 "Choosing the winners")
The six-member jury for the Business Standard awards for corporate excellence in 2013 made it look simple. That was only to be expected from a jury comprising six of India Inc's leading decision-makers. What perhaps made the job of selecting the outstanding individuals and institutions simpler was the tone set by the jury's chairman, K V Kamath, at the beginning of the one-and-a-half hours of intense discussions.
The ICICI Bank chairman said: "The success of the winners that we select should endure." He wanted his jury colleagues to focus on companies of the future and those that had contributed and would contribute to a "new India".
Everyone also agreed with Cyril Shroff, managing partner at law firm Amarchand & Mangaldas, that what should matter more than their performance in the stock market was entrepreneurship and a sustainable business model. McKinsey India Managing Director Noshir Kaka added: "We should look at individuals who built real institutions at a time when the challenges in the external environment were severe."
Each jury member had thoroughly read the 260-page information docket, containing details of the candidates shortlisted for the awards. This was evident from the colour-coding of the positive and negative attributes of each candidate and Kamath's comment that the difficulties faced by India Inc were evident from the fact that almost 60 per cent of the names shortlisted last year were missing this time.
The initial shortlisting, by the Business Standard Research Bureau, was done by choosing firms that had posted topline growth of over 20 per cent and bottomline growth of over 10 per cent, compounded in each of the three years between 2010-11 and 2012-13.
Other financial criteria, including returns on net worth and capital employed, were also applied. While KKR India CEO Sanjay Nayar added two more criteria - innovation and successful globalisation - Marico CMD Harsh Mariwala pitched for a close look at governance standards. Quite expectedly, entrepreneurial instincts were on top of the priority list for Future Group CEO Kishore Biyani.
Kamath began the process by asking members to shortlist two candidates from each category. The merits of the nominees ranked first and second were then subjected to intense scrutiny.
Not much time was taken in picking N Chandrasekaran, CEO and MD of Tata Consultancy Services, as CEO of the Year, for what the jury termed his industry-beating performance. Despite being the largest information technology services company in India, TCS has clocked strong growth in sales and profits, outpacing its peers by a wide margin. For instance, its top line has grown at 28-30 per cent in the last three years, while profits have grown at 23-34 per cent. TCS' revenues and profits are now 50-56 per cent more than its nearest listed competitor.
Return ratios are also among the highest in the industry and the company has delivered high returns to its shareholders; this is reflected in the 26 per cent compound annual growth rate in its market capitalisation in the last three years.
The jury said Sun Pharmaceutical had not only changed the landscape of the Indian pharmaceutical industry but also set new standards. Led by Dilip S Shanghvi, Sun Pharma has grown at a stupendous rate in the past couple of years, partly aided by acquisitions at attractive valuations. Its net sales have grown at an annual rate of over 40 per cent in the past three years, whereas its profit growth was 37 per cent.
In the domestic market, the company focused on specialty plays. This helped it grow its domestic revenues at a consistent pace, unaffected by pricing policy changes. Also, its strategy to build up a strong product pipeline in the US helped it become a formidable player in the world's largest healthcare market. Not surprisingly, its market capitalisation has grown at a CAGR of 42.4 per cent in the past three years.
Choosing the Star MNC of the Year appeared the easiest. Apart from the fact that the number of companies able to meet the criteria was the smallest among all categories, Hindustan Unilever (HUL) was on top of everyone's list. Despite its huge size, HUL, the leader in the fast-moving consumer goods category, has reinvented itself in the past few years and reported strong numbers, led by good growth rates across its business categories. Notably, this has come on the back of stronger profit growth.
Net sales have grown at a CAGR of 15 per cent in the last three years, while profit growth was 21 per cent - in 2012-13 its profit increased 37 per cent to Rs 3,839 crore.
What's more, its return ratios have been one of the best and close to 100 per cent over the past few years, whereas its market capitalisation has increased at a CAGR of 27 per cent over the past three years. Simply put, it has doubled in three years - with 12 per cent gains coming in the year ended October 2013.
There were quite a few contenders for the Star PSU of the Year category, but Bharat Petroleum Corporation Ltd (BPCL) was the unanimous choice. Among the key factors that went in the company's favour was its successful foray into oil and gas exploration. In the past few years, the company has bought a stake in various global hydrocarbon assets - some for as low as $100 million - that today are worth much more than the purchase price, thanks to the oil and gas finds in the blocks. Its Mozambique assets - valued at Rs 10,183 crore, or Rs 141 per share for BPCL, by IDBI Capital analysts in a November report - are the most valuable. Together with its Brazil investments (Rs 30 a share), the total value of these hydrocarbon assets is pegged at Rs 12,357 crore, or Rs 171 a share for BPCL.
Overall, too, the view of the jury was that BPCL had been innovative in its business of refining and marketing. From the shareholders' perspective, BPCL's shares have fared far better on the Bombay Stock Exchange over the past year than those of its peers Hindustan Petroleum Corporation and IndianOil Corporation.
The Star SME of the Year was Ahmedabad-based Astral Poly Technik, led by managing director and founder, Sandeep Engineer, India's largest plumbing and drainage pipe maker, with revenues of Rs 821 crore in 2012-13. Its revenue has grown nine times since its initial public offering in early 2007 (a CAGR of more than 40 per cent). Its net profit expanded at the rate of 47 per cent during this period. The growth in its financial success is reflected in its share price. An investment of Rs 1 lakh in its initial public offering would have grown to Rs 8.6 lakh currently.
The jury was impressed by the story of a company that has been continuously expanding and building its production capacity. Support from its technology partner, Lubrizol, which controls nearly 70 per cent of the global chlorinated polyvinyl chloride market, has also been an important success factor.
The ICICI Bank chairman said: "The success of the winners that we select should endure." He wanted his jury colleagues to focus on companies of the future and those that had contributed and would contribute to a "new India".
Everyone also agreed with Cyril Shroff, managing partner at law firm Amarchand & Mangaldas, that what should matter more than their performance in the stock market was entrepreneurship and a sustainable business model. McKinsey India Managing Director Noshir Kaka added: "We should look at individuals who built real institutions at a time when the challenges in the external environment were severe."
Each jury member had thoroughly read the 260-page information docket, containing details of the candidates shortlisted for the awards. This was evident from the colour-coding of the positive and negative attributes of each candidate and Kamath's comment that the difficulties faced by India Inc were evident from the fact that almost 60 per cent of the names shortlisted last year were missing this time.
The initial shortlisting, by the Business Standard Research Bureau, was done by choosing firms that had posted topline growth of over 20 per cent and bottomline growth of over 10 per cent, compounded in each of the three years between 2010-11 and 2012-13.
Other financial criteria, including returns on net worth and capital employed, were also applied. While KKR India CEO Sanjay Nayar added two more criteria - innovation and successful globalisation - Marico CMD Harsh Mariwala pitched for a close look at governance standards. Quite expectedly, entrepreneurial instincts were on top of the priority list for Future Group CEO Kishore Biyani.
Kamath began the process by asking members to shortlist two candidates from each category. The merits of the nominees ranked first and second were then subjected to intense scrutiny.
Not much time was taken in picking N Chandrasekaran, CEO and MD of Tata Consultancy Services, as CEO of the Year, for what the jury termed his industry-beating performance. Despite being the largest information technology services company in India, TCS has clocked strong growth in sales and profits, outpacing its peers by a wide margin. For instance, its top line has grown at 28-30 per cent in the last three years, while profits have grown at 23-34 per cent. TCS' revenues and profits are now 50-56 per cent more than its nearest listed competitor.
Return ratios are also among the highest in the industry and the company has delivered high returns to its shareholders; this is reflected in the 26 per cent compound annual growth rate in its market capitalisation in the last three years.
The jury said Sun Pharmaceutical had not only changed the landscape of the Indian pharmaceutical industry but also set new standards. Led by Dilip S Shanghvi, Sun Pharma has grown at a stupendous rate in the past couple of years, partly aided by acquisitions at attractive valuations. Its net sales have grown at an annual rate of over 40 per cent in the past three years, whereas its profit growth was 37 per cent.
In the domestic market, the company focused on specialty plays. This helped it grow its domestic revenues at a consistent pace, unaffected by pricing policy changes. Also, its strategy to build up a strong product pipeline in the US helped it become a formidable player in the world's largest healthcare market. Not surprisingly, its market capitalisation has grown at a CAGR of 42.4 per cent in the past three years.
Choosing the Star MNC of the Year appeared the easiest. Apart from the fact that the number of companies able to meet the criteria was the smallest among all categories, Hindustan Unilever (HUL) was on top of everyone's list. Despite its huge size, HUL, the leader in the fast-moving consumer goods category, has reinvented itself in the past few years and reported strong numbers, led by good growth rates across its business categories. Notably, this has come on the back of stronger profit growth.
Net sales have grown at a CAGR of 15 per cent in the last three years, while profit growth was 21 per cent - in 2012-13 its profit increased 37 per cent to Rs 3,839 crore.
What's more, its return ratios have been one of the best and close to 100 per cent over the past few years, whereas its market capitalisation has increased at a CAGR of 27 per cent over the past three years. Simply put, it has doubled in three years - with 12 per cent gains coming in the year ended October 2013.
There were quite a few contenders for the Star PSU of the Year category, but Bharat Petroleum Corporation Ltd (BPCL) was the unanimous choice. Among the key factors that went in the company's favour was its successful foray into oil and gas exploration. In the past few years, the company has bought a stake in various global hydrocarbon assets - some for as low as $100 million - that today are worth much more than the purchase price, thanks to the oil and gas finds in the blocks. Its Mozambique assets - valued at Rs 10,183 crore, or Rs 141 per share for BPCL, by IDBI Capital analysts in a November report - are the most valuable. Together with its Brazil investments (Rs 30 a share), the total value of these hydrocarbon assets is pegged at Rs 12,357 crore, or Rs 171 a share for BPCL.
Overall, too, the view of the jury was that BPCL had been innovative in its business of refining and marketing. From the shareholders' perspective, BPCL's shares have fared far better on the Bombay Stock Exchange over the past year than those of its peers Hindustan Petroleum Corporation and IndianOil Corporation.
The Star SME of the Year was Ahmedabad-based Astral Poly Technik, led by managing director and founder, Sandeep Engineer, India's largest plumbing and drainage pipe maker, with revenues of Rs 821 crore in 2012-13. Its revenue has grown nine times since its initial public offering in early 2007 (a CAGR of more than 40 per cent). Its net profit expanded at the rate of 47 per cent during this period. The growth in its financial success is reflected in its share price. An investment of Rs 1 lakh in its initial public offering would have grown to Rs 8.6 lakh currently.
The jury was impressed by the story of a company that has been continuously expanding and building its production capacity. Support from its technology partner, Lubrizol, which controls nearly 70 per cent of the global chlorinated polyvinyl chloride market, has also been an important success factor.