After studying law I vectored towards journalism by accident and it's the only job I've done since. It's a job that has taken me on a private jet to Jaisalmer - where I wrote India's first feature on fractional ownership of business jets - to the badlands of west UP where India's sugar economy is inextricably now tied to politics. I'm a big fan of new business models and crafty entrepreneurs. Fortunately for me, there are plenty of those in Asia at the moment.
Weighed down by excess capacity and debt-laden balance sheets, corporate India was in no mood to expand for the last seven years. Cutting costs, squeezing efficiencies and furiously paying down debt was the order of the day.
Now, Indian companies have far cleaner balance sheets and an economy averaging 6.5 percent growth has meant that capacity utilisation rates have inched up to 73 percent. Some sectors are still saddled with excessive debt or capacity or both, but several companies are now talking about adding an extra production line or putting up a greenfield plant.
The Forbes India model equity portfolio looks at companies poised to benefit from this. In some cases like Birla Corp, the expansion is already underway—15.5 MT to 20 MT. Others like Balrampur Chini have cash in place to take part in a long-awaited consolidation in the sector, whereas acquisitive giants like Motherson Sumi have a track record of arranging financing should a deal materialise.
Auto and engineering have emerged as two bright spots. With car and two-wheeler sales booming and truck sales also showing an uptick, next round of capacity additions are being planned. Look for small auto component companies that are available at cheaper valuations than the original equipment manufacturers.
This equity portfolio is not a defensive play and so a steep tumble or volatility in the markets could result in temporary capital loss. It’s also not a one-size-fits-all portfolio. In some cases, stories may have already started playing out (KEC International) whereas in others, the market is still waiting for confirmation (Siemens).