Indian Stocks: Real Asset Growth or Accounting Tricks?
By Varun Mittal
Value Research analyzes six Indian companies where assets tripled in 3 years. Discover if it’s genuine business expansion or accounting maneuvers.
Asset Growth: Real Expansion or Accounting Shift?
Six major Indian companies have seen their net asset base more than triple in three years. However, Value Research Online cautions that a growing balance sheet doesn’t always signal genuine operating capacity or profit growth.
Asset expansion can stem from acquisitions, joint venture consolidations, or accounting changes for long-term leases, rather than new operational capacity. The key is whether these assets were acquired efficiently and are generating sufficient returns.
InterGlobe Aviation (IndiGo): Financing Strategy Shift
- Property, Plant, and Equipment (PPE) showed a tenfold jump for InterGlobe Aviation.
- This was largely due to a shift towards more owned and finance-leased aircraft, not a proportional increase in new operating capacity.
- Total asset base, including right-of-use assets, grew by a more modest 2.3 times.
- The move aims to reduce long-term costs and enhance fleet control, but also increases capital intensity for IndiGo.
Bajaj Auto: Consolidating KTM
Bajaj Auto’s consolidated asset expansion primarily comes from taking full control of the Pierer/KTM structure. Previously an associate, KTM’s entire balance sheet, including significant PPE, capital work in progress, and borrowings, is now consolidated.
Bajaj’s challenge is to transform KTM, a stressed global premium-motorcycle business, into a profitable platform. Despite this, Bajaj’s core standalone business showed strong revenue and profit growth in FY26.
PCBL Chemical: Acquisitions & Capacity Expansion
PCBL Chemical’s asset growth is a mix of acquisition and capital expenditure. It acquired Aquapharm to diversify into water-treatment and specialty chemicals, while also expanding its carbon black and specialty black capacity.
However, FY26 results showed a decline in consolidated revenue and profit after tax. Weak carbon black margins and Aquapharm’s struggle to justify its acquisition cost impacted performance. The expected operating leverage has not yet materialized.
Beyond the Balance Sheet
While a stock screen can highlight companies with growing balance sheets, investors must look deeper. Understanding the underlying reasons for asset growth is crucial to determine if it truly represents real business expansion and value creation.