Inspired with Saurabh Mukherjea's latest book The Unusual Billionaires, we set out to search for the companies that stand out on the basis of the twin filters of revenue growth of at least 10 per cent and a minimum return on capital employed (ROCE) of 15 per cent every year for the last decade.
How tough are these requirements really?
Take a look at the ten largest listed non-finance companies that clear the 15 per cent ROCE criterion.
Not even one of them has been able to grow revenues by 10 per cent each year in the last ten years. Names like Infosys, TCS, Sun Pharma and Asian Paints - all stalwarts in the own right - fell on the wayside on this stringent requirement.
Why these two filters?
Revenue growth of 10 per cent does not appear to be too tough a task but growing by 10 per cent every year is a Himalayan feat even for some of India's best. This filter takes care of the growth aspect.
A high return on capital employed ensures that the company has some sort of moat. A company that does not earn more than its cost of capital generally does not enjoy any pricing power and hence has limited competitive advantage. Ensuring that the returns on capital are high takes care of this angle.
Click on the links below to read about the 'Unusual Five' that have scaled both these requirements to stand apart from all of India Inc.
The other articles will be uploaded over the course of this week. Do watch out.