India's Revival is Accelerating. Here's How to Profit from it

Dollar Industries, a Kolkata-based producer of clothing and hosiery, is not a regular stock in the Forbes magazine.

But the company did feature in an elite list recently.

Forbes releases a list of the best 200 mid-sized businesses in the Asia-Pacific region every year.

Among the companies highlighted in the 2022 list by Forbes Asia, is the Indian apparel maker Dollar Industries.

Reason? The company showed exemplary ability to bounce back from the COVID-19-induced trade and supply chain disruptions.

Dollar Industries reported 30% sales growth for the fiscal year March 2022. Its net profit soaring 72% over previous year. Besides expanding its clothing range for women, the company recently added a spinning mill and a warehouse.

Another Indian company that made to the list is Aarti Industries (AIL). This company makes chemical products used in the downstream manufacture of pharmaceuticals, agrochemicals, polymers, additives, surfactants, pigments, and dyes.

Over the last decade, AIL has transformed from an Indian company servicing global markets to a global entity with state-of-the-art manufacturing facilities in India.

I am not referring to these stocks to predict their near-term price movement or to suggest any action on them. But to highlight the fact that scores of such mid-sized companies in India are gaining global recognition.

In fact, a comparison with industrialised Asian peers is also encouraging.

The number of Indian businesses that made to the 'Best Under a Billion' list in 2022 was 24. Amongst Asian nations, this put India in fourth place, one spot ahead of China, which had 22 entities on the list.

With 30, Taiwan has the most promising billion-dollar companies, followed by Japan with 29 and South Korea with 27.

Now, India's mid and small manufacturers were earlier scorned for lack of corporate governance, questionable accounting, high levels of debt, environmental concerns, management issues, or legal troubles.

You may even want to dismiss the recent sturdy financial performance as one-off case due to post Covid recovery.

But the fact is that several such companies have transformed themselves over the past few years. The results show in their financial numbers as well as the quality of their products.

For instance, one such mid-sized company had a disappointing debut on the bourses not so long ago. But it has come a long way from being a one trick pony.

The company's state-of-the-art manufacturing unit has a total built-up area of around 1,00,000 sq. ft. and houses a 6000 sq. ft. R&D testing yard. The facility is not just equipped with the latest technology. But it also has a high emphasis on green energy, automation and safety.

The company's profit margins and cash flows do remain vulnerable to fluctuations in forex and raw material prices. This is because the company imports its raw materials. However, its effective pricing mechanism ensures stability in the overall profit margins and mitigates these risks to a large extent.

The company continuously rationalises its cost structure by adopting an asset-light production model. Moreover, it sets up manufacturing units in excise-free zones and achieves higher economies of scale to maintain its cost structure.

Such concerted efforts to maximise shareholder wealth has brought the stock under the radar of long-term value investors.

Stocks like this have massive upside as India's Revival gathers steam.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)

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