ECONOMIC MOAT AND LONG-TERM ORIENTATION: A Comparative Study of Indian Companies

The objective of this paper that we are working on is to derive economic moat generated by Indian companies over five time period and see whether they have maintained competitive advantage over its competitors in order to protect its long-term profits and market share from competing firms. We focused on non-finance companies. The study focuses on the relationship between Economic moat and various other parameters like Market Perception, Sales Growth, RORE, Product Innovation, Market Innovation, Incremental Output Ratio, and Free Cash Flow, where Price to Earning Ratio represents Market Perception. The methodology presented in the paper enables us to understand the performance and sustainability of Indian companies. 

Analysis of companies is also necessary for asset acquisition, portfolio formation and wealth creation. Finance companies research a lot on past financial performance and provide advisory services to individuals and institutions on portfolio formation. Fundamental analysis, technical analysis, industry studies and studies on movement in macroeconomic variables can be found in this research paper.

Along with the balance sheet and profitability numbers, the importance of ‘Economic Moat’ in generating resilience in companies have been emphasized in literature as well. As a moat protects a castle from attacks by intruders, an economic moat protects a company from market shocks. This cushion creates resilience and helps a company think for the long term.

In line with the above, we seek to answer the following questions.

  • Do economic moats reduce volatility ?
  • Do economic moats encourage innovation?
  • Do economic moats help in growth?
  • Do economic moats help in securing strong competitive position?

Tushit Banerjee
Pragati Kumari
PGDM Batch 2018-20