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Boring beats sexy: India Inc’s Invisibles
The Times of India - 16 May 2012

In business, it’s often more profitable to be boring than sexy.

Many of India’s corporate conglomerates have both glamorous and low-key businesses - and no brownie points for guessing which of them gets the media’s adrenaline going.

Everyone’s familiar with ITC’s Welcomgroup hotels - luxury five-stars with restaurants to match. In 2010-11, they did business of a shade under Rs 1,200 crore.

But how many know that ITC also sells education stationary under a brand called Classmate? Not many. And how many know that it makes about Rs 800 crore out of this business? Very few.

It’s often these “invisible” businesses that are driving growth in many conglomerates. And they have quietly, almost silently gathered heft within some of India’s frontline corporate behemoths.

Corporates like ITC, Murugappa, Godrej, TVS, Videocon and BM Khaitan have invisible performers in their diversified portfolios. They are now generating equal, if not higher, revenue than the more appealing, much-written-about businesses.

For ITC, a buoyant and recession-proof education market has helped drive Classmate. “Education is aspirational for the middle class. People will cut back on food, clothing and shelter, but not compromise on education. People want their kids to go to an English medium school. I can see a huge drive here,” said Chand Das, chief executive of ITC’s education and stationery products business.

There are other unsung growth heroes elsewhere in India Inc, sitting on more than a decade of remarkable emerging market stories. Consider the Rs 5,768-crore Godrej & Boyce Manufacturing Co, which is known more for refrigerators, but also houses an industrial products business catering to precision components for aerospace and engineering equipment for wind turbines and nuclear power plants. Today, the industrial products division contributes as much to the turnover as does appliances and furniture.

The Rs 9,800-crore Coromandel International, a part of the Murugappa Group, operates a chain of retail outlets, called Mana Gromor, selling crop-related products to farmers in the hinterland. Coromandel has built a Rs 1,300-crore business in the past six years retailing agri inputs such as fertilizers, crop protection products, micronutrients, seeds, sprayers, mechanized farm services and veterinary feed. “We have 800 outlets mostly in Andhra Pradesh, and are now beginning to expand to other states,” said group chairman A Vellayan.

The RP-Sanjiv Goenka Group, which is known more for its retail business Spencer’s as also its power utility CESC, has seen its relatively low-profile carbon black business grow rapidly in the last five years. Group chairman Sanjiv Goenka said that given its international expansion plans, the Rs 2,000-crore turnover Phillips Carbon Black is in line to become one of the biggest in the world.

The TVS Group, where caution is preferred over soaring ambition, has built a fast expanding logistics business which could hit $1 billion in revenue in the next three years. R Dinesh, a member of the southern business family, has grown sales at TVS Logistics 15-fold, bought a clutch of foreign companies, and thrown open his own to private equity investors such as Goldman Sachs and Kohlberg Kravis Roberts & Co (KKR).

What appears to have worked for some of these invisible businesses is the economic growth that’s come out of investments in infrastructure as well as mainstream consumption stories like education stationery for ITC.

Click here to know more about the Education and Stationary Products Business