Investing in boring, old-fashioned companies that allocate capital sensibly

Like our favourite cricketer, Rahul Dravid, the 7 companies decoded by us a decade ago in ‘The Unusual Billionaires’ delivered market beating performance by focusing on 3 principles which are simple to understand but hard to deliver on: (a) stick to the core and expand only into adjacencies; (b) focus on deepening your existing moats; and (c) allocate capital with discipline and resist the flavour of the season. For a detailed review of these 7 companies and in-depth drilldowns into 5 more such franchises, please refer to our new book “The Art of Enduring”.

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Copyrights and intellectual property for the referenced book “Breakpoint” remain with the original publisher and author. No challenge to their ownership is intended.

Sticking our necks out in 2016

When we published ‘The Unusual Billionaires’ (UB) in 2016, we did something that, in hindsight, was rather brave: we labelled seven Indian companies as “great” and put that judgement in print. Greatness, though, is a claim about the future, not the past. Even as we wrote the book in 2016, we were aware that almost every business book which claims to have identified the recipe for greatness suffers the indignity of seeing its champions devalued by the ravages of time.

We knew that the only honest test of our judgement would come with time. The decadal anniversary of the UB seems like the right time to review our judgement. The outcome matters all the more because the intervening years were brutal: demonetization in 2016, the GST rollout in 2017, the pandemic in 2020, wars in Europe and West Asia, snarled supply chains, a trade war and the sharpest interest-rate swings in a generation.

In spite of these disruptions, the UB companies have beaten the broader benchmark by a significant margin. The performance of these seven franchises since the book was published is shown in the table below.

Source: ‘The Art of Enduring’, Annexure 1. * Loan book growth for the 2 banks; ^ ROE for the 2 banks; #stock price CAGR from 31-March-2015 to 31-July-2026

If Rs 100 was equally split in these seven stocks on 31 March 2015, the total value of the portfolio would have risen to Rs 390 by 31^st July 2026. The same Rs 100 invested in the BSE Sensex would have been worth Rs 279. The untouched Unusual Billionaires portfolio would have thus outperformed the broader market by 40%.

Even we were surprised by the extent of the outperformance of the UB companies especially since we are regularly berated by commentators for investing in boring, old-fashioned companies whose valuations are supposedly so high that they can’t climb higher. That’s when we decided we will double down on “boring, old-fashioned” companies in the sequel to the UB, “The Art of Enduring”.

Investing in boring, old-fashioned companies that allocate capital sensibly

What separates these companies from the index, is not luck or a benign environment. It is the stubborn repetition of three habits. (1) Each stayed close to its core, expanding only into sensible adjacencies rather than chasing unrelated growth. (2) Each kept deepening its competitive moat, whether through supply chains, brands, manufacturing or underwriting. (3)  And each allocated capital with discipline, investing where returns were defensible and resisting the fashion of the season. Even Axis, the laggard, ultimately leaned on precisely these principles to rebuild.

That consistency is the whole point. Great companies are NOT the ones that avoid difficult decades. They are the ones that keep compounding their advantages through the disruption, so that when the dust settles they stand stronger. A decade of demonetization, a pandemic, wars and rate shocks were about as stringent a test as any Indian business could be subjected to. Six of seven Unusual Billionaires passed it. And they rewarded their shareholders with healthy returns for the patience.

A brief assessment of each of the UB companies

Asian Paints: Asian Paints faced its stiffest challenge in years with the Aditya Birla Group’s Rs 10,000-crore entry through Birla Opus, arriving just as building-material demand slumped. Margins fell to a decade low (bar one Covid year) and it ceded a little market share. Its response was characteristic — deepen the moat. It kept investing in the supply-chain and demand-forecasting systems that dealers still rate as the industry’s best, and committed roughly Rs 3,250 crore to backward integration to lower costs. Over FY15-25, the company’s revenue compounded at CAGR of 9.2% and ROCE averaged a solid 30.7%. The stock returned 11.4% from 31-March-15 to 31-July-2026, comfortably ahead of the market.

Berger Paints: Berger also continued to do what it does best – focusing on differentiated products and distribution. It rolled out an O9 supply-chain platform, accelerated tinting-machine installations from about 3,000 to over 7,000 a year, and doubled down on niche brands such as Anti-Dust and Weathercoat Long Life. These initiatives reflected in market share gains, from around 18.9% in FY22 to 21.2% in FY25. And this was despite ferocious competition and weak demand. The company’s revenue grew 10.2% with average ROCE over the decade near 25%. The stock compounded at 13.5%, a full 4 percentage points ahead of the Sensex, from March 2015 to July 2026.

Marico: Marico’s story was one of reinvention. Its legacy engines slowed as competition intensified in value-added hair oils and edible oils. Yet the company managed to grow Parachute’s coconut-oil market share from 57% to 63% and, more importantly, built new engines of growth. The Saffola brand was extended from oil into foods and now accounts for around 13% of revenue, with Masala Oats alone a Rs 500-crore-plus brand. Marico acquired the direct-to-consumer names Plix and True Elements to enter fast-growing categories. Headline revenue growth over FY15-25 was a muted 6.6%, but ROCE averaged an exceptional 55.7%. Over 31-March-15 to 31-July-2026 the stock compounded at 14.2%; a solid 4.7 percentage points beat to the BSE Sensex.

Page Industries: Page showed what operational discipline looks like. Revenue roughly tripled to about Rs 4,900 crore while headcount held near 18,000, reflecting massive gains in manufacturing efficiency. The company added a greenfield plant in Odisha to lower costs further. Growth did slow, from around 30% a year before 2016 to roughly 11% more recently, as the innerwear category cooled and Page’s own premium dominance (a 70–75% share) left little room to run. Even so, ROCE averaged about 47% through FY15-25. The stock compounded at 10.0% over March 2015 to July 2026, slightly better than the 9.5% the Sensex returned over the same period.

Astral: Astral was the standout. It kept allocating capital with discipline in its core pipes business – expanding installed capacity at a 14% CAGR and expanding from four plants to eleven, while moving into fittings, sanitaryware and paints without once diluting returns. ROCE averaged at 21.8% through the decade-long period. Astral brought long-standing pipe distributors along into the new businesses, in a continued demonstration of strengthening the company’s Architecture, a key pillar of its competitive advantages. These initiatives led to a 19% stock price CAGR from 31-March-2015 to 31-July-2026, almost double the market’s annual rate.

HDFC Bank: HDFC Bank navigated two eras and a mega-merger. Under Aditya Puri (up to FY21) it grew loans and deposits at about 20% a year, well ahead of the industry, and held gross NPAs below 1.5%. The fact that NPAs were maintained at these levels is the truest test of a lender’s risk management. The handover to Sashidhar Jagdishan and the 2022 merger with HDFC Ltd created a roughly $200-billion balance sheet. ROE moderated towards 15% as the merged entity absorbed increased liability costs from higher statutory liquidity ratio and priority sector lending requirements. The merger, however, gives the bank an unmatched cross-sell opportunity and a low-cost structure at a massive scale, which becomes a long-term defensible moat. The company’s stock, over March 2015 to July 2026 compounded at 9.9%, a slight beat to the broader market.

Axis Bank: Axis is the one that trailed.  And its story is the most instructive. A heavy corporate-loan book unravelled between FY16 and FY18, with gross NPAs spiking from 1.7% to 6.8% and ROE falling below 7%. The turnaround came under Amitabh Chaudhry from 2019 – an aggressive clean-up, tighter underwriting and a decisive pivot to retail, which rose to 71% of loans. The 2023 acquisition of Citi’s India consumer business and a permanent Max Life partnership sharpened its franchise. By FY25, ROE was back near 16% and NPAs down to about 1.3%. The stock returned only around 7.2% over the eleven-odd years ending 31-July-2026, dragged by the early stress.

Investing with us in old in boring, well-managed capital allocators

If you like the idea of investing in such companies, you should consider investing in our Consistent Compounders Portfolio (CCP as well call it). CCP consists of 20 clean, well-managed franchises with ‘Unusual Billionaire style’ moats.

Three phases of CCP’s performance since inception

Indeed some of the UB companies are sitting inside CCP and making us richer as we speak. After 5 blockbuster years ending Diwali 2021 when portfolio compounded at 27% p.a., CCP ran into rough weather for the next 4 years as Quality itself got hammered in India. In 2026 however Quality is back with a bang as you can see on the charts above.

CCP is available as a PMS offering from Marcellus. Indians and NRIs can invest in it with a minimum investment amount (as per SEBI’s regulations) being Rs 50 lakhs.

To invest with us, please visit Invest.Marcellus.in OR click on the QR code shown below.

Thanks,
Saurabh Mukherjea & Salil Desai

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Salil Desai and Saurabh Mukherjea work for Marcellus Investment Managers (www.marcellus.in). The views and opinions expressed in this material are those of the authors and do not necessarily reflect official policy. This material is for informational and educational purposes only and should not be considered financial, investment, or other professional advice.

“Stocks discussed/mentioned above may form the part of our PMS portfolio/s.
Accordingly, Marcellus, its employees, their immediate relatives, and clients may maintain interests or positions in these securities.
Any reference to these companies is intended strictly for informational and educational purposes within the context of this discussion and should not be construed as investment advice.”