The Greek philosopher Heraclitus once said, “Change is the only constant.”
While this applies to people, it also applies to businesses. How a company responds to changes and trends determines its ability to survive (or thrive). Without changing itself, it risks becoming irrelevant and obsolete.
However, if it chooses the path of transformation, it can continue to survive and even thrive.
Here are five companies that changed their business and thrived.
#1 BSE
The first on our list is the Bombay Stock Exchange.
What is now a fintech company was once a gathering of stockbrokers under a banyan tree. This later evolved into an office in a Mumbai building in 1928.
For decades stockbrokers would buy and sell physical stocks on an open trading floor.
Then, in 1995, the Bombay Stock Exchange switched to an electronic trading system as digitalization took the world by storm.
The company made this switch in just 50 days. Called BSE On-Line Trading (BOLT), this automated screen-based trading platform had a capacity of 8 million orders per day.
Today, BSE is the fastest exchange in the world at a speed of 6 microseconds.
The company uses a technology platform called Bolt Plus, which is based on the business architecture of global giant Deutsche Borse.
It has more than 4,000 securities listed on its platform and has commodity derivative contracts in gold and silver. It also has a platform for trading shares of small and medium-sized companies and operates India INX, India’s first international exchange.
BSE is a perfect example of how a company turned the hub and transformed its business to stay relevant.
In the December 2021 quarter, the company’s revenue grew 60% year over year, while net profit nearly doubled.
BSE saw a 44% year-over-year increase in average daily turnover in the equity segment at Rs 55,200 crore. The total number of transactions in its mutual fund distribution platform, BSE StAR MF, also grew 106% year-over-year to 50 million.
#2 Kabra ExtrusionTechnik
Next on the list is Kabra ExtrusionTechnik (KET).
The company is the market leader in the manufacture of plastic extrusion machines. It has a market share of over 60% in the segment.
KET is the sole supplier to many players in the plastics industry, such as Supreme Industries and Ashirvad. It has maintained its leadership through strong in-house R&D and long-standing technical ties with leading players around the world.
However, in fiscal 2021, the company decided to venture into the electric vehicle (EV) segment through its battery division Battrixx.
Led by various government initiatives/incentives, fuel prices and environmental concerns, demand and consumer awareness of electric mobility have increased. The same is reflected in the high demand for electric vehicles (EV).
The company believes this momentum of shift will continue to grow and is a huge opportunity.
Battrixx is positioned to supply a wide range of advanced Li battery packs with a smart battery management system (BMS).
In March 2022, Battrixx announced that it had acquired a 100% stake in Pune-based Varos Technology, a pioneer in developing IoT tools for EV infrastructure and battery management systems.
This will strengthen KET’s leadership position in newer technologies for electric vehicles and other energy storage applications.
For the December 2021 quarter, the company reported 70% year-over-year revenue growth and a 51% year-over-year increase in net profit.
It has also approved a proposal to raise up to Rs 300 crore for the expansion of Battrixx. With these funds, Battrixx will increase its annual production capacity from 100,000 battery packs to 700,000 packs by the end of 2024.
#3 Arman Financial Services
Third on the list is Arman Financial Services, a non-bank finance company.
The company is headquartered in Ahmedabad and provides loans to the unorganized sector living in rural and semi-rural areas.
It also owns Namra, a microfinance company, which provides loans exclusively to women’s self-help groups for income-generating activities such as animal husbandry, dairy, agriculture and related businesses, kirana shops and other rural activities.
Prior to May 2013, Arman Financial was engaged in the business of two wheeler finance and microfinance lending through the Joint Liability Group (JLG) model.
However, in 2013, the company decided to grow its microfinance business.
Following the RBI guideline to create a separate category of NBFC for loans to the microfinance sector, the company was the first in India to obtain a “NBFC-MFI” license for its wholly owned subsidiary – Namra Finance Ltd (Namra) .
In 2017, Arman also started the MSME Lending Business.
Today, microfinance loan is the largest business segment of the group, accounting for 80% of total assets under management (AUM). Over the past three years, the company’s revenue has grown at a CAGR of 35%, while net profit has grown at a CAGR of 13%.
With a view to deeper penetration, the group has expanded to newer regions over the past 4 years. The company’s branch network grew from 80 branches in March 2017 to 239 branches in March 2021.
For the December 2021 quarter, Arman Financial reported revenue increase of 22.4% yoy and net profit of 140% yoy.
#4 MoldTek Packaging
Last on our list is MoldTek Packaging, a market leader in rigid plastic packaging.
In the 1990s, the company pioneered the concept of plastic buckets for the paint industry. It also introduced plastic containers to the lubricant industry with value-added features such as ‘pull-up spout’ and tamper and leak-proof features.
In the 2010s, the company saw opportunities in the food packaging and FMCG industry. It changed its business and received orders from segment leaders such as Adani Wilmar, ConAgra, Cargill, Healthy Heart etc.
This resulted in solid growth for the company. It increased production capacity in existing factories and set up a new factory in Dubai to continue to meet demand.
After a successful introduction and implementation in food and FMCG packaging, the company is shifting up a gear again. It recently announced its entry into pharmaceutical (domestic and OTC) packaging.
The margin profile of the pharmaceutical segment is superior compared to food and FMCG (F&F) products. Pharma also enjoys better premium prices compared to F&F.
Management expects pharmaceutical packaging revenues to contribute from 2024. The immediate focus is on CRC Caps where the market opportunity could be worth Rs 500 crore.
In the December 2021 quarter, MoldTek reported a 20% year-over-year revenue increase, while net profit was up 11.4% year-over-year.
It also recently raised Rs 100 crore via QIP issuance, at a price of Rs 740 per share.
The issuance witnessed participation from major investors such as Goldman Sachs India Equity, White Oak India Equity Fund, Aditya Birla Sun Life Trustee Private Limited Plc, ICICI Prudential Smallcap Fund and others.
To conclude…
Moving a business in a different direction can be a risk that not many people would be willing to take.
However, if done at the right time, with calculated foresight, it can pay off.
Change and transformation in an organization have many positive sides. They drive innovation, help employees develop skills and lead to better business opportunities.
They also stimulate growth, which in turn drives the share price and thus the value of the company higher.
Sometimes, however, risks can’t pay off.
Before investing in a company that is about to change, assess the company’s fundamentals and prospects.
Despite the positive opportunities, sustainable research must not be compromised.
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
This article is from Equitymaster.com
(This story was not edited by DailyExpertNews staff and was generated automatically from a syndicated feed.)