From Caterpillar India to JCB India: India's best unlisted companies

Equity investors love Indian subsidiaries of global multinational corporations (MNCs). Most of the subsidiaries listed on Indian bourses enjoy premium valuations, thanks to their superior earnings profile, industry- leading margins and nearly debt-free balance sheets. This makes them a safe haven in an increasingly volatile and uncertain growth environment that India faces currently. 

Things are not very different in the unlisted space. The list of India’s best unlisted companies is dominated by Indian subsidiaries of well-known American and European MNCs. 

There is, however, some difference in the listed and unlisted space. Top unlisted MNCs are capital good makers operating in the business to business (B2B) segment; top listed MNCs are largely consumer companies such as Hindustan Unilever, Nestle, Colgate Palmolive and Maruti Suzuki, among others.  

Caterpillar India is the best unlisted company this year. It is one the top manufacturers of construction & mining equipment and heavy diesel engines in the country. It reported revenues of Rs 8990 crore in FY19, up 42.8 per cent year-on-year (y-o-y), while net profits were up 82 per cent to Rs 1292 crore. It’s nearly debt-free last year with gross debt to equity ratio of 0.1x and return on equity of 37.7 per cent, among the highest in its category. 

It is followed by Bombardier Transportation India, which manufacturers coaches and rolling stock for metro trains. Its revenues were up by 30 per cent y-o-y in FY18 to Rs 2554 crore while net profits were up 46 per cent y-o-y to Rs 214 crore. The Canadian multinational is followed by Cummins Technologies India, Coca-Cola India and Syngenta India.

Only two Indian-owned and promoted companies feature in the top ten this year — Gharda Chemicals and drug maker USV.

How did we find the best companies?

The list has been prepared from the sample of 300 largest unlisted companies in terms of revenues, based on their financials for either FY19 or FY18. It excludes unlisted subsidiaries of listed companies. 

The companies were first ranked on revenue and profit growth reported in their latest fiscal year. Then they were ranked on their return on equity, net profit margins, gross debt to equity ratio and annual revenues. The companies that top the list offers the best combination of faster earnings growth, better margins, lower balance sheet leverage and superior return on equity. Toppers combine superior financial metrics with large-scale operations in their industries.