What’s a good visual depiction of admiration, asks a colleague. Can we use a symbol for love, maybe? Or should we show a winner’s podium? The resultant debate threw up few answers; it was easier to define what admiration is not, than to figure out what it is. Of course, this is because something like admiration cannot easily be quantified.
The previous two India’s Most Admired Companies rankings have shown that admiration often has little to do with bottom lines and P&Ls. (The classic example is that of Indian Oil, which consistently tops the Fortune India 500, but does not figure in the top 10 All Stars.)
This year, we’ve shown the correlation between value creation and admiration (see Admiration vs. Value on page 80). While there are a few value destroyers in the top 45, the overwhelming majority had either created value or maintained it. That said, companies such as Hindustan Petroleum and Vodafone India, which were value destroyers over a five-year term, have been rated admirable by their peers. Equally, companies such as Infosys, Accenture, Mondelez India Foods (earlier Cadbury India), and Toyota Kirloskar to name but a few, find no place in the All Stars list this year.
They haven’t done too badly; in fact, some may have performed better than the 45 on the list. It’s just that this year, their peers think that some companies lack what the French call je ne sais quoi, that certain composite of qualities that add up to admiration.
The list also sees the entry of 19 new companies, including GMR Infra, Idea Cellular, Abbott Pharma, Shapoorji Pallonji, and BSES Rajdhani. Interestingly, none of the new entrants is a value destroyer over a 10-year period; only GMR showed a fall in value over a five-year term.
Value creation apart, the list springs some surprises in terms of the composition of just the top five. Last year, two of the five were IT or IT services companies; this year, consumer goods firms (ITC and Hindustan Unilever) rule, and IT has slipped to below rank 5. If this was an equity portfolio, this consumer goods bias makes sense, since FMCG companies are traditionally seen as defensive stocks.
Look at the top 10, and there are three FMCG companies (the two above with the addition of Coca-Cola) and one consumer durables firm (Samsung India)—and still only one IT company (TCS). Clearly, India’s once red-hot sector is not as admired as it was even a year ago. At the same time, there’s a new kid on the block in IT—Cognizant debuts at 38.
What about the stalwarts of Indian industry—the public sector? They are prominent in the Fortune India 500, but seem a little less visible on this list. “But,” says Ravi Jagannathan, co-director, Financial Institutions and Markets Research Center at The Kellogg School of Management at Northwestern University, U.S., “within industries, those in the public sector tend to perform worse than their peers in the private sector, and that may be due to public sector enterprises having to meet other objectives.” That seems to be borne out by the fact that public sector giants such as ONGC, NTPC, and SAIL, were ranked high in terms of corporate governance, endurance, and social value, and not so much on innovativeness.
Clearly, there’s no one easy way to define admiration. But after all the explanations and the spreadsheets and the number-crunching, we realised one thing: that the companies on and off our rankings are all stars.
