Diversification pays

At a time when companies are focussing more on core competencies, comes the news that diversification may still pay. An analysis of corporate results by the Centre for Monitoring the Indian Economy finds that, in 1996 to 1998, when growth in corporate sales halved, it was the diversified groups that did well. The 70-odd companies with a diversified portfolio recorded a real growth in sales of 12.4 per cent, which is more than double the 5.1 per cent recorded by the entire manufacturing sector during this period.

In fact, a large part of the increase in sales of these companies has actually come from the increased capacity Larsen and Toubro, for instance, set up new cement capacities, and Reliance invested further into petrochemicals.