Business built on trust: India

In his 1972 article, “Gifts and Exchange”, Nobel Laureate Kenneth Arrow observed that “virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time.”1 Trust anchors every long-term partnership, successful negotiation and bold investment. Strong execution builds confidence but it can easily be lost without integrity.

Over the past six months, we have made three separate trips to India, visiting 60 companies across Mumbai, Delhi, Bangalore, Chennai, Hyderabad and Pune. Throughout our travels, and over the 30-plus years we have been investing in India, we found companies that we believe have the ingredients needed to build trust. The following examples demonstrate how trust can be earnt, nurtured and in some cases regained.

CG Power

CG Power, which makes motors and transmission equipment, was once plagued by governance and financial issues that severely damaged its reputation. Since the end of 2020, when Tube Investments (part of the Murugappa Group) took a controlling stake, it has been on a remarkable journey of renewal. Under their ownership, CG Power is rebuilding the trust of its customers, investors and employees.

We recently met Amar Kaul, who became CG Power’s chief executive officer in July 2024. He described the trust that the Murugappa Group placed in him from the outset, telling him “all yours from here on in.” That simple statement underscores the confidence they place in his leadership. Rebuilding trust after it has been lost is no small feat. It requires commitment, accountability and transparency. Under his leadership, CG Power has embraced these principles, investing in capacity, improving growth profitability and returning the company’s balance sheet to a net cash position. Its shares have witnessed a swift re-rating, demonstrated in the chart below.

CG Power share price history (March 2005 to March 2025)

Source: FactSet as of 27 March 2025. Chart data from March 2005 to March 2025. Tube Investments and the Murugappa Group took a controlling stake in CP Power in November 2020. For illustration purpose only. Past performance is not a guide to future performance.

Dr. Lal PathLabs

One of India’s leading providers of diagnostics services, Dr. Lal PathLabs has built its reputation for reliability over a period of more than 75 years. Clearly, trust is essential in an industry that holds sensitive medical information, which guides treatment decisions and ultimately has a direct impact on its customers’ health outcomes.

During our recent conversation with the company’s Chief Financial Officer (CFO), Ved Prakash Goel, we discussed India’s market for diagnostic services, which is highly fragmented and under-penetrated. While this presents an opportunity for rapid expansion, the company has instead opted to pursue a more measured approach to growth. Mr Goel’s explanation for this choice was clear: “healthcare is a one-mistake industry”. A single lapse in quality can severely damage a company’s reputation. Prioritising quality over rapid expansion demonstrates an understanding that trust is essential to this business, that it is fragile and that it is built through consistency and care.

Spending on healthcare in India has significant room to grow

Healthcare expenditure per capita (in US dollar terms)

Source: World Health Organization – Global Health Expenditure Database. Data is for 2022 (latest full data set) and in USD.

The Tata Group

During our travels we met several members of the Tata Group:

• Tata Consultancy Services (TCS);
• Tata Consumer Products;
• Tata Communications;
• Tata Chemicals;
• Tata Elxsi;
• Tata Power;
• Tata Motors; and
• The Indian Hotels Company.

These companies have been built by generations of professional managers working alongside a long-term owner, the Tata family. These companies are all partly owned by Tata Sons, 66%2 of whose shares are held by philanthropic trusts supporting education, art and culture, health and livelihood generation. The Tata family have repeatedly demonstrated their commitment to ethical business practices and social responsibility.

“The Tata philosophy of management has always been, and is today more than ever, that corporate enterprises must be managed not merely in the interests of their owners, but equally in those of their employees, of the consumers of their products, of the local community and finally of the country as a whole.” JRD Tata, 19733 

TCS is a multinational information technology services and consulting company. During our recent meeting with its CFO, Samir Seksaria, he suggested that its low failure rate and prioritising long-term relationships over short-term wins that has earned it the trust of its clients. Its customers need to feel confident that their sensitive information will be protected and that their business-critical operations won’t be interrupted when they are undertaking a digital transformation. This trust has encouraged its clients to share their long-term vision and business plans with TCS. This has allowed it to move up the value chain, selling more services to its clients and capturing a greater share of their spending. This is reflected in the steady growth of the number of customers from which it derives annual revenues of more than USD100 million.

Number of clients deriving revenues >USD100 million

Source: TCS Data Sheet Q3 FY25. 

Triveni Turbines

Triveni Turbines is one of the world’s leading producers of steam turbines. These are primarily used to generate power and help its customers to increase the energy-efficiency of their manufacturing processes. Consistently delivering high-quality and energy-efficient solutions, has built Triveni a strong reputation for reliability, selling into around 20 different end markets4.

Triveni’s customers are committing significant sums of capital to buying turbines that will be central to their operations for decades. These are not small decisions and they are not made quickly. This makes trust paramount. That trust is not only earned by delivering a high-quality product but also ensuring its long-term reliability and by offering comprehensive aftersales support.

Our recent discussions with Triveni touched on its strategic approach to pricing as they attempt to grow in the US. Triveni benefits from having its cost base predominantly located in India, which allows it to offer competitive pricing. It is careful not to price too aggressively, understanding that positioning its product as ‘cheap’ might damage perceptions of its quality. It tries to ensure that its customers know that its competitive pricing does not come at the expense of reliability.

The companies we met during our recent travels to India reaffirmed our belief that trust requires continuous effort, discipline and a commitment to act with integrity.

• CG Power’s turnaround demonstrates that trust, once lost, can be restored through disciplined execution and transparency.
• Dr. Lal PathLabs’ measured approach to expansion demonstrates an understanding that trust can be eroded quickly if quality is compromised.
• The Tata companies leverage their reputation that has been built through several generations of ethical leadership and long-term vision.
• Triveni Turbines shows that earning trust is an ongoing process, one that extends beyond the quality of the product to the ongoing support that it offers after sale.

Thank you for trusting Stewart Investors to be a responsible manager. We will continue to entrust your savings to companies that we believe have exceptional cultures, strong franchises and resilient financials. Not only are these companies well positioned to contribute to, and benefit from, sustainable development but we also believe they will deliver strong long-term returns.

Charlotte Toms
April 2025