That’s what keeps businesses alive, that’s what makes the difference between good and bad managements and that is what makes investors better or worse off. To understand what drove the companies that outran the others over the past five years, we present The Outperformers.
Good is the enemy of great,” writes Jim Collins in his book Good to Great. Like the most of us who settle for ‘good’ in our lives, a majority of companies never become great because they stay satisfied with good. While his research yielded some remarkable insights on why some companies make the leap to greatness while others fall short trying, Collins goes on to say that greatness is not a function of circumstance but largely a matter of conscious choice. So, what drives outperformance in companies over the longterm? Why do some companies thrive while others struggle in the same economic environment?
Our annual edition The Outperformers tries to answer just that by taking a closer look at companies that have outperformed over a five-year period and what they have done right to create significant value for their investors (see: Coasting uphill). As a starting point, we zeroed in on companies with a market capitalisation of over a billion dollars and looked at their compounded stock return from FY13 to FY18. The Sensex generated an annual compounded return of 11.80% during the same period and companies that outperformed the benchmark index formed our universe. You can find the complete listing on page 124. From a sector perspective over the past five years, private banks and NBFCs have managed to deliver stellar return for their shareholders as they took away market share from PSU banks, which continue to grapple with NPAs and mounting losses. And their dream run is likely to continue according to Neelkanth Mishra, managing director, Credit Suisse India: “Private banks are the only space that will continue to see an 18-20% growth over the next five years as PSU banks continue to cede market share and private banks leverage technology to innovate and grow significantly higher