How we did it?
For compiling the list of companies, we included companies with net sales below Rs 1,000 crore during FY10. With a view to exclude small companies with possibly dubious credentials, we eliminated from the list companies with a market capitalisation of less than Rs 50 crore.
To make sure that the list was populated only with companies showing healthy financials, we added further criteria, such as return on capital employed (RoCE), debt-equity ratio (DER) and interest coverage ratio (ICR), cash flows from operations and dividends paid.
India Inc’s Small Speedsters
As a result, the final list comprised companies, which consistently maintained their RoCE over 15% during the past three years, DER below 1.5 in the past three years and an ICR above 5. Companies which had missing or skipped dividends more than once during the last three years or companies with more than one year of negative operating cashflows, too, were weeded out. This left us with nearly 140 companies with healthy financials.
Since we were trying to identify the fastest growing companies, we calculated weighted average growth rates of sales and profits for all these companies, assigning the highest weightage to growth in FY10. This rewarded their latest performance over growth in the past. Finally, the three-year sales and profit growth and RoCE were assigned 30:30:40 weightage to decide the final rankings.
We also decided not to select such companies that have strained their balance sheets for the sake of pursuing high growth. Our list comprises healthy cash generating companies, paying regular dividends with under-leveraged balance sheets. These companies are also earning substantially higher on the capital they have invested in their businesses than their cost of funds.
For compiling the list of companies, we included companies with net sales below Rs 1,000 crore during FY10. With a view to exclude small companies with possibly dubious credentials, we eliminated from the list companies with a market capitalisation of less than Rs 50 crore.
To make sure that the list was populated only with companies showing healthy financials, we added further criteria, such as return on capital employed (RoCE), debt-equity ratio (DER) and interest coverage ratio (ICR), cash flows from operations and dividends paid.
India Inc’s Small Speedsters
As a result, the final list comprised companies, which consistently maintained their RoCE over 15% during the past three years, DER below 1.5 in the past three years and an ICR above 5. Companies which had missing or skipped dividends more than once during the last three years or companies with more than one year of negative operating cashflows, too, were weeded out. This left us with nearly 140 companies with healthy financials.
Since we were trying to identify the fastest growing companies, we calculated weighted average growth rates of sales and profits for all these companies, assigning the highest weightage to growth in FY10. This rewarded their latest performance over growth in the past. Finally, the three-year sales and profit growth and RoCE were assigned 30:30:40 weightage to decide the final rankings.
We also decided not to select such companies that have strained their balance sheets for the sake of pursuing high growth. Our list comprises healthy cash generating companies, paying regular dividends with under-leveraged balance sheets. These companies are also earning substantially higher on the capital they have invested in their businesses than their cost of funds.
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