New Delhi, June 22 -- Diversification is a well-worn corporate strategy. Done right, it can help companies de-risk operations, tap new revenue streams, and create lasting shareholder value. Done poorly, it can distract management, strain capital, and ultimately erode core businesses-a phenomenon legendary investor Peter Lynch once dubbed "diworsification."

Several marquee Indian companies are now testing that fine line between smart expansion and costly distraction. Grasim's recent move into paints, UltraTech's foray into cables and wires, and IndiGo's venture into hotels have raised eyebrows. But in each case, there's a strategic logic: Grasim and UltraTech can leverage their existing cement distribution networks, while IndiGo's establi...