ET500 list: Here are 12 reasons to feel cheerful about 2013

MUMBAI: The past few quarters have been a test of India Inc’s resilience amid weak demand, sticky inflation and uncertainty on the policy front. The gains by the benchmark indices in the last few weeks of 2013, largely due to a rally in a handful of companies, only serve to mask the underlying economic gloom.

On the one hand, new business is hard to come by due to slack demand and, on the other, higher input costs cannot be passed on for fear of driving away customers. Under such testing circumstances, a handful of companies across sectors have done well through a sustained focus on core operations without losing sight of game-changing opportunities; an ability to observe restraint when it comes to financing acquisitions through borrowings; and a strong leadership pipeline.

That’s the ET500 theme for the year — thriving in adversity, companies that have kept their balance sheets free of stress and maintained strong profit growth. The ET Intelligence Group (ETIG) identified 12 companies with sound business models and strong balance sheets in the year’s ET500 list.

They have turned in exceptional performances by making the best of opportunity through a judicious combination of internal and external financing and converting these into growth engines. The dozen star performers are Britannia, Cairn India, Gujarat Gas, HCL Technologies, JSW Steel, Lupin, Motherson Sumi, MRF, NTPC, Power Grid Corporation, Prestige Estates Projects and UltraTech, belonging to various sectors and offering a diverse choice for investors.

ETIG spoke to the leaders of the 12 companies to understand what differentiated them from peers. What emerges from these conversations is a sense of the factors that helped these companies to do well despite the difficult environment. Some benefited by meticulously following the well-trodden road, without being distracted by tempting yet pricey acquisitions and diversifications -- for instance, NTPC, the nation’s largest power generator.

“Ours is a time-tested model,” said Arup Roy Choudhury, chairman and managing director. “We have been running it successfully for the last 40 years. This is the sector where you need to be consistent, where you can’t be a fly-by-night operator.”

On the other hand, others were able to beat the slowdown because they decided to invest precisely when rivals were holding back. “Businesses were shrinking and so were IT budgets; the mood was pessimistic,” said Anant Gupta, president and CEO of HCL Technologies, while explaining the dilemma his company faced in the aftermath of the financial crisis that hit western economies hard in 2008.

“We had two options: either to be pessimistic ourselves and cut investments in new initiatives or to ride on the downward wave by investing more and finding growth amidst pessimism.” The country’s fourth largest IT services player chose to grow through acquisitions and by investing in new skills.

As for Gujarat Gas, it’s a story of how organisations can handle tough business situations without losing out on growth and profitability by engaging with stakeholders. Given that there are few signs of an economic revival, corporate performance is bound to be hit. But we believe that the ET500 star performers are strong enough to overcome such disadvantages.

As far as the ET500 ranking goes, the top 10 aren’t very different from last year, with just one new entrant. Essar Oil gained six places to claim the 10th spot, ahead of Hindalco. This makes it the sixth petroleum company in the top 10, while two of the remaining four – Tata Motors and Tata Steel – belong to one business house. Of the 10, six are stateowned. State Bank of India is the only non-manufacturing company in the top 10.