The Fastest growing Companies exercise kicked off with unaudited data on companies whose numbers for financial years 2013-14, 2012-13, 2011-12 and 2010-11 were available with Ace Equity Database, an extensive repository of financial as well as non-financial information of listed and unlisted Indian firms.
We began with a universe of 3,669 listed companies, excluding trading companies, banks and financial services companies and real estate firms. The reason being that trading companies often trade on behalf of others, while the income of banks and financial services firms is basically the interest or fee they earn from the money they handle. The real estate sector was excluded as it is still to recover from the turmoil it has been in since 2008.
We then applied a series of filters to this list. For instance, all companies with less than Rs 100 crore in net sales and Rs 10 crore in net profits in 2013-14 were eliminated. After the initial exclusion, we applied a few other filters to ensure that only fast-growing but financially healthy companies made it to the list.
We only included companies that had declared a net profit and a growth in net sales in at least three of the four years under consideration. By extension, companies whose revenues dipped in more than one of the last four years were excluded.
The ranking of India’s fastest growing companies is based on the average of the last four years’ year-on-year (y-o-y) growth in net sales. We considered the average of the past four years’ y-o-y growth in net profits and the compound annual growth rates (CAGR) in net sales and net profits to arrive at the final list. We chose the four-year average over CAGR because the former captures the twists and turns in a company’s fortunes better. In comparison, CAGR only captures growth between the first and the last year.
This year, the ‘total expenses’ head has been replaced with companies’ market cap on the last trading day of every financial year in the last four fiscals. All the company financials used are on a standalone basis. The list does not include companies whose financial year ends in June 2014.
(This story was published in BW | Businessworld Issue Dated 11-08-2014)