Scalability Thinking – Mental Models

PAT scalability remains focus area of this post.

Historical data to chew. Table illustrates list of cos whose PAT has grown at least 5x in last 14 years. Only cos that have crossed 50 cr PAT are considered. Table is descending sort on the ’multiple_PAT ‘parameter (marked in yellow).

Intent is to find factors contributing to the scalable stories. Some of the factors are –

• niche of their own
• not fragmented market
• starting RoCE good mid teen and improving
• good business model
• competitive intensity not high
• margin and asset turns played role (only where super efficient)
• value migration

Let’s expand the above factor list. Collaborative effort call. VP members familiar with the successful scalable stories can throw light on new factors.

Interesting to note that well known names like Asian Paints and Pidilite could not make it to the 5x list yet; and not much discussed co (no VP thread) like Bengal & Assam co Ltd made it to the list.