Inc. India 500

                                                            Inc.India Best Performing Mid-size Companies
 
Who are the Inc.India Best Performing Mid-size Companies?
Inc.India Best Performing Mid-size Companies are companies that have ambitions greater than their size would suggest and aspirations greater than those of their peers.  In brief, they are companies that: 
 

• Are not merely growing, but are transitioning, to the next level
• Have the passion to grow – i.e. chase the next level. From ‘tens of crores’ to ‘fifties of crores’. From fifties to hundreds; and so on…
• Are committed to quality in what they produce as well as what they use – inputs, services, processes, advice…
• Are committed to and aspire towards high ethical and governance standards
• Are open to competition and at their core, committed to being ‘global’

 
In terms of net sales, these enterprises lie between Rs 50 crores and Rs 1,500 crores. To account properly for the differences that size and scale make, and to give small firms a fair shot at making the ‘Best High Growth Companies’, we have divided companies into four size segments. They are:
 
1)      India’s Best 100 Under 100 (Best 100 companies with turnover under Rs 100 crores)
2)      India’s Best 100 Under 500 (Best 100 companies with turnover between Rs 100 and Rs 500 crores)
3)      India’s Best 100 Under 1000 (Best 100 companies with turnover between Rs 500 and Rs 1000 crores) 
4)      India’s Best 100 Under 1500 (Best 100 companies with turnover between Rs 1000 and Rs 1500 crores) 
 
Why recognise, study, showcase and share the inspiring performances of these companies?
Indian mid-size companies matter. They account for a surprisingly large share of employment and are considered the drivers of innovation and entrepreneurship. However, in corporate India the big and the small typically grab the glory, leaving a large vacuum in between. As a result, the achievements of mid-size companies are usually unrecognised and their challenges often not well understood.   
 
But we at 9.9 Media believe that the much talked-about ‘India Story’ which has catapulted this economy into a formidable global player, has been scripted, in no small measure, by this agile, growth-hungry and hugely ambitious segment of industry that we have chosen to call ‘Growth Enterprises’. Entrepreneurship that was stifled for decades is once again thriving within these companies. Spectacular tales of inspiration, self-motivation and sheer performance are unfolding and as result, these mid-size companies are clocking astounding growth rates.
 
Given our commitment to the mid-size community we strongly believe that studying and showcasing inspiring performances of these companies will result in further business excellence within this community.
 
Our Mission
However, recognising business excellence amongst Indian mid-size companies – mostly unlisted and largely family owned – is far more difficult than the common job of covering large listed companies. The main reason is that leaders of these companies, unburdened by laws requiring public disclosure, don't have to tell us anything. But that's precisely what makes this mission so valuable.
 
Few, including 9.9 Media, have begun to realise this value and are undertaking the task. The others include Businessworld (India’s most read business magazine) and Business Standard. In July 2007 Businessworld – to recognise and reward excellence – ranked India’s best performing Indian medium size enterprises. It described them as cats that prowl for opportunities and growth using their agility, not just power. In the same spirit, Business Standard in January 2008 highlighted the growing importance of mid-sized companies in their BS 1000 list.  
 
Ranking methodology
The underlying model to identify top performing companies in all the three brackets is analogous to the process of ranking a student on the average of the scores obtained in a typical test or an exam. Likewise to identify these top performers the analysis looks at five key parameters: size, top-line growth, bottom-line growth, profitability ratios and return ratios. The size parameter is derived from taking a ‘simple average’ of net sales and total assets for the last 4 years. Top-line and bottom-line growth measure the cumulative annual growth rate (CAGR) in sales and profits for the last 4 years. The profitability is calculated from ‘average net profit margins’ and ‘average operating profit margins’. The returns ratio is a simple average of return on capital employed (ROCE) and return on equity (ROE). These parameters are converted into scores.  Scores on the individual parameters are calculated by converting the value of each parameter for a company into a 100 percent scale using the following formula:
 

Company X’s parameter score = (Company X’s parameter value ÷ Average value of the parameter for the sub-group) × 50

 
For example, the average top-line growth for companies in the Rs 50 to 100 crores bracket is 14%. If a company X’s last three years CAGR in net sales is 16%, then the resulting ratio is 1.14. This ratio multiplied by 50 equals the company’s top-line score of 57.1%.
 
Performance Ranking
 
A company’s rank in all the three brackets is based on its ‘Performance score’. The performance score is the weighted average of the scores of the five parameters – size score, top-line score, bottom-line score, profitability score and returns ratio score.
 
However, unlike a student’s ranking from a single annual test, we shall look at the previous t 4 years data for each parameter to ensure that consistent performance – and not a one-off achievement – is captured, and rewarded.
 
Finally, to remain objective throughout the exercise and adjust for potential numerical anomalies, we shall make size adjustments to remove low base effects. This adjustment is done through the normalisation method, wherein the average size and adjusted net profit for the last 4 years are used to compute size and profit multiple respectively. The respective multiples are then multiplied with a company’s top-line and bottom-line growth rates and operating profit to arrive at the size-adjusted CAGR values.
 
Definitions
 
Total Assets: Value of the total assets at the end of the year. This includes net fixed assets, investments, inventory, cash and bank balances, and total receivables.
 
Net Sales: Revenue earned from the main line of business; excludes other income, non-recurring and extraordinary income. ‘Net sales’ is net of excise duty, rebates and discounts and sales returns.
 
Adjusted Net profit: The reported net profit of a company adjusted for extraordinary income/expense
 
Net profit Margin: A ratio of profitability calculated as net profits divided by net sales. It measures how much out of every rupee of sales a company actually keeps in earnings
 
Operating profit margin: Operating profit margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc.
 
Return on capital employed: PBIT/average capital employed, where the average capital employed is the sum of the current and the previous year’s capital employed divided by two. PBIT is net of extraordinary income/ expense. The values are in percentage.
 
Return on net worth/return on equity: Net profit–preference dividend/ average net worth. Net profit is adjusted for extraordinary income/ expense. The values are in percentage.
 
The deadline is fast approaching. To be considered for the list, please fill out the application form (it takes only a couple of minutes), www.growthinstitute.in/inc500ranking/ before 20th May, 2011.