Disruptive Innovation: Indian Companies Doing it Right

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair."
- Charles Dickens, A Tale of Two Cities

You could blame me for using this quote too often.

But almost one and a half century later, its relevance in investing has increased.

That's how I feel about the investing in the age of disruption. The age of buying your favourite set of companies and forgetting about them is past us.

The lifespan of the companies has narrowed. In 1960, the average age of an S&P company was 60 years.

Today, it is less than 20. And it is expected to reach 14 years by 2026.

The companies that are not agile or adapting to the future technologies are unwittingly marching to their early demise.

So, should you dump the investments in the conventional business and rush to buy new age companies?

Investors who did that a few years ago are still smarting from the losses.

With venture capital and easy money drying up in the wake of rising Fed rates, it is easy to spot the ones swimming naked.

A recent case in point is Byju - a big disruptor in the education segment. The unicorn has fallen from grace.

This would be more a norm than exception, unless there is a method to innovation.

While there are a lot of companies making headlines that have grown too big to be sustainable, there is also a select group where disruption is happening in a gradual but smart fashion.

This not only increases optionality to grow, but does so without jeopardizing the whole business model.

Consider Laurus Labs.

When the entire world was battling the Covid wave, India emerged as the pharmacy capital of the world, thanks to the low cost of production as compared to developed nations.

However, we are yet to make a dent when it comes to breakthrough technologies in the medical field. You see, most of the success history for Indian pharma companies lies in the generic medicines.

Laurus could change that perception.

A relatively new entrant in the pharma space, it has a goal to invest up to 10% of profits on disruptive technologies. The company has been investing a part of its capital to incubate businesses dedicated to disruptive technologies.

One such incubation - ImmunoACT, recently got the approval of India's first (indigenously developed) CAR-T cell therapy - NexCAR19, from the Central Drugs Standard Control Organization (CDSCO).

It's an innovative cancer therapy that only a few countries that have access to. What makes it more special is that it is available at one tenth of the cost at which it is provided by foreign players.

Laurus will in-license few gene therapy assets of ImmunoACT and owns rights to launch these products in various geographies.

Gene therapy could be the new frontier to fight diseases. And Laurus Labs is pioneering this revolution.

Now that's the kind of innovative business model that I like. If it becomes big, the gains could be huge. If the effort does not fructify, the losses are capped.

To be an early entrant in such disruptive plays could be a huge advantage. And the listed space offers enough such opportunities.

Laurus is not the only one. There are companies like Infoedge (Zomato, Policybazaar), BSE Ltd, and Kabra Extrusion Technologies Ltd that have done this quite well.

For instance, BSE Ltd, apart from being an exchange, derives value from StarMF, that's like the UPI of mutual fund industry. It's a platform with over 200,000 agents distributing mutual funds on it.

It has also entered newer streams like IPO distribution SME, bond distribution, commercial paper distribution, insurance distribution with Ebix of the US.

Kabra Extrusiontechnik, until a few years ago, was known as the largest manufacturer of plastic extrusion machinery in India.

However, with its new venture - Battrix, it has made a significant mark in the EV battery technology and green energy space.

The revenues from this segment now exceed the revenue from extrusion machinery segment. By FY23, it had captured 18% market share in the lithium-ion batteries in its segment and is the largest chemistry agnostic battery pack manufacturer now.

And then there is Tube Investments of India Ltd. Conventionally, the company's main verticals include engineering, metal formed products and bicycles.

In FY23 and FY24, it entered multiple new disruptive business segments related to EVs and clean technology. Still in the gestation period, these businesses have the potential to be game changers for the company - something that investors should monitor.

You see, the core of investing is asymmetry of payoffs - the willingness to bear a little risk in the hope of potentially making a lot of gains.

Due to all the unknowables in the market a prudent investor aims to maximize gains, at the risk of affordable losses. The method to innovation is no different.

Every measure taken for growth comes with a probability of failure. It's the prudence of the management and the execution that makes all the difference between businesses that blow up and the companies that create new growth engines.

Make sure you are investing in the right stocks.

Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
Equitymaster Agora Research Private Limited (Research Analyst)