The price of an extra rupee

Summary: Growth looks good until you ask what it cost. This column applies Buffett’s test, how much new capital a company needs for each extra rupee of annual profit, to 1,104 Indian companies. It starts with a biscuit maker and a brewer to show how different those costs can be, then lays out what the numbers say about growth in India.

Summary: Growth looks good until you ask what it cost. This column applies Buffett’s test, how much new capital a company needs for each extra rupee of annual profit, to 1,104 Indian companies. It starts with a biscuit maker and a brewer to show how different those costs can be, then lays out what the numbers say about growth in India. A packet of biscuits and a bottle of beer. Over the last decade, Britannia added Rs 1,777 crore to its annual operating profit and needed Rs 598 crore of fresh capital to get there. United Breweries added Rs 60 crore of annual operating profit and put in Rs 1,605 crore. Same decade, same country, two consumer businesses you can buy on a shop counter. That gap is what this month’s cover story is about, measured in a different way. While the cover sorts India’s companies using our Quality Score, which reads a decade of returns and balance-sheet strength in one number, this column does the arithmetic behind it, the one Warren Buffett actually did in his 2007 letter, and which you can do yourself. The question Buffett asked Buffett’s test is not how fast a business grows. It is what the growth costs. See’s Candies grew its chocolate volume about 2 per cent a year for 35 years. Nobody would call that exciting. But to lift its annual pre-tax profit from under $5 million to $82 million, it needed only $32 million of extra capital, which works out to roughly 40 cents of new money for every dollar of new yearly profit. FlightSafety, the pilot-training business Berkshire bought in 1996, added $159 million of annual

This article was originally published on November 01, 2026.