These companies achieved rapid growth without losing equity

How these businesses thrived with zero equity dilution

Page, Supreme, Hawkins: Achieved growth and didn't lose equity

Often, companies try to boost their earnings through external funding. This is usually of two kinds: equity and debt. However, the drawback of borrowing too much is that it causes the balance sheet to become highly leveraged. Raising capital through equity, on the other hand, can result in the gradual dilution of shareholders' stake.

Yet some companies have reported consistent earnings growth without relying heavily on external funding sources. These businesses did not raise equity and kept their debt levels to a minimum.

We focused on companies in the manufacturing space since such firms typically require efficient working capital management, high-margin products and effective fixed capital utilisation to thrive without dependence on external capital.

To identify such businesses, we applied the following filters on all the listed companies with a market capitalisation of at least Rs 500 crore:

  • Equity share capital should have remained stable for the past 10 years

  • The company should have reported double-digit growth in earnings and revenue over the last 10 years
  • The 10-year average ROCE (return on capital employed) should have been greater than 20 per cent
  • The company should have had an average asset turnover ratio of more than one

Upon applying these filters, we got a list of 23 companies. We further filtered out companies in the technology, trading and holding sectors, leaving us with an exciting list of four companies: Page Industries, Hawkins Cookers, Supreme Industries and Coromandel International.

These businesses have reported a consistent rise in their earnings without raising additional equity. Further, they have witnessed impressive growth, profitability and efficiency over a 10-year period.

High growth, profitability and efficiency

These companies have grown their earnings without raising additional equity

Financials Page Industries Hawkins Cookers Supreme Industries Coromandel international
Growth (%)
10Y sales growth 19 10.1 10.5 12.6
10Y profit growth 17.6 10.8 11.6 16.6
10Y median EBIT margins 19.8 13.2 12.3 10
10Y median ROCE 62.2 61.5 32.8 22.6
10Y median asset turnover 2 2.3 1.7 1.3
10Y median cash conversion cycle 62 15 19 57

Page Industries

Page Industries is a market leader in India's innerwear sector and the exclusive licensee of Jockey in India, Sri Lanka, Bangladesh, Nepal, and the UAE.

Page's biggest advantage is its strong brand presence, which allows it to enjoy higher profit margins. Further, a firm brand name helps it focus on EBOs (exclusive brand outlets), which boast a higher footfall and conversion rate than MBOs (multi-brand outlets).

In addition, higher margins coupled with efficient working capital management have helped the company generate consistent cash flows. Consequently, the company did not need to raise any equity capital and significantly reduced its long-term debt.

Hawkins Cookers

Hawkins Cookers is among the leading players in the country's pressure cooker business. It sells under three brands: Hawkins, Miss Mary and Futura.

In FY23, sales from pressure cookers contributed 83 per cent of the company's revenue. An emphasis on quality has enabled it to sell its products at a higher price than its peers, resulting in relatively higher margins.

Further, the company has consistently concentrated on its high-margin cookware business, which helps it use its assets efficiently. As a result, it has maintained a 10-year average asset turnover of 2.3 times.

Supreme Industries

With a market share of 11 per cent, Supreme Industries is the largest manufacturer of plastic piping products in India as of FY23. Unlike its peers that solely focused on piping systems, Supreme has diversified its offerings with plastic piping, packaging, industrial products and consumer products business, including plastic furniture. The company has been focusing on adding value-added products to earn higher margins.

Moreover, the company leverages its distribution networks effectively to cross-sell products, leading to efficient asset utilisation and high asset turnover compared to peers.

Coromandel International

Coromandel International , a Murugappa Group company, is an agricultural solutions provider in India. Its two main segments are nutrient and allied products and crop protection products. It is India's top single super phosphate (SSP) producer with a 13.8 per cent market share and the largest private player in the phosphatic industry with a 17.2 per cent market share in the NPK and DAP segment.

India imports most of the raw material (phosphorus acid and rock phosphate) required to produce phosphate fertilisers. However, Coromandel International did backward integration to reduce its manufacturing costs. The company invested in Foskor and Tunisian Indian Fertilizers to source its raw materials. This, combined with economies of scale, made Coromandel International the lowest-cost producer in the phosphatic industry and helped it generate high margins.

Currently, Coromandel International operates at almost 100 per cent capacity. This is due to increasing production volumes through debottlenecking without necessarily expanding or building new facilities, thus improving overall efficiency and enabling the company to maintain a high asset turnover ratio.

Word of caution

The above companies are not stock recommendations. We only aim to provide investment ideas through this exercise. We recommend conducting thorough due diligence before making any investment decisions.

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