As a society, we are fascinated by wealth and power. Growing up in suburban Delhi on a diet of Amar Chitra Katha comics, I couldn’t help noticing that the ancient kings not only boasted martial prowess but also great wealth and always married the most beautiful princesses. In fact, two of the country’s great epics essentially revolve around the tussle for property, power and women. These cultural mores have impacted the way we view corporate captains in contemporary India — too often, the cover pictures of business magazines are grown-up versions of the Amar Chitra Katha covers. Simply replace the ancient marauding warrior with the modern-day tycoon preening in front of his luxurious office, the caption helpfully informing us how he “transformed” or “powered” his business.

More specifically, contemporary narratives in business journalism are about either crony capitalists (the modern-day Kauravas) or “get-rich-quick” entrepreneurs (the Pandavas). While such caricatures might help magazines sell a few more copies, they combine with our traditional obsessions to create a distorted picture of what successful businesspeople in India are really like.

Most promoters and CEOs of listed businesses that I come across are grounded, hard-working individuals who have risen in life from modest beginnings. Their life centres around steadily improving and growing their business alongside dealing with the vagaries of the economic cycle and the country’s thicket of regulations. If you see them on the street, you will not recognise them. Several of them drive ordinary cars and most of them live a life characterised by middle-class values.

Three years ago, it dawned on me that most of India’s consistently successful businesses are actually led by anonymous people such as these. That realisation led me to write The Unusual Billionaires .

If you look at the past decade for listed companies that have consistently grown their revenues at a minimum of 10 per cent per annum while maintaining a return on capital employed (RoCE) at 15 per cent or better, only 15-20 will make the grade. In fact, if you look at every successive decade in post-1991 India, you will find eight companies that pass muster frequently: Asian Paints, Berger Paints, HDFC Bank, Axis Bank, ITC, Marico, Page Industries and Astral PolyTechnik.

My colleagues and I spent the better part of two years researching these companies threadbare. We met not only the current management teams but also the CEOs reigning during the 1970s, ’80s and ’90s, the customers, suppliers and even competitors. The Unusual Billionaires traces our memorable journey over the past two years. Here is a sneak peek into what makes these eight companies succeed so consistently.

1. Focus on the long term without being distracted by short-term gambles: For 99 per cent of Indian promoters, the “opportunistic” gene is so deeply embedded that as soon as they spot a new sector they can venture into, they go “off-strategy”. As the leading market strategy consultant Rama Bijapurkar says, “Most companies tend to focus on short-term results and hence that makes them frequently do things that deviate away from their articulated strategy… (and) their long-term goals.”

2. Constantly improve the core franchise using the IBAS (Innovation, Brands, Architecture and Strategic Assets) framework: Created by the British economist John Kay, the framework captures how great companies strive over many decades to create sustainable competitive advantages (which, in turn, allow them to pull away from their competitors). Examples of this include Asian Paints’s use of IT as early as the ’70s to forecast sales patterns. Similarly, Astral PolyTechnik has innovated its CPVC pipes and fittings with lead-free and bendable products.

As its promoter, Sandeep Engineer, told me: “We grew at 40-plus per cent CAGR (compound annual growth rate) for 7-8 years up to 2014, when the economy wasn’t that strong. Where was the slowdown? Slowdown is in the mind! If you create new product segments, if you create leadership, if you create brand, growth will be strong and ahead of industry.”

3. Sensibly allocate capital while avoiding expensive and unrelated forays: As successful companies grow, they throw off ever-increasing amounts of cash. The challenge then is to allocate this cash in a way that the RoCE does not suffer. Beyond a point, the best way to protect RoCE is to return large amounts of money to shareholders, something that most promoters find hard to stomach. ITC stands out as an example of a firm that has always returned large amounts of money to shareholders while making modest investments in new businesses. Similarly, Asian Paints has forayed overseas but never stretched its balance sheet for this. As its MD and CEO, KBS Anand, said of its home improvements business: “At the moment, the home improvements business is too small to have any significant impact on the overall firm’s RoCE. But if you are talking about building long-term strength with your channel partners, then whatever RoCE we lose in the new business will be more than offset by increase in RoCE of the paints business.”

Saurabh Mukherjea is CEO — Institutional Equitiesat Ambit Capital. His book The Unusual Billionaires was published this month

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