the coverage ratio, the
better.
PROFIT AND ROE RANK: Based on the
weighted average profit growth and
ROE of the company. The higher
the profit growth or ROE, the
higher the rank.
RANK FOR DEVIATION IN PROFITS: Based
on the deviation in the company’s
profitability. The lower the
deviation, the higher the rank.
RETURNS (1, 5 AND 10 YEARS, %): All
returns refer to the total returns,
comprising change in stock price
and the total dividends received
during that period. Returns of
more than one year are
compounded per annum.
TTM P/E: Ratio of the market price
of the stock to the latest 12-month
earnings per share of the company.
MEDIAN P/E: Median of five-year
daily price-to earnings of the
company.
June 2021 Wealth Insight 33
Britannia number of measures – launch of Britannia aspires to become a full-
Industries innovative products (milk shakes, fledged FMCG player.
Britannia cakes); deeper penetration,
Industries, with especially in rural India; cost- Alkyl Amines
direct reach to control measures, premiumisation Set up in 1979, the company is a
23.7 lakh outlets of products; and others – have led leading manufacturer of aliphatic
as of March 2021, is to business transformation. As a amines in India. Derived from
the market leader in result, the company’s profit margin ammonia, aliphatic amines find
the biscuits segment in India. has improved to 14.1 per cent in their applications
Britannia’s product portfolio FY21 from just 4.1 per cent in mainly as
includes biscuits, bread, cakes and FY13. This has aided profits to solvents and
others and it is well-known for grow from `260 crore to `1,850 crore intermediates
brands like Good Day, Tiger, etc. during the same period, a rise of in industries
The company has turned 27.8 per cent per annum. like pharma,
around since its current CEO, Though around 80 per cent of speciality
Varun Berry, joined in 2013. A sales still come from biscuits, chemicals, etc.

Profit 100
Here is the list of India’s most profitable companies, based on 10-year
profit growth, consistency of profit growth and return on equity

Final M-cap Weighted average Weighted average Deviation in profit growth TTM profit
rank Company name Sector (` cr) 10Y profit growth (%) 10Y ROE (%) over 10 years (times) growth (%) ROE (%)
1 Britannia Industries FMCG 84,312 27.6 46.1 0.6 41.6 69.6
2 Alkyl Amines Chemicals Chemicals 18,844 48.3 30.3 0.9 52.5 39.7
3 Bharat Rasayan Chemicals 5,429 35.9 29.3 0.9 1.8 23.8
4 HDFC AMC Finance 59,667 19.4 38.1 0.6 -2.3 30.9
5 Eris Lifesciences Healthcare 9,101 24.5 38.2 1.0 16.7 24.2
6 Larsen & Toubro Infotech IT 63,003 17.9 35.5 0.6 23.7 28.8
7 ICICI Securities Finance 15,973 81.0 62.7 2.1 76.1 60.7
8 Alembic Pharmaceuticals Healthcare 18,448 35.9 29.5 1.2 48.3 23.6
8 Ajanta Pharma Healthcare 16,958 24.6 28.2 1.0 45.9 21.4
10 Avanti Feeds FMCG 7,221 48.7 37.6 1.8 17.3 26.4
11 Colgate-Palmolive FMCG 42,626 15.4 61.5 0.6 14.2 56.6
12 Bombay Burmah Trading Agri 8,410 23.2 30.1 1.1 42.0 29.2
12 SBI Cards And Payment Finance 91,194 41.6 27.9 1.4 -36.7 15.2
12 Kellton Tech Solutions IT 615 39.5 25.4 1.2 -11.6 14.8
12 Aarti Drugs Healthcare 7,622 63.4 24.5 1.3 161.5 35.3
16 Hindustan Unilever FMCG 5,58,445 15.7 65.2 0.8 7.5 15.7
16 Abbott India Healthcare 34,208 22.0 26.0 0.9 9.1 28.7
18 KSE FMCG 672 560.6 31.9 2.2 2661.2 52.9
19 Muthoot Finance Finance 46,872 29.7 23.8 1.0 26.0 26.9
20 Tata Elxsi IT 21,687 32.5 33.0 1.7 36.6 29.5
20 Deepak Nitrite Chemicals 23,572 101.6 24.3 1.4 24.1 35.8

34 Wealth Insight June 2021

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 With a technocrat promoter at current 80–90 kilo tonnes per revenue from exports.
helm, over the years, Alkyl has annum. The start of its 5,000 MTPA
successfully diversified into value- Dahej plant in Gujarat in 2013
added products like amine Bharat Rasayan was a game changer as its
derivatives and speciality Bharat Rasayan is the flagship product basket expanded. The
chemicals. Strong focus on R&D company of the Bharat group and company has a product mix of
has led to a scale-up to nearly 100 is involved in the more than 200 varieties of
products. Also, the company’s manufacturing pesticides. Further, clampdown in
speciality chemical Acetonitrile of technical- China against chemical
has been a major success and now grade companies has also benefited the
contributes 25 per cent to its top pesticides, domestic agrochemical players as
line. The clampdown in China on which are a key they could increase their export
pollution-causing industries, ingredient for revenue.
coupled with ongoing supply-chain pesticides The demand for domestic
shifts, has led to Indian buyers formulations. agrochemicals is expected to
fulfilling their needs locally. Formulation is the process of remain elevated on the back of the
The momentum in the pharma making the final product. The government’s focus on enhancing
sector continues to be a strong company’s operations are B2B in farmers’ income. However, related-
tailwind for Alkyl. The company nature and it counts major party transactions and the
plans to invest `150–200 crore in players like Syngenta and company’s reliance on large
the coming year to expand its Sumitomo amongst its customers. working capital require a careful
production capacity from the It derives almost 50 per cent of its assessment.

See page 33 for the explanation of the columns of this table.

Rank Returns (% pa) P/E

Debt to equity Interest coverage Final
(times) ratio (times) Profit ROE Deviation in profits 1Y 5Y 10Y Current TTM Median Company name rank
0.9 23 29 6 8 18.3 21.2 36.4 45.5 55.5 Britannia Industries 1
0.1 50 9 18 19 400.9 96.6 72.8 90.1 18.8 Alkyl Amines Chemicals 2
0.1 43 17 23 18 96.3 62.1 51.2 34.4 22.3 Bharat Rasayan 3
- - 55 11 3 13.7 - - 45.5 43.1 HDFC AMC 4
0.0 231 36 10 24 49.0 - - 27.6 23.6 Eris Lifesciences 5
0.0 31 60 14 2 128.2 - - 32.8 22.5 Larsen & Toubro Infotech 6
- - 3 2 75 58.5 - - 15.8 18.7 ICICI Securities 7
0.1 64 16 22 47 8.4 11.6 - 16.2 19.3 Alembic Pharmaceuticals 8
0.0 92 34 25 26 30.0 4.6 59.3 25.3 25.3 Ajanta Pharma 8
0.0 335 8 12 67 28.9 30.4 79.1 19.7 17.7 Avanti Feeds 10
0.0 158 84 3 6 23.1 16.4 15.6 41.5 45.5 Colgate-Palmolive 11
0.6 16 40 20 34 41.7 24.0 32.2 22.6 12.8 Bombay Burmah Trading 12
- - 12 26 56 86.5 - - 94.9 67.9 SBI Cards And Payment 12
0.2 7 14 36 44 307.8 -8.5 - 9.1 7.3 Kellton Tech Solutions 12
0.4 15 5 39 50 251.5 46.2 48.6 25.2 16.7 Aarti Drugs 12
0.0 72 78 1 16 18.1 24.7 25.3 69.8 64.0 Hindustan Unilever 16
0.0 54 44 31 20 -7.7 28.9 27.3 49.4 38.5 Abbott India 16
0.1 97 1 17 79 70.8 35.1 33.7 6.8 15.6 KSE 18
- - 26 44 29 56.1 44.0 24.8 14.1 12.5 Muthoot Finance 19
0.0 85 20 16 64 374.7 32.1 42.0 62.0 27.2 Tata Elxsi 20
0.4 11 2 41 57 239.6 89.7 59.2 31.5 19.3 Deepak Nitrite 20

June 2021 Wealth Insight 35

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KSE
Founded in 1963,
KSE is a leader
in the cattle-feed
industry in
Kerala, with
more than one-
third market share. It
is also involved in oil-cake and
dairy processing. The company
has managed to build this market
position on the back of a network
of 600 dealers, quality products
and efficient customer support
through services such as on-call
veterinary doctor.
The company derives about 85 per
cent of its revenue from the cattle-
feed business, which is susceptible to
fluctuations in raw-material
(coconut oil cake) prices. On the specialty chemicals and
demand side, milk prices influence performance products. It is the
the cattle-feed-buying habits of dairy largest producer of phenol and
farmers. Soft raw-material prices, acetone in the country.
driven by a good monsoon, led to a The company’s
dramatic increase in the company’s products are
earnings for the last 12 months (as of used in a
December 2020). Because of this diverse set of
spurt in profit, KSE has featured at industries,
the top of the list ranging from
Though the business has shown dyes to
strong recent performance, the detergents.
long-term superior profit growth A clampdown on chemical
drivers remain missing because of companies in China for causing
high competition in the cattle-feed pollution gave Indian companies
industry. an opportunity to fill the gap.
Deepak’s performance division
Deepak Nitrite saw a swift turnaround as the
Founded in 1970, Deepak Nitrite supply of chemicals such as OBA
makes over 100 basic, fine and and DASDA dwindled after the

Final M-cap Weighted average Weighted average Deviation in profit growth TTM profit
rank Company name Sector (` cr) 10Y profit growth (%) 10Y ROE (%) over 10 years (times) growth (%) ROE (%)
22 Dr. Lal Pathlabs Healthcare 22,682 17.1 27.8 0.7 0.7 21.1
23 Granules India Healthcare 7,966 49.3 19.1 0.9 95.8 26.9
24 Asian Paints Chemicals 2,66,043 11.5 28.2 0.6 2.0 25.3
25 Cholamandalam Financial Finance 10,609 60.9 30.2 2.4 12.2 32.0
26 Procter & Gamble Hygiene FMCG 43,857 17.7 44.5 1.1 56.9 57.4
27 Torrent Pharmaceuticals Healthcare 46,067 48.3 25.1 1.6 122.2 22.5
28 HCL Technologies IT 2,47,025 20.1 26.7 1.0 26.8 23.4
28 Can Fin Homes Finance 6,786 29.5 19.2 0.8 26.5 18.8
30 Tasty Bite Eatables FMCG 4,103 35.2 25.9 1.7 -15.8 18.9
30 Relaxo Footwears FMCG 22,980 20.9 22.2 0.7 5.4 17.6
32 Indian Energy Exchange Power 11,178 14.8 45.7 1.2 13.2 40.0
32 Expleo Solutions IT 693 32.6 26.7 2.0 51.5 29.8
34 Tata Consultancy Services IT 11,28,488 10.4 36.1 1.0 -3.5 33.0
34 Astral Plastic Products 33,697 21.8 19.2 0.6 10.0 18.1
36 APL Apollo Tubes Iron & Steel 14,909 29.3 20.3 1.1 30.0 23.3
37 Marico FMCG 61,224 10.4 35.2 1.0 -5.8 32.0
38 IRCTC Hospitality 27,957 21.7 30.1 1.6 -48.8 17.7
38 NGL Fine-Chem Healthcare 992 41.8 23.1 1.8 176.0 34.8
40 Infosys IT 5,61,106 10.1 24.9 0.6 14.0 26.3
40 Mindtree IT 34,705 22.5 24.0 1.2 60.4 27.1
40 HDFC Bank Bank 7,65,035 21.0 17.9 0.2 16.7 16.0
43 Manappuram Finance Finance 12,738 69.5 21.6 2.0 18.9 25.7
44 Just Dial Miscellaneous 4,859 23.4 22.5 1.2 -0.8 22.0

36 Wealth Insight June 2021

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Chinese intervention, leading to
margin improvement. The `1,400
crore investment in phenol, for
which the country was nearly 80
per cent import-dependent, has
contributed to the business.
Additionally, the spread of COVID
led to a drastic increase in use of
IPA-based (isopropyl alcohol)
sanitisers.
The company is doubling its
IPA plant capacity, along with
adding new chemistries to its
product offerings. Medium-term
growth looks tapered, as its phenol
plant is already running at 115 per
cent utilisation and for further
business growth, the company will
need to demonstrate its
competencies in new chemistries.
ICICI Securities financialisation of savings. These
It is the equity securities arm of trends have gained speed due to
the ICICI Group. The company COVID. The company gained over
derives its revenue primarily 3.5 lakh clients in Q4FY21, with
from broking (60 per cent in FY21) majority of them coming from
and distribution of mutual funds tier 2 and 3 towns. While
(25 per cent). With a client base of revenues got a leg-up from this
around 15.6 lakh, it is trend, improving from `1,200
the third-largest crore in March 2020 to `2,584
broking firm in crore in March 2021, net profit
India. grew by more than three times on
The broking the back of an improving cost-to-
industry has income ratio.
been However, the cyclical nature of
experiencing equity markets is likely to
strong tailwinds normalise the brokerage income
for the past few years due to sooner or later. Additionally, the
penetration of internet trading industry is seeing the entrance of
apps and sites, growing interest in many new fintech players backed
equity markets and by deep-pocket investors.

Rank Returns (% pa) P/E

Debt to equity Interest coverage Final
(times) ratio (times) Profit ROE Deviation in profits 1Y 5Y 10Y Current TTM Median Company name rank
0.0 22 64 27 10 77.6 24.7 - 96.8 50.3 Dr. Lal Pathlabs 22
0.4 27 7 74 21 109.4 20.3 44.4 14.7 17.0 Granules India 23
0.0 45 77 24 5 82.0 25.1 27.1 86.2 60.9 Asian Paints 24
- - 6 19 82 122.9 6.0 16.0 13.2 14.8 Cholamandalam Financial 25
#N/A 154 62 8 38 35.9 18.0 22.9 64.7 74.7 Procter & Gamble Hygiene 26
0.7 5 10 37 62 13.5 15.7 26.7 36.8 37.1 Torrent Pharmaceuticals 27
0.0 35 52 29 31 87.4 22.9 24.8 22.7 14.8 HCL Technologies 28
- - 27 73 12 78.9 17.2 37.5 15.4 16.3 Can Fin Homes 28
0.4 21 18 32 63 57.0 42.9 59.3 102.8 71.7 Tasty Bite Eatables 30
0.0 22 49 53 11 65.7 33.2 54.4 94.5 58.6 Relaxo Footwears 30
0.0 120 70 7 42 137.9 - - 54.8 31.6 Indian Energy Exchange 32
0.0 68 19 28 72 343.7 -8.4 37.7 13.3 13.4 Expleo Solutions 32
0.0 57 83 13 27 64.4 21.6 20.9 35.2 24.6 Tata Consultancy Services 34
0.1 41 45 71 7 195.3 47.6 56.7 89.3 66.6 Astral 34
0.5 7 28 64 33 398.9 49.5 47.5 52.5 23.2 APL Apollo Tubes 36
0.1 41 82 15 30 50.7 14.8 23.1 52.0 46.9 Marico 37
0.0 46 47 21 60 39.8 - - 124.0 59.9 IRCTC 38
0.2 28 11 48 69 391.0 48.5 62.0 23.9 17.0 NGL Fine-Chem 38
0.0 134 87 38 4 109.3 19.4 16.1 29.5 18.7 Infosys 40
0.0 27 41 43 45 146.8 28.1 39.5 31.0 21.2 Mindtree 40
- - 48 80 1 63.6 21.0 21.5 25.6 27.5 HDFC Bank 40
- - 4 54 73 24.6 29.8 12.7 8.2 11.3 Manappuram Finance 43
0.0 40 38 51 43 107.3 0.1 - 21.3 20.9 Just Dial 44

June 2021 Wealth Insight 37

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Hindustan Unilever year (average 10-year asset turnover toothpaste and toothbrush
The largest FMCG brand in India, is over 2.3). Another important business in India, with around 50
Hindustan Unilever (HUL) is a factor is the dividend-payout ratio per cent market share as of FY19.
household name. Its portfolio which has averaged about 80 per Oral care contributes
includes home-care, beauty and cent for the past decade. High around 90 per
personal care, and payout meant that equity remains cent to the
food products. stable with improving earnings, company’s top
Most of the resulting in a high ROE. line, while the
company’s Last year, HUL merged with rest comes
brands hold the GSK Consumer Healthcare, from personal-
top two spots in acquiring brands such as Horlicks care products
their categories. and Boost, which complemented under Palmolive.
During the past its food business. Going ahead, the In India, Colgate is synonymous
decade till FY20, the company intends to focus on with toothpastes.
company has achieved an average volume-led growth, especially in During the last few years, the
ROE of around 90 per cent due to rural India, along with utilising company has lost its market share
various factors. Superior e-commerce channels. owing to the entry of new players
operational efficiency has led to the such as Patanjali. As a result, its
company being able to churn out Colgate-Palmolive sales grew by only 3 per cent YoY
more sales from total assets year on Colgate is the leader in the during five years till FY20, while

Final M-cap Weighted average Weighted average Deviation in profit growth TTM profit
rank Company name Sector (` cr) 10Y profit growth (%) 10Y ROE (%) over 10 years (times) growth (%) ROE (%)
45 Berger Paints Chemicals 73,105 14.1 23.7 0.9 -7.2 21.7
45 Adani Total Gas Trading 1,31,229 32.3 21.2 1.5 15.2 27.3
47 Kaveri Seed Company Agri 4,422 30.3 25.6 2.1 39.6 26.5
47 CCL Products Agri 4,084 15.8 20.6 0.7 10.0 17.2
49 Vinati Organics Chemicals 17,245 20.5 25.8 1.4 -20.1 19.4
50 Balkrishna Industries Automobile & Ancillaries 36,644 18.6 20.6 0.9 20.6 19.6
51 Bajaj Finserv Finance 1,74,544 12.7 22.9 0.8 -10.5 18.3
52 Poly Medicure Healthcare 9,609 22.4 23.7 1.4 25.3 23.6
52 Dhanuka Agritech Chemicals 4,139 18.9 23.4 1.1 55.6 24.3
52 Atul Chemicals 24,266 24.1 19.4 1.1 -2.6 17.5
55 Nestle India FMCG 1,66,004 17.2 57.8 2.1 5.8 105.8
56 Advanced Enzyme Tech Healthcare 5,100 26.0 21.5 1.5 12.3 16.8
56 Saksoft IT 530 20.0 18.8 0.8 8.2 18.6
58 Triveni Turbine Capital Goods 3,125 21.8 38.3 3.0 -29.9 15.3
58 ITC FMCG 2,61,378 8.0 10.0 1.0 -11.5 22.8
60 Divis Laboratories Healthcare 1,06,771 19.9 22.2 1.1 46.1 22.5
61 Honeywell Automation Consumer Durables 37,200 24.6 19.0 1.1 0.9 20.1
62 Newgen Software Tech IT 2,299 23.4 21.1 1.4 22.9 20.0
63 Garware Technical Fibres Textile 5,399 20.8 18.4 0.9 -0.4 17.6
64 R Systems International IT 1,542 32.3 20.9 2.0 41.4 21.5
65 SBI Life Insurance Co Insurance 97,732 12.3 19.2 0.8 7.8 15.0
66 Hawkins Cookers Consumer Durables 2,962 9.1 10.1 1.9 -13.8 51.0
66 Alkem Laboratories Healthcare 35,810 25.3 18.9 1.4 38.3 22.3

38 Wealth Insight June 2021

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profit grew by 8 per cent on the
back of cost control and lower ad
spends. However, Colgate is able to
maintain a very high ROE
through a combination of decent
profit margins (around 15 per
cent) and high financial leverage,
which is maintained at the
expense of its suppliers with
whom the company is able to
negotiate high payable days.
To give impetus to growth, the
company has done several niche-
product launches recently, such as
Vedshakti and Diabetics. Further,
it is pushing its reach in rural
areas.
ICICI Securities
As we saw in the previous section
on profit-growth toppers, ICICI Financial leverage is the ability
Securities has been a beneficiary of a company to deploy debt to
of several tailwinds. As a result, it boost its returns. Being in the
has managed to increase its broking industry, giving margin to
earnings at a fast clip. its clients is part of ICICI
The company has an asset-light Securities’ business. When its
business model and majority of clients trade more and for higher
its expense goes towards amounts, the company stands to
employee costs. profit from that.
This means as The company has maintained
the business dividend payouts of more than 60
grows, it does per cent during the past decade. A
not need to go combination of these factors has
for heightened resulted in a high ROE over the
capex. years. However, cyclicity and
Additionally, it increasing competition in the
earns very high broking industry could lead to a
operating margins of about 40–45 reduction in profit margins going
per cent and is able to generate ahead, as a result its ROE may
high financial leverage. also normalise.

Rank Returns (% pa) P/E

Debt to equity Interest coverage Final
(times) ratio (times) Profit ROE Deviation in profits 1Y 5Y 10Y Current TTM Median Company name rank
0.2 20 73 45 17 75.0 31.9 38.7 123.3 64.0 Berger Paints 45
0.2 16 21 56 58 1097.2 - - 318.8 62.9 Adani Total Gas 45
0.0 660 24 35 77 101.3 12.3 28.0 13.7 15.2 Kaveri Seed Company 47
0.4 14 67 60 9 66.1 7.6 31.9 22.8 21.9 CCL Products 47
0.0 969 51 33 53 88.0 51.3 49.0 69.1 34.0 Vinati Organics 49
0.2 128 58 59 22 126.1 46.2 41.2 34.8 22.6 Balkrishna Industries 50
- - 75 50 15 135.3 43.3 36.7 40.6 32.5 Bajaj Finserv 51
0.3 9 43 46 52 260.8 43.9 41.8 81.0 33.6 Poly Medicure 52
0.0 137 57 47 37 81.2 7.8 29.1 21.0 20.8 Dhanuka Agritech 52
0.0 90 37 69 35 84.8 35.4 48.3 38.2 24.9 Atul 52
0.0 18 63 4 76 7.9 24.4 16.5 76.7 71.1 Nestle India 55
0.0 112 30 55 59 208.1 - - 36.3 18.7 Advanced Enzyme Tech 56
0.1 15 53 77 14 248.2 19.9 28.6 12.1 10.1 Saksoft 56
0.0 76 46 9 90 50.9 -1.6 - 33.7 33.9 Triveni Turbine 58
0.0 314 90 30 25 37.2 3.9 10.9 19.5 28.7 ITC 58
0.0 2244 54 52 40 71.0 31.0 28.6 56.7 33.7 Divis Laboratories 60
0.0 104 35 75 39 54.8 35.9 33.5 80.3 60.9 Honeywell Automation 61
0.1 21 39 57 54 132.7 - - 20.4 19.2 Newgen Software Tech 62
0.2 19 50 78 23 113.6 54.0 48.5 40.5 21.2 Garware Technical Fibres 63
0.1 18 22 58 74 69.0 21.2 38.2 16.1 15.2 R Systems International 64
- - 76 72 13 28.9 - - 66.5 56.7 SBI Life Insurance Co 65
0.1 21 86 5 71 33.9 18.9 21.6 44.9 32.7 Hawkins Cookers 66
0.2 30 31 76 55 20.0 20.8 - 23.0 28.2 Alkem Laboratories 66

June 2021 Wealth Insight 39

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HDFC Bank around 22 per cent to more than L&T Infotech
HDFC Bank is `1.1 trillion. This was achieved on Started under the aegis of its
India’s most the back of prudent credit parent L&T, L&T Infotech (LTI)
valued bank. As underwriting and focus on has come into its own since its
of FY21, its consistent growth. Even as public listing in 2016. The company
bank network banks, along with some private provides a bouquet of IT services,
stood at 5,608 banks, recorded high bad assets, such as application
branches. Despite HDFC bank has maintained low development
operating in a commoditised NPA numbers. Consistent and
business, HDFC bank has profitability was also achieved maintenance,
demonstrated superior through undertaking more-than- enterprise
performance, as seen through its required provisioning during solutions,
industry-leading net interest good times. testing, etc.,
margins (4.2 per cent for FY21), The new management at the across various
along with a robust asset profile bank intends to focus more on industries, such as
(gross non-performing assets at MSME lending going ahead. The banking and finance (29.8 per
1.3 per cent). damage from COVID-induced cent of FY21 revenue), insurance
Over the past decade till FY21, economic slowdown also remains (15.6 per cent), manufacturing
the bank grew its advances by to be seen. (16.5 per cent) and others. Like

Final M-cap Weighted average Weighted average Deviation in profit growth TTM profit
rank Company name Sector (` cr) 10Y profit growth (%) 10Y ROE (%) over 10 years (times) growth (%) ROE (%)
68 Havells India Capital Goods 62,360 24.8 24.0 2.7 21.4 19.5
68 PFC Finance 29,952 37.3 20.3 2.6 3.1 22.2
70 Sharda Cropchem Chemicals 2,949 22.5 17.7 1.2 84.2 16.5
71 Cholamandalam Investment Finance 43,185 18.9 17.4 1.0 0.7 14.6
72 Ipca Laboratories Healthcare 27,252 40.1 15.8 1.8 71.8 24.5
73 Syngene International Miscellaneous 22,721 17.8 20.3 1.3 -7.0 14.8
73 Rites Capital Goods 5,843 30.3 19.9 2.5 -29.5 16.4
75 HDFC Life Insurance Co Insurance 1,35,603 16.8 25.6 2.2 0.2 17.3
76 Supreme Industries Plastic Products 26,958 15.9 23.0 1.8 29.8 23.0
77 Amara Raja Batteries Automobile & Ancillaries 13,170 10.4 19.9 1.1 -7.4 15.2
78 Indraprastha Gas Inds. Gases & Fuels 35,816 14.5 19.9 1.3 -10.1 17.2
79 Gujarat Ambuja Exports Agri 3,979 31.6 15.9 2.2 123.1 19.1
 65) 'LYHUVLÀHG      
81 Persistent Systems IT 17,374 10.4 17.0 1.1 16.4 15.4
82 DFM Foods FMCG 1,677 12.9 24.5 2.8 -25.4 16.0
83 Adani Ports and SEZ Logistics 1,49,875 10.1 19.5 1.2 -14.3 14.7
84 Grindwell Norton Abrasives 13,393 10.7 16.5 1.2 8.1 16.8
85 Coforge IT 20,291 18.0 19.3 2.6 -0.1 20.9
86 Mold-Tek Packaging Plastic Products 1,326 15.7 18.1 1.9 3.0 18.0
87 Elantas Beck Chemicals 2,737 10.4 20.6 2.3 24.6 15.0
88 FDC Healthcare 5,650 15.7 16.0 1.8 40.4 18.0
89 Birlasoft IT 7,103 11.3 16.7 1.6 31.4 14.5
90 Sharda Motor Industries Automobile & Ancillaries 1,105 14.2 17.2 2.6 -26.1 14.6

TTM: Trailing 12 months. In ROE calculation, equity as per the latest balance sheet is used.

40 Wealth Insight June 2021

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other Indian IT services and through various acquisitions. under management) growth of
companies, LTI drives around 68 The company won two large around 14 per cent per annum
per cent of its revenue from deals in Q4 for a total value of $66 over the last 10 years till FY20.
North America. million. Going forward, COVID is This trend has been accelerated
During the past 10 years till expected to accelerate digital- due to demonetisation, low
FY21, LTI has managed to deliver services uptake, which will interest on traditional savings
consistent profit growth of benefit LTI. avenues, better
around 20 per cent YoY. This has marketing,
been achieved on the back of HDFC AMC amongst
various measures, such as With an AUM of `3.95 trillion as others.
consistent client additions of FY21, HDFC AMC is one of the Recent
(increased from 264 in FY17 to largest and most profitable fund regulatory
over 400 in FY21), focus on digital houses in the country. It offers a changes, which
services (33 per cent in FY18 to diversified product mix across have capped
45.6 per cent in FY21), equity and debt segments through expense ratios, have
diversification across various its 227 branches and a network of taken some sheen off AMCs.
industries, alliances with more than 65,000 distributors. However, long-term growth
technology specialists, such as Mutual funds are a sunrise prospects of the industry remain
Amazon, IBM, Oracle and others, sector and have seen AUM (assets intact.

Rank Returns (% pa) P/E

Debt to equity Interest coverage Final
(times) ratio (times) Profit ROE Deviation in profits 1Y 5Y 10Y Current TTM Median Company name rank
0.2 23 33 42 88 118.2 25.4 31.2 73.1 53.9 Havells India 68
- - 15 62 86 47.5 10.9 4.9 3.3 4.4 PFC 68
0.0 116 42 81 41 143.9 4.2 - 13.1 17.4 Sharda Cropchem 70
- - 56 82 28 261.1 25.3 34.1 29.5 21.6 Cholamandalam Investment 71
0.1 120 13 90 66 37.6 37.4 22.5 25.8 30.7 Ipca Laboratories 72
0.3 15 61 63 51 72.6 24.7 - 57.8 38.1 Syngene International 73
0.0 86 25 67 83 15.0 - - 13.8 12.6 Rites 73
- - 65 34 78 36.4 - - 99.1 84.9 HDFC Life Insurance Co 75
0.0 64 66 49 65 147.9 22.2 32.4 29.4 33.9 Supreme Industries 76
0.0 74 81 65 36 39.2 -2.6 24.8 22.5 27.2 Amara Raja Batteries 77
0.0 116 71 66 49 12.5 35.9 23.6 33.0 27.2 Indraprastha Gas 78
0.1 61 23 89 80 201.2 46.0 29.0 14.6 10.8 Gujarat Ambuja Exports 79
          65) 
0.0 101 85 85 32 359.6 28.4 30.1 39.5 16.4 Persistent Systems 81
0.4 4 74 40 89 66.1 0.2 30.8 64.3 63.0 DFM Foods 82
1.2 4 89 68 48 147.8 33.5 19.1 31.7 19.5 Adani Ports and SEZ 83
0.0 70 79 87 46 159.5 33.0 28.8 57.0 36.5 Grindwell Norton 84
0.0 36 59 70 87 147.0 49.6 35.3 45.7 21.0 Coforge 85
0.5 6 68 79 70 167.5 24.8 36.4 35.0 24.5 Mold-Tek Packaging 86
0.0 368 80 61 81 69.5 20.0 13.3 42.8 30.3 Elantas Beck 87
0.0 117 69 88 68 39.8 13.6 13.5 18.3 19.5 FDC 88
0.0 33 88 86 61 290.2 12.2 14.0 25.4 10.8 Birlasoft 89
0.0 63 72 83 85 207.2 18.0 - 23.7 14.3 Sharda Motor Industries 90

The median P/Es are for five years. If five-year data are not available, they are for three years or one year. Profit data as of December 2020. Price data as on May 14, 2021.

June 2021 Wealth Insight 41

Subscription copy of [balaji.orange@gmail.com]. Redistribution prohibited.
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dropped from the
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42 Wealth Insight June 2021

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June 2021 Wealth Insight 43

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