The Practus Hurun PE 2022 report tracks the PE-funded companies that saw top-of-the-line growth in FY2021 according to different metrics

Practus and Hurun India on Tuesday launched the first edition of their ‘Practus Hurun India PE Performers 2022’ report that ranks India’s best-performing PE-backed companies.

Presenting the report at a press conference, Practus and Hurun India said that while preparing the list, an emphasis was given to companies that reported growth in their operating cash flow and improved revenues and profitability in FY2021.

Deepak Narayanan, the CEO and founder of financial services firm Practus, said: “The Practus Hurun India’s Top PE Performers 2022 showcases companies that delivered improved revenues, profitability, and operating cash flows in FY21. The List celebrates PE fund managers who made the decisions in backing these high-performance companies and those who actively influenced and managed the improved performance.”

Practus and Hurun said that a total of 125 companies fitted the report’s desired metric, of which 21 made it to the list based on performance and funding criteria.

Anas Rahman Junaid, MD and chief researcher of Hurun India, a market research company, said, “The next phase of India’s value creation has to be driven by the combination of capital and intellect.” He added that private equity funds and their managers are “one such catalyst” that could accelerate the Indian economy’s value creation. 

“In this context, it is important to celebrate the stories of high-performing companies who have demonstrated growth post receiving funding and investors/funds who have identified and are closely managing these investments,” Rahman said.

Key Findings Of The Report:

Top Companies Based On Weighted Average Performance Growth

The report said that its weighted average performance growth metric takes into account the growth in revenue, EBITDA, and operating cash flow, plus the key person, who can be a lead advisor, managing partner, fund manager, or principal in the PE fund.

Honasa Consumer, which owns the personal care brand Mamaearth, led the chart with an average growth of 491 per cent over the last year. 

At the number two position on the list, Encube Ethicals, an integrated pharmaceutical company, saw an average growth of 343 per cent.

In the third position was the technology-driven logistics company, Ecom Express, with a growth rate of 283 per cent.

Top Companies Based On Revenue Growth

According to the report, Desiderata Impact Ventures (Progcap) logged the highest revenue growth of 474 per cent among companies in the list. 

Honasa Consumer (Mamaearth), which reported a 315% year-on-year (YoY) revenue growth, held the second position based on revenue growth.

The third company on the list was Zetwerk, with revenue growth of 160 per cent YoY in FY21.

Top Companies Based On Operating Cash Flow Growth

According to the Practus Hurun data, Encube Ethicals topped the list in this segment, with the operating cash flow rising by 855 per cent in FY21, followed by Ecom express at 701 per cent, and Honasa Consumer (Mamaearth) at 468 per cent.

Top Companies In Terms of EBITDA Growth

The report said earnings before interest tax depreciation and amortisation (EBITDA) “provide investors with a snapshot of short-term operational efficiency.”

“As the margin ignores the impacts of non-operating factors, such as interest expenses, taxes, or intangible assets, the result is a metric that is a more accurate reflection of a firm’s operating profitability,” the report noted.

Honasa Consumer (Mamaearth) posted the highest YoY EBITDA growth in FY21 at 641 per cent, followed by Acme Formulation at 235 per cent and Encube Ethicals at 183 per cent.

Key Metrics Behind Selection Of Companies For This List

Practus Hurun noted that the IPO prices have melted in recent times due to the difference in a company’s private and public valuations. This has shocked the public since the Indian markets historically value companies using the price-to-earnings ratio (P/E). 

But the P/E ratio may not be effective for companies whose earnings aren’t much, although the scope could be vast. Hence, PE investors invest in early-stage companies with strong growth potential using different metrics.

“PE funds, which are usually backed by institutional investors, such as pension funds and so on that have a relatively lower risk appetite, are typically interested in profitable, moderate growth companies–an antithesis to the start-up investment, which focuses on hyper-growth over profitability.”