The growth imperative

 

Why aggressive growth is the key to profitability

Report | June 2016 | Kanvic Grey Matter

by Deepak Sharma, Ravindra Beleyur, Vlad Flamind, Gehan Wanduragala, Guillaume Santesmases

Kanvic analysis has found that the companies which prospered in the last five years were those that relentlessly focussed on expanding their top lines.

Amidst the many troubles beleaguering Indian Inc., we have been able to identify a number of companies in every industry that have prospered in this hostile environment, achieving healthy revenue growth at the same time as bettering their bottom lines.

 

What we have discovered is that the winners of recent years have been those that pursued aggressive growth, relentlessly focussing on expanding their top lines to steer their way to higher profits.

 

One of the most significant findings from the Kanvic Performance Navigator is that the companies that have increased profits over the last five years have been those that pursued the most aggressive growth.

 

Companies that increased their top line by more than their industry’s median were more likely to see profit growth, while those who grew below the industry median were more likely to see a profit decline.

Given that top line growth has had a disproportionate impact on profits, the clear imperative for India Inc. is getting back to growth.

 

Equally interesting as the correlation between aggressive growth and increasing profitability, is the fact that there are companies in every sector that have achieved growth. This is despite the fact that many industries have faced well documented challenges in recent years.

 

For example, even in the troubled construction space that has been beset by delays to large infrastructure projects, there are companies that have achieved growth above the median of any other sector, including such high performers as information technology.

By contrast the media & entertainment sector has seen the highest revenue growth with a median growth rate of 20%. Yet even in this high performing sector there are companies that have recorded significant revenue falls over the period.

 

In fact, the Kanvic Performance Navigator finds that there is eight times more variation in revenue growth inside sectors than between sectors. Therefore, whatever the industry, breakthrough growth is possible for India Inc.

 

What this shows is that the strategies pursued by individual companies matter far more to their growth and profitability than the external forces that may be impacting their industry.

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