Companies in India can be a powerful engine for driving economic goals. Here’s how they can realize extraordinary growth.
As India anticipates a century of independence in 2047, it is committing to sustainable and inclusive growth in its goal of becoming a developed economy. This ambition is likely to see 600 million jobs created, income rising sixfold to over $12,000 per capita and GDP growing to $19 trillion.1 In realizing this goal, the private sector is an indispensable partner.
We set out to understand how Indian enterprises can achieve the extraordinary growth necessary for them to propel India towards its centennial aspirations. We analyzed the performance of 837 Indian publicly traded companies between 2012 and 2022.2 The results of the research were clear. Most companies performed in line with national economic growth, over the period.3 However, what’s impressive is that one in every five companies (top quintile) were able to double their revenue every five years and quadruple it in ten, achieving revenue growth of 15 percent or more, compounded annually. This extraordinary growth rate is more than two and a half times4 the GDP growth rate during the same period, and it has the potential to act as a GDP growth catalyst (
Our research clearly indicated that extraordinary growth rates such as these are achievable for Indian enterprises, but persistent myths abound that deter companies from pursuing such growth. This article debunks those myths and proposes enablers for companies aspiring to such growth.
The top quintile companies also delivered nearly double the total shareholder returns (30 percent) over five years compared to the Nifty 50 benchmark index of 14 percent total shareholder returns.5 We deem this as extraordinary growth, and companies achieving this as “growth champions.” Higher returns are important because when compounded over a ten-year period, this increase could create ten times more wealth for shareholders compared to the benchmark index.
Our analysis identifies common misconceptions surrounding growth champions, providing a roadmap for others to follow. A more nuanced understanding of sustained high growth could help to recognize champions, identify best practices, and provide both a benchmark to measure progress and a roadmap for others to follow.
Myths about growth can prevent companies from aiming high
While most companies aspire to growth, misperceptions of leaders can keep them from setting high growth targets. Leaders may believe growth depends on size, on being in the right industry, that growth comes at the expense of profit, or that a low-growth company cannot dramatically turn around performance. Lessons learned from the companies in our sample shed light on these four common myths around growth outperformance:
Myth 1: Size matters. Only large companies can outperform in uncertain times
Indian companies have had to overcome considerable uncertainty over the past few years, such as the impact of COVID-19, supply chain disruptions, and severe weather events—and it’s likely that uncertainty will continue. In this environment, business leaders could well believe that success is the domain of large, established companies. However, our study revealed that 36 percent of smaller companies, with revenue less than INR 1,500 crore (approximately $180 million) in 2022, were classed as growth champions.6 Only 10 percent of mid-sized firms (revenue between INR 1,500—4,000 crore) and 11 percent of large firms (revenue greater than INR 4,000 crore) showed similar growth (Exhibit 2). While it is true that some of this high growth can be attributed to the low base effect, the difference in average growth rate between these categories is too significant to overlook.
Myth 2: Companies must either choose growth or profits, not both
Many firms may consider growth and profitability as trade-offs. After all, growth plans frequently incur sizeable costs as companies expand capacities, enter new markets, introduce new product lines, or invest in brands. But our research confirms that revenue growth and profit growth have a high correlation coefficient of 0.95, which shows a strong relationship between the two variables (Exhibit 3). Companies with extraordinary growth in revenue also saw gross profit increasing in parallel, with an average of 20 percent profit growth compounded annually, compared to less than 9 percent profit growth for peers over the same period.
Growth provides scale benefits, but that only explains part of this correlation. Growth champions reduce costs and pursue value engineering to open new markets and create surplus profits for investing in future growth.7 This may include investing in distribution networks that increase their access to customers, investing in their brand and marketing, or tightly managing their pricing strategy.
Myth 3: Extraordinary growth is only possible in high-growth industries with tailwinds
Higher revenue is easier to unlock when companies are fortunate enough to be in high-growth industries. Financial services, IT, and healthcare companies in our sample have all grown revenue at double-digit rates over the past decade (Exhibit 4). But it’s also true that while tailwinds matter, extraordinary growth is possible in almost every industry. Hence, a company in an industry facing headwinds should not be limited by the belief that growth is beyond reach.
Myth 4: Once a low-growth company, always a low-growth company
Companies that trail their peers can turn around performance. In fact, companies can stage a significant recovery within a ten-year horizon. When we analyzed the performance of sample firms between the first and second half of the past decade, we found that one in two trailing companies were able to leapfrog from the bottom two quartiles into the top.
Performance turnaround is much more prevalent in high-growth sectors. Almost 50 percent of companies who ended the decade in the top quintile for the financial and real estate industries were not in this position in the first half of the past decade (Exhibit 5). This figure was much lower in slow-growing industries, where less than half of the companies had overturned performance to gain a top-quintile position.