Greatest Indian Companies
Zero innovation ability
What is the way out.
Like everywhere else in the world, India is seeing the emergence of promoterless, professionally managed, board run companies. Infosys, L&T, HDFC, NSE etc all fall into this category. It is critical for these companies to innovate. Innovation is not about capital.
Money is necessary but not sufficient. If it was about money, Adani and Ambani would have been kings of innovation. They are exemplary financial engineers. They may even be very good quality engineers.
At least Reliance can do a pretty good job of pioneering engineering (which is what they wrongly think is innovation). The promoter himself is a good engineer. And the entire team from Manoj Modi to Mashelkar to PMS Prasad are solid engineers. They are as good as any.
But when it comes to building a better solar cell or a better battery, they are a laughing stock. They backed the Siemens process to manufacture polysilicon using a junk licensor whilst China galloped ahead to the fluidised bed reactor. End result is the Reliance cost will be more than the Chinese selling price. Protecting such a co is a waste of national resources. The stupidity pervades from polysilicon to wafer to cell to module. Battery is even more hilarious. In addition to junk goods, India has become the worlds largest buyer of junk capital goods. Akin to buying a mfg line to make 386 computers.
This is the best Indian company. Go down to Adani or Adani and it gets progressively worse. If you get to a company like L&T, it is down to PC, not even EPC – having progressively got out of engg. Nothing wrong with it. We are a large country with huge requirements for contracting. And they are the country’s best contractor. Even Adani uses them. Contracting is a highly scaleable business. And can even be profitable. But it will never be valuable.
Value is reflected in share price. So Reliance or L&T are well past both – their peak P/E multiple and their half lives as an organisation. Adani on the other hand has no false pretences. He niether has an innovation fund nor an innovation claim. He is happy to make L&T his vendor and let Jio run his telecom network. He has made his weakness into his strength and Gautam Adani provides a clarity of vision and purpose, few corporates in the world can match. But then, will he be valuable. Unfortunately no. Cement is cartelisation and port /airport is monopoly infrastructure. These are old age businesses, more suited to private equity than to a listed business. They are “fixed income” propositions. Sure you can make a cartel in cement and increase earning but that doesn’t take you far for long. The Jindals with their steel maverick stuff will soon realise the same.
Applying lipstick on a pig will only go that far. There is no option but to innovate to create value.
In five years, five of the top ten market cap companies will be new players. Which are these companies ?? Clearly they exist already.