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Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
Value Research
December 2015
Volume IX, Number 6
EDITORIAL POLICY
The goal of Wealth Insight, as with
all publications from Value COVER STORY
H T
Research, is not just limited to
generating profitable ideas for its
readers; but to also help them in
generating a few of their own. We
aim to bring independent,
unbiased and meticulously-
researched stories that will help
you in taking better-informed
SECTORS
investment decisions, encouraging
you to indulge in a bit of research
on your own as well.
All our stories are backed by
quantitative data. To this, we add
rigorous qualitative research
obtained by speaking to a wide
TO BET ON
variety of stakeholders. We firmly
stick to our belief of fundamental
research and value-oriented
approach as the best way to earn
wealth in the stock market. Equally
important to us is our unwaveringly Five sectors that are doing better than the rest
focus on long term planning.
Simplicity is the hallmark of our
style. Our writing style is simple
and so is the presentation of
ideas, but that should not be
construed to mean that we
over-simplify.
Read, learn and earn and lets
grow and evolve as we undertake
this voyage together.
Editor
Dhirendra Kumar
Special Correspondent
Mohammed Ekramul Haque
Research & Editorial
Vikas Vardhan, Prasobh
& Vibhu Vats
Design
Mukul Ojha, Kiran Sindhwal
Production
Hira Lal
Data source for stocks
AceEquity
VALUE GURU
2015 Value Research India Pvt. Ltd.
Wealth Insight is owned by Value
8BSSFO#VGGFUU
Research India Pvt. Ltd., 5, Commercial
Complex, Chitra Vihar, OFXTQBQFSTBOENPSF
Delhi 110 092.
Editor: Dhirendra Kumar. This adjunct to the four-part
Printed and published by Dhirendra
Kumar on behalf of Value Research India
interview published in the
Pvt. Ltd. Published at 5, Commercial earlier issues of Wealth
Complex, Chitra Vihar, Delhi 110 092.
Printed at Option Printofast, 46, Insight presents the
Patparganj Industrial Area, Delhi-110092
remaining titbits of the
Advertising Contact:
conversation Ekramul
Mumbai: 22838665 / 22838198
Delhi: 22457916 / 22457918 Haque had with Thomas A
Venkat K Naidu +91-9664048666 Russo, which are a bonus
Biswa Ranjan Palo +91-9664075875
for any value investor
Total pages 64, including cover
4 Wealth Insight December 2015
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Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
$PMVNOT EDIT MARKET COMPASS
CZ DHIRENDRA
#JH NPWFT
KUMAR
*OTUJUVUJPOBM NPWFT
,JMMJOH UIF .BSLFUCBSPNFUFS
VOEFBE
The new Insolvency
#FUUJOH PO*10T
and Bankruptcy Bill will
MAINSTREET be a significant reform,
with a wide-ranging WORDS WORTH WISDOM
CZ SAURABH impact on Indias
MUKHERJEA business practices *UTBMM BCPVUNPOFZ
5IF$PGGFF$BO
1PSUGPMJP ANALYSTS DIARY
Why the buy-and-
4NBMM JTCFBVUJGVM JOQIBSNB
forget approach to
investing is more GENERALLY
SPEAKING %SBHPOTTUFFMXPFT
effective than
churning your portfolio CZ VIVEK KAUL )PXUPTQPUDVSSFOUQFSGPSNFST
in search of better
returns -BCPVSJOH $BVHIUJOUIFDSPTTGJSF
VOEFSMBXT :FT UIJT JTBCVMM NBSLFU
The maze of labour
laws in India has
OFFBEAT made it difficult for DIY
the country to
CZ SANJEEV rejuvenate its &TTFOUJBM DIFDLTPOTUPDLT
PANDIYA manufacturing sector
5IJTUJNFJUT
EJGGFSFOU
STOCK ANALYSTS CHOICE
It may not be. Given 0VSTDPSFDBSE
China-related
recessionary concerns STRAIGHT TALK
and the commodity
crisis, the bomb may
already be ticking.
CZ ANAND
TANDON STOCK IDEAS
(PMEJOBOFX *EFBTUPEFMWFEFFQFS
BWBUBS
The gold bond "UUSBDUJWFCMVFDIJQT
THE CHARTIST
scheme converts a
play on asset prices
)JHI EJWJEFOEZJFMETUPDLT
CZ DEVANGSHU into an income + %JTDPVOUUPCPPLWBMVF
DATTA asset price play. It is
a step in the right 3FBTPOBCMZQSJDFEHSPXUITUPDLT
#BTFFGGFDU direction. 6QEBUFPODPNQBOJFTXJUINPBU
IBMMVDJOBUJPOT
The base effect can
distort the real picture
WORDS WORTH NOW
at times. The need is to
go beyond it and find
out the real causes.
DISCLAIMER
The contents of Wealth Insight published by Value Research India Private Limited (the Magazine) are not intended to serve as professional advice or guidance and the Magazine takes no responsibility or liability, express or implied, whatsoever for any investment
decisions made or taken by the readers of this Magazine based on its contents thereof. You are strongly advised to verify the contents before taking any investment or other decision based on the contents of this Magazine. The Magazine is meant for general reading
purposes only and is not meant to serve as a professional guide for investors. The readers of this Magazine should exercise due caution and/or seek independent professional advice before entering into any commercial or business relationship or making any
investment decision or entering into any financial obligation based on any information, statement or opinion which is contained, provided or expressed in this Magazine.
The Magazine contains information, statements, opinions, statistics and materials that have been obtained from sources believed to be reliable and the publishers of the Magazine have made best efforts to avoid any errors and omissions, however the
publishers of this Magazine make no guarantees and warranties whatsoever, express or implied, regarding the timeliness, completeness, accuracy, adequacy, fullness, functionality and/or reliability of the information, statistics, statements, opinions and materials
contained and/or expressed in this Magazine or of the results obtained, direct or consequential, from the use of such information, statistics, statements, opinions and materials. The publishers of this Magazine do not certify and/or endorse any opinions contained,
provided, published or expressed in this Magazine.Reproduction of this publication in any form or by any means whatsoever without prior written permission of the publishers of this Magazine is strictly prohibited. All disputes shall be subject to the jurisdiction
of Delhi courts only. ALL RIGHTS RESERVED
6 Wealth Insight December 2015
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EDIT
,JMMJOH UIFVOEFBE
The new Insolvency and Bankruptcy Bill will be a significant reform, with a
wide-ranging impact on Indias business practices
DHIRENDRA KUMAR
CONSEQUENCES ARE WIDE RANGING FROM THE THINNESS OF
"NPOH UIF TUSBOHF UFSNT UIBU BSF THE CORPORATE BOND MARKET TO THE REFUSAL OF BANKS TO
USED IN CONJUNCTION WITH BUSINESSES IN )NDIA IS @ZOMBIE EASILY LEND TO SMALLER BUSINESSES
3EARCH THE INTERNET AND YOU WILL FIND LOTS OF HEADLINES 4HE DRAFT BILL IS AN IMPRESSIVE PIECE OF WORK 4HE
ABOUT THE ZOMBIE COMPANIES AND BUSINESSES IN )NDIA !T BROAD GOALS OF THE BILL ARE TO ENSURE THAT INSOLVENT
ONE POINT OVER PER CENT OF THE COMPANIES LISTED ON THE BUSINESSES ARE WOUND UP OR SET ON A VIABLE REVIVAL PATH
"3% WERE SAID TO BE ZOMBIES /N 7IKIPEDIA THE ENTRY IN A TIME
BOUND MANNER WITHIN DAYS THOSE
FOR A ZOMBIE STARTS WITH THIS DEFINITION @:OMBIES ARE MANAGING THE BUSINESS ARE UNABLE TO STRIP ITS ASSETS AND
FICTIONAL UNDEAD CREATURES CREATED THROUGH THE CRUCIALLY OBSTRUCTIONIST LAWSUITS ARE UNABLE TO DERAIL OR
REANIMATION OF HUMAN CORPSES :OMBIES ARE MOST DELAY THE PROCESS )T ALSO SETS UP CONDITIONS UNDER WHICH
COMMONLY FOUND IN HORROR AND FANTASY GENRE WORKS SUCH BUSINESSES CAN CONTINUE TO OPERATE
4HE INTERESTING WORD HERE WHICH FITS THE WORLD OF /NE EXTREMELY SIGNIFICANT POINT OF THE BILL IS THAT IT
BUSINESS AND INVESTMENTS IN )NDIA WELL IS @UNDEAD DEFINES THE CONCEPT OF @OPERATIONAL CREDITORS WHO HAVE
.EITHER ALIVE NOR DEAD BUT UNDEAD n BUSINESSES WHICH EQUIVALENT RIGHTS TO @FINANCIAL CREDITORS /PERATIONAL
ARE DEAD AND YET CANNOT BE RECOGNISED AS SUCH CREDITORS WOULD PRIMARILY BE SUPPLIERS WHO HAVENT
5NDER THE MUTANT SOCIALIST LEGACY BY WHICH )NDIA IS RECEIVED PAYMENTS CUSTOMERS WHO HAVE PAID IN ADVANCE
STILL GOVERNED WE CANNOT BRING OURSELVES TO ADMIT THAT AND ARE YET TO RECEIVE THE GOODS OR SERVICES AND
BUSINESSES FAIL AND DIE )N REALITY NOT ONLY DO THEY DIE IN EMPLOYEES WHO ARE YET TO BE PAID SALARIES AND OTHER
A COUNTRY WITH LAKHS OF BUSINESSES A FEW HUNDRED MUST DUES )N )NDIA SO FAR THESE ARE THE GROUPS THAT ALWAYS
BE DYING EVERY DAY !ND YET OUR LEGAL CODE AND PRACTICE END UP BEARING LOSSES &OR EXAMPLE UNDER SUCH A LAW
HAS NO RATIONAL TREATMENT FOR THIS EVERYDAY OCCURRENCE THE COUNTLESS CUSTOMERS OF ZOMBIE REAL
ESTATE FIRMS LIKE
$ECLARING A BUSINESS UNVIABLE AND WINDING IT DOWN IN A 5NITECH AND OTHERS WOULD HAVE BEEN ABLE TO FORCE A
MANNER THAT ITS CREDITORS GET WHATEVER RECOMPENSE IS LIQUIDATION OF THE ASSETS /R IN +INGFISHERS CASE
POSSIBLE IS PRACTICALLY IMPOSSIBLE 4HE ROUTINE THING THAT EMPLOYEES WITH YEARS OF UNPAID SALARIES WOULD HAVE
HAPPENS IS THAT IF THERES ANY VALUE LEFT IN THE BUSINESS RIGHTS EQUAL TO THOSE OF THE BANKERS
THEN THE PROMOTERS WHO RAN IT AGROUND STRIP IT OUT LONG "EYOND ACTUAL INSOLVENCY PROCEDURES ) THINK THERES
BEFORE ANY CREDITORS CAN GET NEAR IT 4HERE ARE NUMEROUS A HIDDEN ADVANTAGE IN SUCH A LAW .OT PAYING CREDITORS
EXAMPLES OF THIS WITH +INGFISHER !IRLINES BEING ONLY OR SUPPLIERS OR ENORMOUS DELAYS IN PAYMENT IS A
THE MOST HIGH PROFILE AND NOTORIOUS ONE STANDARD TACTIC OF UNSCRUPULOUS )NDIAN BUSINESSES )N
(OWEVER ALL THIS IS SET TO CHANGE NOW !MONG THE FACT FOR MANY BUSINESSES NOT PAYING ON TIME SEEMS TO
REFORMS THAT THE .$! GOVERNMENT HAS INITIATED THE BE THE PRIMARY SOURCE OF WORKING CAPITAL 4HIS LAW
)NSOLVENCY AND "ANKRUPTCY "ILL IS AS CRUCIAL FOR THE COULD IN TIME LEAD TO A CHANGE IN SUCH BEHAVIOUR
FUTURE OF )NDIAN BUSINESS AS ANYTHING ELSE )N )NDIA ON /F COURSE THESE ARE EARLY DAYS AND JUST THE DRAFT OF
AN AVERAGE CREDITORS MANAGE TO RECOVER A MERE PER THE "ILL HAS BEEN RELEASED )N OUR COUNTRY THE BIGGEST
CENT OF THE VALUE DUE TO THEM FROM INSOLVENT BUSINESSES OBSTACLE TO ANY REFORMS IS THE POLITICAL OPPOSITIONS
4HE EQUIVALENT NUMBER IN DEVELOPED COUNTRIES IS ABOVE DETERMINATION TO NOT LET ANYTHING POSITIVE HAPPEN 3O
PER CENT 4HESE ARE 7ORLD "ANK FIGURES 4HE LETS KEEP OUR FINGERS CROSSED
December 2015 Wealth Insight 7
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MARKET
C MPASS BIG MOVES: LARGE CAPS
The large-cap universe consists of 86 large companies, constituting the top 70 per
cent of the total market cap. Trend lines indicate the rebased prices of the stocks
against the Sensex over three months.
Bank of Baroda PRICE `174 BHEL PRICE `178
-1.75% -31.15%
TTM SALES (` cr) 43,913 TTM PROFIT (` cr) 2,109 TTM SALES (` cr) 29,184 TTM PROFIT (` cr) 930
MKT CAP (` cr) 40,807 P/E 19.35 MKT CAP (` cr) 44,081 P/E 47.40
One of its branches accused of money laundering Continuous decline in profitability
Cairn India PRICE `131 Essar Oil PRICE `217
-15.12% 15.11%
TTM SALES (` cr) 5,913 TTM PROFIT (` cr) 27 TTM SALES (` cr) 65,362 TTM PROFIT (` cr) 1,862
MKT CAP (` cr) 24,711 P/E 9.44 MKT CAP (` cr) 30,902 P/E 16.60
Crude prices remain low To delist; Rosneft acquires 49% stake
Motherson Sumi Systems PRICE `273 Punjab National Bank PRICE `137
-19.12% -10.47%
TTM SALES (` cr) 37,206 TTM PROFIT (` cr) 1,640 TTM SALES (` cr) 47,644 TTM PROFIT (` cr) 2,423
MKT CAP (` cr) 36,417 P/E 31.75 MKT CAP (` cr) 27,530 P/E 11.36
Volkswagen-emission-scandal fallout Asset-quality concerns
Tata Motors PRICE `403 Vedanta PRICE `87
15.30% -15.58%
TTM SALES (` cr) 39,638 TTM PROFIT (` cr) -3,317 TTM SALES (` cr) 70,601 TTM PROFIT (` cr) -12,240
MKT CAP (` cr) 1,16,268 P/E 15.23 MKT CAP (` cr) 26,252 P/E
Improving JLR sales Global commodity meltdown
Data as on November 13, 2015
8 Wealth Insight December 2015
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Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
MARKET
C MPASS BIG MOVES: MID CAPS
The mid-cap universe has 218 mid-sized companies, making the next 20 per cent of
the total market cap. Trend lines show rebased stock prices against the BSE Midcap
index over three months.
Central Bank of India PRICE `67 Force Motors PRICE `3,296
-34.95% 24.94%
TTM SALES (` cr) 26,610 TTM PROFIT (` cr) 628 TTM SALES (` cr) 2,623 TTM PROFIT (` cr) 135
MKT CAP (` cr) 11,285 P/E 17.96 MKT CAP (` cr) 4,435 P/E 32.97
Gross NPAs remain over 6% Improving profitability; Q1 profit up over 80% YoY
Godfrey Phillips India PRICE `990 IDBI Bank PRICE `86
37.08%
69.82%
TTM SALES (` cr) 2,503 TTM PROFIT (` cr) 174 TTM SALES (` cr) 28,902 TTM PROFIT (` cr) 903
MKT CAP (` cr) 5,886 P/E 33.85 MKT CAP (` cr) 14,147 P/E 15.66
Rally in the stock; cigarette price hike; GST to benefit the company Government to privatise it
IFCI PRICE `26 Rajesh Exports PRICE `698
14.16% 22.75%
TTM SALES (` cr) 3,613 TTM PROFIT (` cr) 537 TTM SALES (` cr) 91,062 TTM PROFIT (` cr) 894
MKT CAP (` cr) 4,338 P/E 8.07 MKT CAP (` cr) 20,569 P/E 23.01
To sell part holding in NSE Gets fresh orders; Valcambi buy a positive
Reliance Communications PRICE `66 Vakrangee PRICE `123
9.52%
-20.98%
TTM SALES (` cr) 21,946 TTM PROFIT (` cr) 594 TTM SALES (` cr) 2,893 TTM PROFIT (` cr) 347
MKT CAP (` cr) 16,751 P/E 21.98 MKT CAP (` cr) 7,517 P/E 21.68
To merge with Sistema Shyam (MTS brand) Abrupt sell-off
Data as on November 13, 2015
10 Wealth Insight December 2015
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MARKET
BIG MOVES: SMALL CAPS C MPASS
The small-cap universe (minimum market cap = `400 crore) has 599 small-cap
companies, making the last 10 per cent of the total market cap. Trend lines indicate
rebased prices of the stocks with BSE Small Cap index over three months.
Amtek Auto PRICE `43 Castex Technologies PRICE `23
-70.22% -79.65%
TTM SALES (` cr) 3,982 TTM PROFIT (` cr) 117 TTM SALES (` cr) 3,022 TTM PROFIT (` cr) 15
MKT CAP (` cr) 954 P/E 2.64 MKT CAP (` cr) 849 P/E 4.62
Non-disclosure of financial information; bond credit rating suspended Amtek Group, the parent, embroiled in financial troubles
Ester Industries PRICE `62 GM Breweries PRICE `706
121.96% 117.14%
TTM SALES (` cr) 835 TTM PROFIT (` cr) 9 TTM SALES (` cr) 332 TTM PROFIT (` cr) 37
MKT CAP (` cr) 545 P/E 60.82 MKT CAP (` cr) 785 P/E 21.16
Strong growth in Q1 and Q2 profits Multifold growth in Q1 and Q2 profits
Gold Line International Finves PRICE `184 Kellton Tech Solutions PRICE `136
92.90%
-53.92%
TTM SALES (` cr) 6 TTM PROFIT (` cr) 1 TTM SALES (` cr) 238 TTM PROFIT (` cr) 22
MKT CAP (` cr) 953 P/E MKT CAP (` cr) 620 P/E 28.09
Companys name appears in a stock-price manipulation scam Strong growth in Q1 and Q2 profits; targets `2,000 crore revenue
Kesar Petroproducts PRICE `64 Rollatainers PRICE `39
-66.65%
195.19%
TTM SALES (` cr) 166 TTM PROFIT (` cr) 8 143
TTM SALES (` cr) TTM PROFIT (` cr) 19
MKT CAP (` cr) 453 P/E 54.62 475
MKT CAP (` cr) P/E 25.36
Q1 and Q2 profits grow 39% and 51%, respectively Amtek Group, the parent, embroiled in financial troubles
Data as on November 13, 2015
December 2015 Wealth Insight 11
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WORDS WORTH
WISDOM
ITS ALL ABOUT MONEY!
Here is what some famous personalities have to say about money
If money is your hope for
independence you will never
have it. The only real security
that a man will have in this
world is a reserve of knowledge,
experience, and ability.
HENRY FORD
When I was young I thought Financial peace isnt the
that money was the most acquisition of stuff. Its learning
important thing in life; now to live on less than you make, so
that I am old I know that it is. you can give money
OSCAR WILDE back and have money to invest.
DAVE RAMSEY
The art is not in making
Frugality includes all the money, but in keeping it.
other virtues. CICERO ANONYMOUS
The management of
money is, in much, the
management of self. The lack
Wealth consists not in having EDWARD BULWER LYTTON of money
great possessions, but in is the
having few wants. Wealth is root of all
evil.
EPICTETUS the ability to
fully experi- MARK
Never spend your money ence life. TWAIN
before you have earned it. HENRY DAVID
THOMAS JEFFERSON THOREAU
12 Wealth Insight December 2015
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Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
MARKET
C MPASS
Institutional moves
Tracking increase/decrease in stakes by institutions, viz., FIIs, mutual funds
and insurance companies
RACKING CHANGES IN INSTITUTIONAL INVESTORS
4 STAKES IN LISTED COMPANIES GIVE US INFORMATION
ABOUT THE MOOD OF THE MARKET 7HEN
INSTITUTIONS RAISE THEIR STAKES IN THE MARKET IT
SUGGESTS A BULLISH TREND AND VICE VERSA 4HE THREE
BIGGEST INSTITUTIONAL INVESTORS IN THE )NDIAN STOCK
MARKET ARE FOREIGN INSTITUTIONAL INVESTORS &))S
INSURANCE COMPANIES AND MUTUAL FUNDS -&S
RESPECTIVELY IN THE ORDER OF THEIR SIZES 3INCE THE NEW
SHARE HOLDING PATTERN IS OUT FOR ALL THE COMPANIES WE
CHECKED WHAT HAS HAPPENED TO INSTITUTIONAL HOLDINGS
4HE FOLLOWING TABLES GIVES THE LIST OF COMPANIES WHERE
INSTITUTIONS HAVE EITHER RAISED THEIR STAKES OR PARED
THEM DOWN IN THE LAST ONE QUARTER 'OING BY THE PAST
TREND &))S AND -&S HAVE ACTED IN OPPOSITE DIRECTIONS
4HE STAKES OWNED BY INSURANCE COMPANIES ARE
DOMINATED BY THE STATE
OWNED ,)# OF )NDIA WI
Large caps
Mutual funds: Increase in stakes Mutual funds: Decrease in stakes
Mkt cap (` cr) Mutual funds (%) Change Mkt cap (` cr) Mutual funds (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
IndusInd Bank Bank 55,797 9.82 7.58 2.24 Indiabulls Housing Finance 33,193 0.81 1.83 -1.02
Bank Of Baroda Bank 42,235 9.32 7.60 1.72 REC Finance 27,022 3.01 3.85 -0.84
Vedanta Iron & Steel 25,230 3.44 1.75 1.69 Bharat Electronics Electricals 27,289 7.93 8.67 -0.74
Yes Bank Bank 30,553 10.26 8.61 1.65 Torrent Pharma Healthcare 25,381 5.95 6.62 -0.67
Cipla Healthcare 51,222 5.92 4.31 1.61 BPCL Crude Oil 61,437 5.79 6.44 -0.65
Insurance companies: Increase in stakes Insurance companies: Decrease in stakes
Mkt cap (` cr) Insurance (%) Change Mkt cap (` cr) Insurance (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
Indian Oil Crude Oil 97,628 11.15 3.47 7.68 Bank Of Baroda Bank 42,235 10.25 11.36 -1.11
PFC Finance 30,368 9.36 6.13 3.23 Eicher Motors Automobile 48,290 0.82 -0.82
Tata Motors Automobile 86,169 12.30 9.56 2.74 BPCL Crude Oil 61,437 3.90 4.69 -0.79
Ambuja Cements Const. Materials 31,915 9.91 8.25 1.66 IndusInd Bank Bank 55,797 1.00 1.49 -0.49
GAIL Gas Transmission 38,321 12.73 11.15 1.58 Britannia Industries FMCG 36,987 3.25 3.62 -0.37
FIIs: Increase in stakes FIIs: Decrease in stakes
Mkt cap (` cr) FIIs (%) Change Mkt cap (` cr) FIIs (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
Indiabulls Housing Finance 33,193 44.57 39.15 5.42 Ambuja Cements Const. Materials 31,915 19.96 26.35 -6.39
BPCL Crude Oil 61,437 19.67 18.13 1.54 Cipla Healthcare 51,222 14.31 18.29 -3.98
Glenmark Pharma Healthcare 29,597 36.83 35.86 0.97 Sun Pharma Healthcare 208,992 19.80 23.76 -3.96
Bharti Infratel Telecom 67,284 25.27 24.30 0.97 Yes Bank Bank 30,553 41.26 44.42 -3.16
HPCL Crude Oil 26,230 19.75 18.86 0.89 M&M Automobile 78,301 29.97 32.99 -3.02
14 Wealth Insight December 2015
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MARKET
C MPASS
Mid caps
Mutual funds: Increase in stakes Mutual funds: Decrease in stakes
Mkt cap (` cr) Mutual funds (%) Change Mkt cap (` cr) Mutual funds (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
Thomas Cook Hospitality 7,395 7.83 2.33 5.50 Strides Arcolab Healthcare 7,295 10.80 13.16 -2.36
PVR Media & Ent. 3,797 13.99 8.89 5.10 Dewan Housing Finance 6,419 1.56 3.52 -1.96
Tata Motors DVR Automobile 11,019 32.05 29.10 2.95 Shriram Transport Fin. Finance 20,976 1.46 2.88 -1.42
Redington Cons. Durables 4,410 15.82 13.20 2.62 Cyient IT 6,285 11.09 12.29 -1.20
Mphasis IT 8,603 4.86 2.31 2.55 Page Industries Textile 14,760 5.18 6.32 -1.14
Insurance companies: Increase in stakes Insurance companies: Decrease in stakes
Mkt cap (` cr) Insurance (%) Change Mkt cap (` cr) Insurance (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
JK Cement Const. Materials 4,589 5.55 1.10 4.45 Tata Communications Telecom 11,771 0.59 5.16 -4.57
Kirloskar Oil Engines Automobile 4,052 4.04 2.51 1.53 Corporation Bank Bank 4,355 20.14 23.90 -3.76
Hindalco Industries Metals 14,589 13.56 12.23 1.33 J&K Bank Bank 4,365 3.17 -3.17
Voltas Consumer Durables 8,878 13.95 12.86 1.09 Bank Of India Bank 10,734 14.25 17.13 -2.88
Strides Arcolab Healthcare 7,295 1.19 0.36 0.83 Andhra Bank Bank 4,367 8.29 9.23 -0.94
FIIs: Increase in stakes FIIs: Decrease in stakes
Mkt cap (` cr) FIIs (%) Change Mkt cap (` cr) FIIs (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
L&T Finance Holdings Finance 11,488 8.27 3.59 4.68 UPL Chemicals 19,626 37.10 48.84 -11.74
Suzlon Energy Capital Goods 10,234 16.25 12.30 3.95 Edelweiss Financial Finance 4,699 18.04 25.53 -7.49
PVR Media & Ent. 3,797 25.41 21.85 3.56 Cholamandalam Inv. Finance 10,119 10.04 16.97 -6.93
GSPL Gas Transmission 6,628 13.76 11.28 2.48 Tata Motors DVR Automobile 11,019 45.03 51.57 -6.54
DCB Bank Bank 4,045 17.04 14.79 2.25 Sequent Scientific Healthcare 4,065 13.75 19.78 -6.03
Small caps
Mutual funds: Increase in stakes Mutual funds: Decrease in stakes
Mkt cap (` cr) Mutual funds (%) Change Mkt cap (` cr) Mutual funds (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
Titagarh Wagons Automobile 1,188 18.37 7.57 10.80 Sasken Comm. IT 414 0.42 10.03 -9.61
KEI Industries Electricals 747 10.89 0.12 10.77 Tara Jewels Diamond & Jewel. 83 2.11 10.91 -8.80
Pantaloons Fashion Retailing 2,028 10.17 0.08 10.09 Omkar Speciality Chemicals 396 4.51 11.74 -7.23
Insecticides Chemicals 833 7.94 1.30 6.64 Himatsingka Seide Textile 2,047 7.73 14.86 -7.13
Astrazeneca Pharma Healthcare 2,914 6.01 6.01 Mcdowell Holdings Finance 36 4.20 9.21 -5.01
Insurance companies: Increase in stakes Insurance companies: Decrease in stakes
Mkt cap (` cr) Insurance (%) Change Mkt cap (` cr) Insurance (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
Dredging Corporation Logistics 935 8.75 5.21 3.54 Titagarh Wagons Automobile 1,188 4.84 -4.84
Gujarat Ind. Power Power 1,094 11.26 9.61 1.65 PTC India Power 1,766 13.78 16.71 -2.93
The Byke Hospitality Hospitality 660 6.96 5.99 0.97 Punjab Chemicals Chemicals 242 0.13 2.43 -2.30
VA Tech Wabag Infrastructure 3,637 0.77 0.06 0.71 TRF Capital Goods 231 0.04 2.16 -2.12
HSIL Const. Materials 1,939 0.51 0.51 Kalindee Rail Capital Goods 185 1.68 -1.68
FIIs: Increase in stakes FIIs: Decrease in stakes
Mkt cap (` cr) FIIs (%) Change Mkt cap (` cr) FIIs (%) Change
Company name Sector Sep-15 Sep-15 Jun-15 (% points) Company name Sector Sep-15 Sep-15 Jun-15 (% points)
Safari Industries Plastic Products 339 20.87 0.04 20.83 Indiabulls Real Estate Realty 2,946 13.89 25.58 -11.69
KDDL Consumer Durables 282 13.90 0.53 13.37 Forbes & Company Automobile 1,837 0.48 9.38 -8.90
Salzer Electronics Capital Goods 306 11.52 0.76 10.76 Mcdowell Holdings Finance 36 21.14 29.97 -8.83
Sasken Comm. IT 414 16.19 6.61 9.58 The South Indian Bank Bank 3,058 19.34 28.16 -8.82
Castex Technologies Automobile 834 20.88 11.39 9.49 Future Consumer Ent. FMCG 2,519 10.02 18.50 -8.48
Data as per the latest (ended September 2015) shareholding pattern
December 2015 Wealth Insight 15
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MARKET
C MPASS
Market barometer
Key ratios can give an indication as to whether a stock or the market is
valued fairly at any given point
O YOU KNOW THE LEGENDARY INVESTOR 7ARREN MARKET PUNDITS LIKE "UFFETT HAVE THEIR OWN FAVOURITE
$ "UFFET SWEARS BY THE MARKET CAP TO '$0 RATIO
)N FACT HE ONCE FAMOUSLY SAID THAT IT IS PROBABLY
THE SINGLE BEST MEASURE OF VALUATIONS AT ANY POINT
RATIOS 4HEY LIKE TO USE THEM OFTEN TO GET AN IDEA OF THE
VALUATIONS !LL YOU HAVE TO DO IS FIND OUT THESE KEY
NUMBERS AND FOLLOW THE GENERAL RULE TO FIGURE OUT WHAT
)NSTEAD OF LOOKING FOR TIPS FROM SOME TALKING HEADS THEY INDICATE 9OU WOULD BE SURPRISED HOW CLEARLY THEY
INVESTORS CAN TAKE A LOOK AT SOME HISTORICAL DATA AND INDICATE THE VALUATIONS IN THE MARKET 7E HAVE
FIND THE RELATIONSHIP BETWEEN THEM TO MAKE THEIR BUY HIGHLIGHTED SOME IMPORTANT POINTERS WHICH WILL HELP
AND SELL DECISIONS WITH BETTER CONVICTION )N FACT MOST YOU GET AN IDEA OF MARKET VALUATIONS WI
Sensexs price/earnings
30 SCALE The historical average Sensex P/E, like
any average, is used to put in perspec-
High 28.57 tive the current scenario. A general
26 guideline to help understand the valua-
tion is:
P/E > 24 = Dangerously
22
overvalued
P/E > 20 < 24 = Overvalued
Historical average 19.27
18 P/E > 16 < 20 = Fairly valued
Median 19.16 P/E > 12 < 16 = Undervalued
P/E < 12 = Highly underval-
14 ued (mouthwater-
ing valuations)
Currently, the Sensex P/E stands at
10 20.52, slightly above the historical
November 2005 November 2015 Min 10.36 average P/E.
Sensexs price/book value
7 SCALE Price to book value tells us how many
times an investor is ready to pay for a
High 6.93 rupee of net assets.
6
Since book value is stable and less
volatile than earnings, some consider it
better than P/E as a measure of
5
valuation. If
P/BV > Average P/BV = Overvalued
4 P/BV < Average P/BV = Undervalued
Historical average 3.67 Currently, P/BV stands at 2.74, way
below its historical average.
3 Median 3.42
2
November 2005 November 2015 Min 2.20
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MARKET
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Sensexs earnings yield (%)
10 SCALE This is is the inverse of the P/E ratio,
discussed earlier, turned into
High 9.65% percentage. It is calculated by taking
8 the earnings per share (EPS) and
dividing it by the stock price. A high
earnings yield indicates that the stock is
6 undervalued. Some investors abroad
also compare earnings yield with yield
Historical average 5.3% on government securities before
4 making investment decisions. However,
Median
critics point out that in India the
5.22% government bond yields typically hover
2
above the earnings yield of stocks.
At the moment, earnings yield is
0 hovering around 4.87 per cent, which is
November 2005 November 2015 Min 3.50% slightly below the average yield of 5.3
per cent.
Sensexs dividend yield (%)
2.5 SCALE It is nothing but the return an investor
gets, in form of dividend, on his invest-
High 2.17% ment. It is measured as dividend per
2.0 share divided by price per share.
Generally speaking, when stocks are
cheap, dividend yields are high.
1.5
If
Median 1.32% Dividend yield >
1.0 Historic dividend yield = Undervalued
Historical average 1.34% Dividend yield <
Historic dividend yield = Overvalued
0.5
Currently, dividend yield is at 1.43 per
cent, signalling an undervalued picture
0 as it is slightly above its average of 1.34
November 2005 November 2015 Min 0.80% per cent.
Market cap to GDP
175 SCALE This measure is Buffetts personal
favourite! He said, It is probably the
High 156.48% single best measure of where valuations
140 stand at any given moment.. Here it
considers the market cap of all the listed
companies on the BSE.
105
If
Historical average 82.28% Market cap > GDP = Market
70 overvalued
Market cap < GDP = Market undervalued
35 Median 82.38%
Currently the market cap to GDP stands
at 83.82 per cent, which is near its
0
historical average of 82.28 per cent.
Min 53.15%
Sources : RBI, BSE
November 2005 November 2015
December 2015 Wealth Insight 17
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Betting on IPOs
In comparison with the pitiful long-term prospects of IPO investments, the
chances of making short-term returns are much higher
NTER'LOBE !VIATION ,TD OR SIMPLY )NDI'O HAS HAD )N COMPARISON WITH THESE PITIFUL LONG TERM
) A DREAM DEBUT ON THE BOURSES )TS SHARES ARE
TRADING ABOVE THE ISSUE PRICE OF ` /N THE
OTHER HAND INVESTORS FOUND THE VALUATION OF #OFFEE
PROSPECTS OF )0/ INVESTMENTS THE CHANCES OF MAKING
SHORT
TERM RETURNS ARE MUCH HIGHER /VER OF
THESE STOCKS LISTED WITH DOUBLE
DIGIT GAINS !ND ONLY A
$AY %NTERPRISES ,TD TOO HOT TO HANDLE )TS SHARES ARE FIFTH ENDED THE FIRST DAY OF TRADING IN THE RED
TRADING BELOW THE ISSUE PRICE 7HATEVER THE PURISTS MAY SAY HOW CAN ONE BLAME
0URISTS SAY THAT GETTING EXCITED ABOUT THE SO
CALLED )NDIAN INVESTORS FOR PREFERRING TO RIDE THEIR LUCK WITH
LISTING POP DOESNT MAKE MUCH SENSE AND WHAT PROSPECTIVE LISTING GAINS
MATTERS MORE IS LONG
TERM RETURN 4HAT SHOULD GO )TS EVIDENT FROM THE POOR LONG
TERM PERFORMANCE
WITHOUT SAYING "UT INITIAL PUBLIC OFFERINGS )0/S THAT )NDIAN )0/S ARE BY AND LARGE OVERPRICED
DATA SUGGESTS THAT INCENTIVES ARE SKEWED AND PROMOTE 'IORDANO #OGLIATI ET AL FROM THE 5NIVERSITY OF
A CULTURE OF SHORT
TERM OPPORTUNISM "ERGAMO )TALY HAD FOUND IN A &EBRUARY STUDY THAT
/NLY THREE IN EVERY STOCKS HAVE DELIVERED DOUBLE
THE MEDIAN )0/ COMPANY IN &RANCE )TALY AND 'ERMANY
DIGIT ANNUAL RETURNS FOR A LONG
TERM )0/ INVESTOR &IVE IS OVERVALUED AT THE OFFERING ISSUE PRICE BY
STOCKS DELIVERED NEGATIVE RETURNS AND IN THE 7HAT ABOUT THE CORRELATION BETWEEN LISTING GAINS
REMAINING TWO INVESTORS MAY HAVE BEEN BETTER OFF AND LONG
TERM PERFORMANCE
PARKING THEIR FUNDS IN SAFER FIXED
INCOME )NTERESTINGLY IT TURNS OUT THAT STOCKS WHICH GAIN
INSTRUMENTS MEANINGFULLY ON LISTING STAND A BETTER CHANCE AT
December 2015 Wealth Insight 19
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MARKET
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PROVIDING DECENT LONG TERM RETURNS !MONG STOCKS Overpriced IPOs and harried investors
THAT GAINED OVER ON LISTING TWO FIFTHS OR Only three in 10 stocks generated decent long-term returns vis-a-vis their
ENDED UP WITH DOUBLE DIGIT ANNUAL RETURNS IN THE IPO issue price. Listing gains, however, were handsome for a majority.
LONG RUN !MONG THE OTHER STOCKS THAT DIDNT DO TOO
WELL ON LISTING ONLY AROUND HAVE MANAGED
DOUBLE DIGIT ANNUAL RETURNS TILL DATE 4HE DATA IS FOR
THE PAST YEARS EXCLUDES STOCKS WITH A MARKET
CAPITALIZATION OF UNDER RUPEES CRORE AT THE TIME
OF LISTING AND THOSE THAT DONT HAVE A TRADING
HISTORY OF AT LEAST FIVE YEARS )T ALSO DOES NOT INCLUDE
RETURNS FROM DIVIDEND INCOME
)N OTHER WORDS )NDI'OS SHAREHOLDERS HAVE A HIGHER
CHANCE OF EARNING DECENT LONG TERM RETURNS
COMPARED WITH SHAREHOLDERS OF #OFFEE $AY
%NTERPRISES 4O BE SURE THE DATA ALSO SHOWS THAT THIS
CANT BE TAKEN FOR GRANTED )N FACT TWO FIFTHS OF THE
STOCKS WITH HANDSOME LISTING GAINS ENDED UP WITH NEARLY HALVING WHEN IT LISTED IN !PRIL "UT USING
NEGATIVE RETURNS WHILE ONEFIFTH GENERATED ONLY ITS ISSUE PRICE AS THE BASE AVERAGE ANNUAL RETURNS
MEDIOCRE RETURNS &OR INSTANCE 3UZLON %NERGY ,TDS HAVE BEEN AN IMPRESSIVE
SHARES HAD GAINED OVER ON LISTING BUT ITS CURRENT 3ADLY RETURNS SUCH AS THESE ARE FEW AND FAR
VALUATION IS JUST ONE FIFTH OF ITS )0/ ISSUE PRICE BETWEEN WI
!MONG STOCKS THAT PERFORMED DISMALLY ON LISTING -OBIS 0HILIPOSE \ )N ARRANGEMENT WITH
#ADILA (EALTHCARE ,TD STANDS OUT WITH ITS SHARES (4 3YNDICATION \ -).4
Performance of the last few issues
Subscription Issue size Issue Listing Adj listing Current Return since listing (%)
Company name ratio (` cr) price (`) Listing date gain (%) price (`) price (`) Stock Sensex
SH Kelkar & Co 27.08 517 180 16-Nov-15 23.33 222 217 -2.48 8.96
Interglobe Aviation 6.15 2,304 765 10-Nov-15 11.90 856 1,146 33.85 9.03
Coffee Day Enterprises 1.82 1,194 328 2-Nov-15 -4.57 313 260 -16.82 5.68
Prabhat Dairy 0.77 474 115 21-Sep-15 0.00 115 138 20.35 7.15
Sadbhav Infrastructure 2.24 294 103 16-Sep-15 7.52 111 96 -13.23 8.10
Pennar Engineered Building 1.15 159 178 10-Sep-15 -15.73 150 162 8.00 9.54
Shree Pushkar Chemicals 1.34 75 65 10-Sep-15 -7.69 60 73 21.92 9.54
Navkar Corporation 2.85 443 155 9-Sep-15 -1.94 152 187 22.76 9.13
Power Mech Projects 273 640 26-Aug-15 -6.25 600 609 1.54 9.15
Syngene International 32.05 550 250 11-Aug-15 18.00 295 365 23.73 0.72
Manpasand Beverages 1.40 441 320 9-Jul-15 -9.06 291 394 35.33 1.79
Syngene International 32.05 550 250 11-Aug-15 18.00 295 365 23.73 0.72
Manpasand Beverages 1.40 441 320 9-Jul-15 -9.06 291 394 35.33 1.79
PNC Infratech Ltd 0.01 488 378 26-May-15 0.79 381 533 39.96 1.95
UFO Moviez India 2.04 610 625 14-May-15 -4.00 600 559 -6.88 3.16
MEP Infrastructure 1.11 324 63 6-May-15 0.00 63 51 -19.76 5.05
VRL Logistics 74.26 474 205 30-Apr-15 40.49 288 412 43.19 3.91
Inox Wind 18.60 1,060 325 9-Apr-15 23.08 400 369 -7.70 -2.83
Adlabs Entertainment 0.60 366 180 6-Apr-15 -6.69 168 114 -31.88 -1.53
Ortel Communications 0.75 217 181 19-Mar-15 0.00 181 185 2.21 -1.41
20 Wealth Insight December 2015
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MARKET
C MPASS
Subscription Issue size Issue Listing Adj listing Current Return since listing (%)
Company name ratio (` cr) price (`) Listing date gain (%) price (`) price (`) Stock Sensex
Monte Carlo Fashions 7.83 350 645 19-Dec-14 -9.30 585 448 -23.44 2.54
Shemaroo Entertainment 7.39 132 170 1-Oct-14 5.88 180 259 37.78 4.96
Sharda Cropchem 59.97 352 156 23-Sep-14 62.88 254 244 -3.52 4.16
Snowman Logistics 59.75 197 47 12-Sep-14 59.57 75 91 17.98 3.12
Wonderla Holidays 38.06 181 125 9-May-14 31.80 165 394 76.74 13.90
Just Dial 1.88 719 530 5-Jun-13 11.32 590 805 13.47 15.81
Repco Home Finance 1.65 270 172 1-Apr-13 -4.07 165 685 71.58 16.27
V-Mart Retail 1.20 80 210 20-Feb-13 2.86 216 437 29.31 13.88
Bharti Infratel 1.30 4,156 220 28-Dec-12 -9.36 200 393 26.28 13.53
PC Jeweller 6.85 609 135 27-Dec-12 2.96 136 387 43.66 13.76
Credit Analysis And Research 40.98 540 750 26-Dec-12 25.34 949 1,329 12.31 13.55
Tara Jewels 1.98 157 230 6-Dec-12 5.22 242 32 -49.49 13.15
VKS Projects 1.03 55 55 18-Jul-12 1.45 2 0 -56.36 15.82
Speciality Restaurants 2.54 150 150 30-May-12 2.00 153 122 -6.38 16.91
Tribhovandas Bhimji Zaveri 1.15 200 120 9-May-12 -4.17 115 104 -2.78 16.27
NBCC 4.93 121 101 12-Apr-12 -0.70 100 928 85.50 14.30
MT Educare 4.80 88 80 12-Apr-12 7.56 86 132 12.53 14.30
Olympic Cards 0.00 25 30 28-Mar-12 -0.17 30 14 -18.21 14.52
MCX 54.13 568 1,032 9-Mar-12 34.40 1,387 858 -12.19 13.62
Indo Thai Securities 1.18 30 74 2-Nov-11 1.35 75 19 -28.57 12.43
Vaswani Industries 4.16 49 49 24-Oct-11 -31.73 33 4 -40.55 13.20
Ujaas Energy 1.57 93 186 20-Oct-11 -3.23 18 17 -1.39 13.16
Taksheel Solutions* 2.99 83 150 19-Oct-11 4.93 157 3 -82.97 25.42
Flexituff International 1.17 105 155 19-Oct-11 0.00 155 229 10.02 12.91
Onelife Capital Advisors 1.53 37 110 17-Oct-11 4.55 115 58 -15.36 12.99
Tijaria Polypipes 60 60 14-Oct-11 3.33 62 5 -46.96 12.87
RDB Rasayans 1.50 36 79 7-Oct-11 7.59 85 25 -25.80 14.21
Prakash Constrowell 2.21 64 138 4-Oct-11 5.07 15 2 -35.12 14.82
PG Electroplast 1.34 121 210 26-Sep-11 -4.76 200 125 -10.71 14.41
SRS 1.25 203 58 16-Sep-11 -5.17 28 21 -6.68 12.86
TD Power Systems 2.92 227 256 8-Sep-11 -1.72 252 285 3.00 12.42
Brooks Laboratories 1.60 70 100 5-Sep-11 10.00 110 73 -9.39 13.11
Tree House Education 1.85 109 129 26-Aug-11 2.95 133 233 14.21 14.45
L&T Finance Holdings 5.34 1,236 52 12-Aug-11 0.00 51 65 5.90 12.70
Inventure Growth 4.58 82 117 4-Aug-11 1.71 30 11 -20.18 11.34
Bharatiya Global Infomedia 2.06 55 82 28-Jul-11 2.44 84 4 -51.53 10.55
Kridhan Infra 1.68 35 108 13-Jul-11 6.48 23 95 38.34 9.91
Rushil Decor 2.62 41 72 7-Jul-11 12.85 81 269 31.54 9.23
Birla Pacific Medspa* 1.18 65 10 7-Jul-11 1.00 10 0 -59.55 10.24
Timbor Home* 1.01 23 63 22-Jun-11 14.29 72 2 -55.08 11.39
Data as on November 19, 2015. Returns for the periods more than one year are annualised. *No longer traded.
December 2015 Wealth Insight 21
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MAINSTREET
The Coffee Can Portfolio
Why the buy-and-forget approach to investing is more effective than churning
your portfolio in search of better returns
SAURABH MUKHERJEA
Churning your portfolio, i.e., buying least earned the highest returns. The implication here
and then selling stocks frequently is one of the easiest is that people who might have suffered the most from
ways to produce sub-optimal returns in the stock mar- myopic loss aversion and acted upon it by selling
ket. This point has been made by several investment stocks did less well much less well than those who
gurus. For example, in his highly readable book, were able to resist the natural impulse and instead
Investing: The Last Liberal Art (2013), Robert hold their ground.
Hagstrom says: Appreciating the destructive power of churn, most
In 1997, Terence Odean, a behavioural economist at thoughtful investors have tried different ways to
the University of California, published a paper titled, reduce churn and thus hold stocks for much longer
Why Do Investors Trade Too Much?. To answer his periods of time. Amongst the more novel attempts in
question, he reviewed the performance of 10,000 this regard has been the Coffee Can Portfolio con-
anonymous investors. struct created by Rob Kirby of Capital.
Over a seven-year period (19871993), In his 1984 paper, Kirby narrated an
Odean tracked 97,483 trades among ten incident involving his clients husband
thousand randomly selected accounts of
INSIDE CCP who had purchased stocks recommend-
a major discount brokerage. The first We used two simple ed by Kirby in $5,000 denomination each
thing he learned was that the investors
rules to create our CCP. but did not ever sell anything from the
sold and repurchased almost 80 percent portfolio. This process led to enormous
of their portfolios each year (78 percent We looked for stocks wealth creation for the client over a
turnover ratio). Then he compared the which over the period of about ten years, mainly on
portfolios to the market average over
preceding ten years had account of one position transforming to
three different time periods (four a jumbo holding worth over $800,000,
months, one year and two years). In generated an ROCE of which came from a zillion shares of
every case, he found two amazing at least 15 per cent and Xerox. Impressed by this approach of
trends: (1) the stocks that the investors
revenue growth of at buy and forget followed by this gentle-
bought consistently trailed the market, man, Kirby coined the term Coffee Can
and (2) the stocks that they sold actually least 10 per cent. Portfolio (CCP) the concept harkens
beat the market . back to the Wild West, when Americans,
Odean wanted to look deeper, so he next examined before the widespread advent of banks, saved their
the trading behaviour and performance results of valuables in a coffee can and kept it under a mattress.
6,465 households. In a paper titled, Trading Is At Ambit, my colleagues and I have discovered that
Hazardous to Your Wealth (2000), Odean, along with this approach works well in the Indian stock market.
Brad Barber, professor of finance at University of We used two simple rules to create our CCP. We looked
California, Davis, compared the records of people who for stocks which over the preceding ten years had gen-
traded frequently versus people who traded less often. erated return on capital employed (ROCE) of at least
They found that, on average, the most active traders 15 per cent and revenue growth of at least 10 per cent.
had the poorest results, while those who traded the Using this approach, we constructed CCPs in each of
22 Wealth Insight December 2015
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MAINSTREET
ITC Marico
Asian Paints Page Industries
Lupin Amara Raja Batteries
HCL Tech Berger Paints
Cadila Healthcare eClerx Services
Britannia Astral Poly Technik
Colgate-Palmolive V-Guard Industries
GSK Consumer Cera Sanitaryware
THE PAST YEARS 3O FOR EXAMPLE IN THE YEAR WE EXERCISES ACTUALLY REDUCES RETURNS BECAUSE THE
USED DATA FROM TO TO IDENTIFY THE COMPANIES INVESTOR IS SELDOM ABLE TO GET BACK INTO THE STOCK
WHICH PASSED THE TWO FILTERS MENTIONED ABOVE AND WE BEFORE IT BEGINS ITS ASCENT 3O FOR EXAMPLE WHILST
THEN KEPT THIS PORTFOLIO UNTOUCHED OVER THE NEXT TEN ,UPINS SHARE PRICE HAS GENERATED PER CENT #!'2
YEARS 7HAT WE FOUND IS THAT EACH OF THE ##0S CREATED OVER THE PAST DECADE THERE HAVE BEEN TWO LONG PERI
OVER THE PAST YEARS INCLUDING THE SEVEN ##0S WHICH ODS OF AROUND THREE YEARS EACH IN WHICH THE STOCK
HAVE COMPLETED A FULL TEN
YEAR CYCLE HAVE OUTPER
HAS RETURNED ONLY
PER CENT PER ANNUM !N
FORMED THE 3ENSEX USUALLY BY n PERCENTAGE POINTS INVESTOR WHO SOLD ,UPIN IN THESE SIX YEARS OF WEAK
PER ANNUM )N FACT NOT ONLY HAS THIS @BUY AND FORGET RETURNS WOULD HAVE IN ALL LIKELIHOOD MISSED OUT ON
APPROACH TO INVESTING HANDSOMELY OUTPERFORMED THE THE PER CENT #!'2
3ENSEX EVEN IN RISK
ADJUSTED TERMS IE ACCOUNTING 3O WHAT WOULD A ##0 CREATED TODAY CONTAIN (ERE
FOR MAXIMUM DRAWDOWN OUT OF THE ITERATIONS OF ARE THE COMPANIES WHICH OVER THE PAST DECADE HAVE
THE ##0 HAVE OUTPERFORMED THE 3ENSEX DELIVERED 2/#% OVER PER CENT EVERY YEAR AND REV
%VEN MORE INTERESTINGLY MY COLLEAGUES FOUND THAT ENUE GROWTH OF GREATER THAN PER CENT EVERY YEAR
INVESTMENT RETURNS ARE BETTER IF YOU BUILD A ##0 IN )4# !SIAN 0AINTS ,UPIN (#, 4ECH #ADILA
YEAR T AND LET IT RUN UNTOUCHED UNTIL T RATHER THAN (EALTHCARE "RITANNIA #OLGATE
0ALMOLIVE '3+
TRYING TO ANNUALLY REBALANCE THE PORTFOLIO AS IS THE #ONSUMER -ARICO 0AGE )NDUSTRIES !MARA 2AJA
NORM IN THE INVESTMENT
MANAGEMENT INDUSTRY 4HIS "ATTERIES "ERGER 0AINTS E#LERX 3ERVICES !STRAL 0OLY
COUNTERINTUITIVE RESULT ARISES FROM THE FACT THAT THE 6
'UARD )NDUSTRIES AND #ERA 3ANITARYWARE WI
SHORT
TERM IN THIS CONTEXT ONEnFOUR YEARS FINANCIAL Saurabh Mukherjea is CEO - Institutional Equities at Ambit Capital and
DATA ON WHICH INVESTORS BASE SUCH ANNUAL REBALANCING the author of Gurus of Chaos: Modern Indias Money Masters.
December 2015 Wealth Insight 23
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ANALYSTS
DIARY
Small is beautiful in pharma
With high numbers of ANDAs, mid-rung pharma companies could
outperform their larger peers in the future
HE PHARMACEUTICAL SECTOR HAS HAD A SUCCESSFUL !UROBINDO 0HARMA TOPS THE LIST OF HIGHEST !.$!
4 RUN FOR QUITE SOME TIME IN THE MARKETS !
STRENGTHENING !.$! ACRONYM FOR
!BBREVIATED .EW $RUG !PPLICATION AN APPLICATION
APPROVALS AMONG )NDIAN FIRMS IN THE FIRST HALF OF
THIS CALENDAR YEAR WITH APPROVALS SO FAR !LMEBIC
0HARMA IS THIRD IN THE LIST OF HIGHEST !.$!
FOR GENERIC DRUG APPROVAL IN THE 53 PORTFOLIO AND APPROVALS THIS YEAR BEHIND ,UPIN WITH NINE
HIGHER EARNINGS GROWTH VISIBILITY HAVE BEEN THE APPROVALS FOLLOWED BY EIGHT OF 'LENMARK SEE THE
MAIN BOOSTERS FOR THE PHARMA CHART BELOW
SECTORS OUTPERFORMANCE %VEN CUMULATIVELY MID
RUNG
"IG PHARMA COMPANIES LIKE 3UN PHARMA COMPANIES ARE RACING
0HARMA ,UPIN $R 2EDDYS HAVE AHEAD WITH HIGHER NUMBER OF
BEEN IN HIGH DEMAND AND ARE !.$! FILINGS n EVEN AHEAD OF
MARKET FAVOURITES (IGH EARNINGS LARGER PLAYERS !UROBINDO 0HARMA
VISIBILITY AND SECULAR EARNINGS AGAIN TOPS THE LIST WITH A PIPELINE
GROWTH MEANT THAT LARGE
CAP OF !.$!S FOLLOWED BY #ADILAS
PHARMA STOCKS WERE PREFERRED SEE THE SECOND CHART BELOW
OVER THEIR MID
RUNG PEERS 4HIS !NOTHER ADVANTAGE GOING MID
HAS TAKEN VALUATIONS OF LARGE
CAP RUNG PHARMA COMPANIES WAY IS
PHARMA STOCKS TO HEATED LEVELS VALUATIONS 30 "3% (EALTHCARE
/N THE OTHER HAND THE OFTEN
INDEX TRADES AT TIMES EARNINGS
IGNORED MID
RUNG PHARMA STOCKS ,ARGE
CAP PHARMA STOCKS TOO TRADE
HAVE BEEN CHUGGING ALONG IN A SIMILAR RANGE )N CONTRAST
INCREASING THEIR EARNINGS !UROBINDO 0HARMA TRADES AT
VISIBILITY WITH A STEADY BUILD
UP OF THEIR !.$! TIMES EARNINGS #ADILA AT TIMES EARNINGS AND 4ORRENT
PORTFOLIOS ! SPATE OF MID
RUNG PHARMA COMPANIES AT TIMES EARNINGS 4HIS BEGS THE QUESTION IS IT THE
IN RECENT TIMES HAS SEEN A HIGHER RATE OF !.$! TIME FOR MID
RUNG PHARMA STOCKS TO TAKE THE LEAD WI
APPROVALS AS COMPARED TO THEIR LARGER PEERS Ekramul Haque ekramul@valueresearch.in
Mid-rung pharma stocks lead in ANDA Mid-rung pharma companies also lead from
approvals this calendar the front in ANDA pipeline
Source: Axis Capital Source: Axis Capital
24 Wealth Insight December 2015
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ANALYSTS
DIARY
Dragons steel woes
With slowing economic growth, Chinas steel demand has decreased,
which means harder times ahead for the steel industry
HU *IMIN WHO IS THE DEPUTY HEAD OF THE #HINA
: )RON 3TEEL !SSOCIATION SAID h#HINAS STEEL
DEMAND EVAPORATED AT UNPRECEDENTED SPEED AS
THE NATIONS ECONOMIC GROWTH SLOWEDv
)N A COUNTRY WHERE INVESTMENTS IN FIXED ASSETS
MAKE UP PER CENT OF THE '$0 THAT IS A
WORRYING SIGN 3TEEL IS A VITAL INGREDIENT IN #HINAS
GROWTH STORY AND PRIMARY RAW MATERIAL FOR MANY
INDUSTRIES INCLUDING REAL ESTATE ! SLOWDOWN IN STEEL
DEMAND THUS SIGNALS A SLOWDOWN IN THE CORE
ECONOMY AS WELL
3TEEL DEMAND CONTRACTED PER CENT IN 3EPTEMBER &ALLING LOCAL DEMAND THAT HAS NOT BEEN MET WITH A
THIS YEAR 9O9 0RODUCTION THAT PEAKED AT MATCHING CUT IN SUPPLY HAS MEANT THAT STEEL PRICES
MILLION METRIC TONNE LAST YEAR SOUNDS A FAR
AWAY HAVE NOSEDIVED -ANUFACTURERS n BOTH LOCAL AND FROM
TARGET FROM THE MILLION TONNE PRODUCED IN THE ROUND THE WORLD AS IN "RAZIL AND !USTRALIA n IN A BID
FIRST NINE MONTHS OF THIS YEAR 3TOCKPILED INVENTORIES TO INCREASE THE MARKET SHARE HAVE REDUCED PRICES
n A HEADACHE FOR PRODUCERS n ARE UP PER CENT TO FURTHER )N THE LAST ONE YEAR ALONE IRON ORE PER
MILLION TONNE AS OF /CTOBER 8U ,EJIANG CENT CONTENT HAS CRASHED FROM PER METRIC TONNE
#HAIRMAN OF "AOSTEEL THE COUNTRYS SECOND LARGEST AND RECENTLY TOUCHED THE MARK
STEEL PRODUCER WITHOUT GIVING A TIME FRAME HAS
WARNED THAT STEEL OUTPUT IS LIKELY TO FALL PER CENT More trouble ahead
"OTH 'OLDMAN AND #ITIGROUP HAVE PROJECTED ORE
Steel prices lowest since 2009 PRICES TO HIT PER METRIC TONNE BY -ANY
#HINA IS THE WORLDS LARGEST STEEL PRODUCER CHURNING LARGE AND MEDIUM
SIZED MILLS ARE ALREADY REPORTING
OUT HALF OF THE WORLDS ANNUAL STEEL PRODUCTION 9OU LOSSES )N THE NINE MONTHS OF THIS YEAR #HINAS STEEL
CAN GAUGE HOW BIG #HINAS STEEL INDUSTRY IS WITH THIS INDUSTRY HAS REPORTED LOSSES TO THE TUNE OF
FACT #HINA PRODUCES MORE STEEL THAN THE 5NITED BILLION !CCESS TO FINANCE AND DEBT REPAYMENT AND
3TATES THE %UROPEAN 5NION 2USSIA AND *APAN RESTRUCTURING HAS BECOME SEVERELY AFFECTED AS THE
COMBINED BANKING INDUSTRY RESTRICTS LENDING TO THE INDUSTRY
!NOTHER HEADACHE IS THE COUNTRYS TRANSITION TO A
CONSUMPTION
LED GROWTH 4HAT WILL MEAN THE COUNTRY
Movement of iron-ore prices
LOOKS AT OTHER CONSUMER
FOCUSED SECTORS FOR THE NEXT
90
LEG OF GROWTH AND NOT INFRASTRUCTURE AND STEEL AS IT
HAS TRADITIONALLY 4HAT ALSO MEANS NEW HOUSING
80
Prices in $ per metric tonne
CONSTRUCTION AND MANUFACTURING COULD REMAIN UNDER
PRESSURE KEEPING A CHECK ON STEEL
PRICE REBOUND
70 4HIS ALSO PUTS INTO DOUBT THE ECONOMIC GROWTH
RATE OF THE COUNTRY #HINA HAS TARGETED PER CENT
GROWTH THIS YEAR WHICH MANY ANALYSTS HAVE
60
QUESTIONED 4HOUGH STEEL PRICES APPEAR UNLIKELY TO
RECOVER MUCH THIS METRIC WILL REMAIN A KEY
50
BAROMETER OF THE COUNTRYS ECONOMIC HEALTH WI
October 2014 September 2015
Ekramul Haque ekramul@valueresearch.in
December 2015 Wealth Insight 25
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ANALYSTS
DIARY
How to spot current performers
The Piotroski F-Score, a nine-point scale, helps you figure out the
outperforming stocks in the last one year
HE 0IOTROSKI & 3CORE WAS DEVISED BY *OSEPH
4 0IOTROSKI A PROFESSOR OF ACCOUNTING AT THE
5NIVERSITY OF #HICAGO 0IOTROSKI BELIEVED THAT
FINANCIAL STRENGTH COULD BE DETERMINED BY USING DATA
SOLELY FROM FINANCIAL STATEMENTS 4HE METHODOLOGY
WAS FIRST PUBLISHED IN 4HE 3CORE DETERMINES THE
FINANCIAL STRENGTH OF A COMPANY USING NINE CRITERIA
&OR EVERY CRITERION THAT IS MET THE COMPANY IS GIVEN
ONE POINT )F A CRITERION IS NOT MET NO POINTS ARE
AWARDED 4HE POINTS ARE THEN ADDED UP ! COMPANY IS
RATED ON A SCALE OF ZERO TO NINE NINE BEING THE BEST
3INCE THE SCORE IS BASED ON RECENT PERFORMANCE WE
CAN SAY IT FILTERS OUT THE @CURRENT OUTPERFORMER IN
The best performers as per the F-Score
Net profit CFO ROA (%) Debt to equity Current ratio EBITDA margin (%) Asset turnover Piotroski
Company name CY PY CY PY CY PY CY PY CY PY CY PY CY PY Score
Allcargo Logistics 247 154 430 311 6.7 4.5 0.32 0.55 1.04 0.95 9.5 8.9 1.52 1.42 9
Bharat Forge 764 522 1,029 716 9.7 6.9 0.74 0.95 1.80 1.37 20.3 16.8 0.99 0.91 9
Birla Corporation 175 130 282 359 3.5 2.8 0.50 0.56 3.65 2.58 12.4 11.0 0.75 0.74 9
Emami 485 402 534 428 32.6 30.2 0.03 0.04 2.96 2.65 28.0 27.3 1.52 1.39 9
Eveready Industries 49 14 72 93 4.4 1.2 0.36 0.38 0.86 0.74 9.5 8.2 1.19 1.09 9
Force Motors 102 78 226 116 5.1 4.0 0.01 0.02 1.63 1.50 8.1 6.8 1.31 1.17 9
Grindwell Norton 104 84 106 106 11.8 10.4 0.02 0.03 1.95 1.87 16.3 15.1 1.38 1.29 9
Gujarat Pipavav Port 387 192 444 290 19.5 10.8 0.00 0.22 2.00 1.80 62.5 52.8 0.44 0.29 9
JSW Energy 1,377 776 3,393 2,269 6.7 3.7 1.24 1.54 1.05 0.94 41.1 39.7 0.46 0.42 9
Kansai Nerolac Paints 275 209 309 195 11.8 9.6 0.03 0.05 2.14 1.79 11.1 10.0 1.83 1.73 9
Max India 365 209 2,579 2,160 1.1 0.8 0.17 0.23 1.03 0.83 5.0 4.3 0.46 0.43 9
Navneet Education 130 115 162 59 15.7 14.8 0.26 0.49 2.15 1.64 24.2 23.7 1.20 1.16 9
NHPC 2,798 1,633 4,061 3,824 4.5 2.6 0.67 0.74 2.01 1.84 81.6 70.1 0.13 0.12 9
Nirlon 33 32 205 175 1.3 1.3 3.00 3.06 0.18 0.15 77.6 77.5 0.10 0.08 9
Relaxo Footwears 103 66 110 125 13.7 10.6 0.65 0.72 1.20 1.10 13.4 12.2 2.00 1.97 9
Solar Industries 156 130 230 170 11.4 10.5 0.48 0.74 1.67 1.41 18.1 17.7 1.07 0.99 9
Star Ferro and Cement 120 5 261 160 5.5 0.2 1.29 1.44 1.22 1.05 29.6 22.0 0.67 0.55 9
VRL Logistics 91 57 232 203 9.4 5.9 1.24 1.65 0.51 0.40 16.8 14.6 1.73 1.54 9
Whirlpool Of India 211 123 300 204 12.3 8.3 0.00 0.00 1.64 1.46 8.9 6.8 2.44 2.37 9
CY: Current year; PY: Previous year; CFO: Cash flow from operations
26 Wealth Insight December 2015
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ANALYSTS
DIARY
TERMS OF PROFITABILITY AND FINANCIAL IMPROVEMENT OVER CONSIDERED STRONG )F THE SCORE ADDS UP TO A NUMBER
THE PAST PERFORMANCE BETWEEN ZERO AND TWO THE STOCK IS CONSIDERED WEAK
&OLLOWING ARE THE NINE CRITERIA OF THE & 3CORE 4HE 0IOTROSKIS !PRIL PAPER @6ALUE )NVESTING 4HE 5SE
FIRST FOUR CRITERIA MEASURE PROFITABILITY 4HE NEXT THREE OF (ISTORICAL &INANCIAL 3TATEMENT )NFORMATION TO
MEASURE THE HEALTH OF THE BALANCE SHEET IN TERMS OF 3EPARATE 7INNERS FROM ,OSERS DEMONSTRATED THAT THE
DEBT AND THE NUMBER OF SHARES OUTSTANDING 4HE LAST 0IOTROSKI SCORE WOULD HAVE SEEN A PER CENT ANNUAL
TWO FACTORS LOOK AT OPERATING EFFICIENCY RETURN BETWEEN AND IF THE EXPECTED WINNERS
WERE BOUGHT AND EXPECTED LOSERS SHORTED 7ITH ANY
0OSITIVE NET INCOME IN THE CURRENT YEAR INVESTMENT SYSTEM LOOKING AT PAST RESULTS DOESNT
0OSITIVE OPERATING CASH FLOW IN THE CURRENT YEAR ALWAYS MEANS IT WILL WORK IN THE FUTURE BUT HAVING AN
(IGHER RETURN ON ASSETS 2/! IN THE CURRENT YEAR INVESTMENT PLAN IS NEVER A BAD IDEA
THAN THE 2/! IN THE PREVIOUS YEAR
#ASH FLOW FROM OPERATIONS GREATER THAN NET INCOME Our take
,OWER RATIO OF LONG TERM DEBT TO EQUITY IN THE 3INCE THE 0IOTROSKI & SCORE IS BASED ON RECENT
CURRENT PERIOD AS COMPARED TO THE VALUE IN THE PERFORMANCE AND COMPARES THE CURRENT YEAR
PREVIOUS YEAR NUMBERS TO THOSE OF THE PREVIOUS YEAR AND THAT TOO
(IGHER CURRENT RATIO IN THE CURRENT YEAR AS ON RELATIVE BASIS IT POINTS MORE TOWARDS RECENT
COMPARED TO THE ONE IN THE PREVIOUS YEAR PERFORMERS )F A COMPANY HAS A LOW SCORE THAT DOES
.O NEW SHARES ISSUED DURING THE LAST YEAR NOT NECESSARILY MEAN THAT ITS FINANCIAL POSITION IS
(IGHER GROSS MARGIN THAN THAT IN THE PREVIOUS YEAR WEAK "UT YES THEY HAVE NOT PERFORMED IN THE
! HIGHER ASSET TURNOVER RATIO AS COMPARED TO THE CURRENT YEAR 4HEREFORE THE 0IOTROSKI & 3CORE COMES
ONE IN THE PREVIOUS YEAR HANDY TO FIND OUT THE COMPANIES WHICH HAVE
PERFORMED OR UNDERPERFORMED RECENTLY AS COMPARED
Decoding the F-Score TO THEIR PERFORMANCE IN PREVIOUS YEAR WI
)F A COMPANY HAS A SCORE OF EIGHT OR NINE IT IS Vikas Vardhan vikas@valueresearch.in
The worst performers as per the F-Score
Net profit CFO ROA (%) Debt to equity Current ratio EBITDA margin (%) Asset turnover Piotroski
Company name CY PY CY PY CY PY CY PY CY PY CY PY CY PY Score
ABG Shipyard -901 -227 -880 -221 -7.2 -1.9 8.36 3.97 1.30 1.18 -62.3 28.0 0.04 0.14 2
Astrazeneca Pharma -21 -1 -46 -1 -5.0 -0.1 0.00 0.00 1.01 1.13 -1.1 -0.8 1.27 1.34 2
Bajaj Electricals -14 -5 88 -7 -0.5 -0.2 0.60 0.50 1.03 1.03 2.6 2.4 1.57 1.65 2
Cipla 1,254 1,417 1,173 1,563 7.8 10.5 0.16 0.12 1.95 2.20 20.3 23.3 0.72 0.76 2
Escorts 76 247 5 343 2.2 7.0 0.27 0.24 1.00 1.05 5.4 7.1 1.19 1.87 2
Future Consumer -95 -15 -249 -79 -7.0 -1.5 0.88 0.14 1.36 2.32 -1.2 3.5 0.96 0.80 1
Godrej Industries 382 296 -1,050 -394 3.1 2.9 1.88 1.50 1.17 1.18 6.6 7.3 0.75 0.78 2
Godrej Properties 236 236 -941 -689 3.4 4.1 1.89 1.40 1.46 1.50 18.5 30.3 0.26 0.21 2
HCL Infosystems -215 -80 -798 257 -3.8 -1.4 0.77 0.60 1.20 1.47 0.4 0.9 1.40 1.60 2
IVRCL -1,568 -882 -332 -493 -11.0 -6.4 12.15 4.28 0.94 0.81 -4.2 5.8 0.27 0.36 2
Larsen & Toubro 4,964 4,875 -669 -7,143 2.7 3.1 2.31 2.25 1.22 1.25 18.1 17.5 0.51 0.54 2
M&M 2,593 4,323 1,055 -244 2.8 5.3 1.47 1.52 1.18 1.44 12.3 13.6 0.83 0.95 2
Network 18 Media -688 -75 -46 -38 -17.7 -1.8 0.20 0.15 0.06 0.25 -7.9 -17.2 0.02 0.02 2
Oberoi Realty 317 311 -971 -517 5.0 5.8 0.19 0.02 2.77 3.18 67.1 61.9 0.15 0.15 2
Tech Mahindra 2,659 3,062 2,409 1,596 15.2 25.1 0.06 0.04 1.77 1.82 18.8 22.8 1.29 1.54 2
CY: Current year; PY: Previous year; CFO: Cash flow from operations
December 2015 Wealth Insight 27
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ANALYSTS
DIARY
Caught in the crossfire
How the governments bid to tackle the mounting losses of power-
distribution companies may hit power-finance companies
HE GOVERNMENT SET ABOUT TO ADDRESS AN AILING How fortunes change!
4 POWER DISTRIBUTION SECTOR 4HE MUCH NEEDED
REFORMS HAVE TAKEN THE SHAPE OF THE 5$!9
SCHEME (ERES HOW THE SECTOR WILL GET AFFECTED AND HOW
The impact on PFC and REC on implementation of UDAY
PFC (STANDALONE)
PROFIT & LOSS FY14 FY15 FY16E FY17E FY18E
THE SCHEME MAY HIT POWER
FINANCE COMPANIES
Net interest income (` cr) 8,553 9,887 10,359 9,811 9,244
What is UDAY? !T ITS CORE THE 5$!9 5JWAL $)3#/-
NII growth (YoY; %) 37.00 15.60 4.80 -5.30 -5.80
!SSURANCE 9OJANA SCHEME CALLS UPON STATE
PAT (` cr) 5,418 6,524 6,843 7,148 7,358
GOVERNMENTS TO TAKE OVER ALL OF THE DEBT OF POWER
PAT growth (YoY; %) 22.60 10.00 9.20 2.70 0.50
DISTRIBUTION COMPANIES n PER CENT OVER THE NEXT TWO
Loans growth (YoY; %) 18.00 14.70 12.60 -0.70 13.30
THREE YEARS AND THE REMAINING PER CENT BACKED BY
STATE GUARANTEES 3TATES WILL ALSO BE REQUIRED TO BEAR ANY YIELDS/MARGINS (%)
FUTURE LOSSES OF DISTRIBUTION COMPANIES Interest spread 3.48 3.41 2.98 2.30 1.73
Why has the government taken this route? 0OWER
DISTRIBUTION Net interest margin 4.82 4.79 4.39 3.74 3.16
COMPANIES HAVE RACKED UP LOSSES TO THE TUNE OF AN PROFITABILITY (%)
ESTIMATED ` CRORE 7HAT MAKES MATTERS WORSE IS Return on assets 2.97 2.81 2.70 2.49 2.25
THAT DISTRIBUTION COMPANIES IN A NUMBER OF STATES Return on equity 20.78 19.64 18.14 16.04 14.39
CANNOT HIKE RATES TO COVER THE TARIFF LOSSES OF PREVIOUS
REC (STANDALONE)
YEARS !S A RESULT OVER THE YEARS LOSSES HAVE PILED ON
PROFIT & LOSS FY14 FY15 FY16E FY17E FY18E
9ET IF FULLY IMPLEMENTED THIS SCHEME IS EXPECTED TO
Net interest income (` cr) 7,271 8,703 9,525 8,813 8,234
RESULT IN REDUCTION OF LOSSES BY ` CRORE
NII growth (YoY; %) 33.10 19.70 9.40 -7.50 -6.60
Bad news for some 4HE 5$!9 SCHEME MAY APPEAR JUST
PAT (` cr) 4,684 5,260 6,397 5,983 5,591
WHAT THE DOCTOR ORDERED FOR POWER
DISTRIBUTION
COMPANIES )T HOWEVER SPELLS TROUBLE FOR ANOTHER SET OF PAT growth (YoY; %) 22.70 12.30 21.60 -6.50 -6.50
POWER SECTOR COMPANIES n THE FINANCIERS SPECIFICALLY Loans growth (YoY; %) 16.70 20.70 17.80 -8.00 12.30
0OWER &INANCE #ORPORATION 0&# AND 2URAL YIELDS/MARGINS (%)
%LECTRIFICATION #ORPORATION 2%# 4HESE TWO STATE Interest spread 3.79 3.83 3.44 2.51 1.88
ENTERPRISES LORDED OVER LOSS MAKING DISTRIBUTION Net interest margin 5.18 5.23 4.81 3.86 3.24
COMPANIES GENERATING HIGHER YIELDS FOR LOANS MADE OUT PROFITABILITY (%)
TO THESE LOSS MAKING COMPANIES Return on assets 3.30 3.12 3.20 2.60 2.18
)F THE 5$!9 SCHEME IS IMPLEMENTED DISTRIBUTION Return on equity 24.20 22.70 23.20 18.60 15.30
COMPANIES WILL SEE AN IMPROVEMENT IN OPERATING Source: JM Financial
PERFORMANCE THAT MAY REDUCE THE DEMAND FOR LOANS FOR
COVERING LOSSES 4HE REQUIREMENT FOR LOANS AS A RESULT BETWEEN &9 AND &9 SAYS *- &INANCIAL 3ECURITIES
COULD ALSO SEE A DECLINE TO AROUND PER CENT AND PER CENT #!'2 RESPECTIVELY
)N A DOUBLE WHAMMY BLOW TO POWER FINANCE BETWEEN &9 AND SEE THE TABLES
COMPANIES BETTER OPERATIONAL PERFORMANCE OF 2ETURNS ON EQUITY 2/% FOR THESE TWO POWER
DISTRIBUTION COMPANIES WOULD LEAD TO THEIR RATINGS FINANCIERS ARE ALSO EXPECTED TO SPIRAL DOWN 0&# COULD
IMPROVEMENT WHICH IN TURN COULD THEN ALLOW THEM SEE ITS 2/% FALL FROM PER CENT IN &9 TO AN ESTIMATED
ACCESS TO BANKS AWAY FROM THE TRADITIONAL GO TO GUYS PER CENT IN &9 *- &INANCIAL ESTIMATES 2%# COULD
0&# AND 2%# SEE ITS 2/% FALL FROM PER CENT TO PER CENT IN THE
,OAN GROWTH FOR POWER FINANCE COMPANIES THEREFORE SAME PERIOD )T REMAINS TO BE SEEN HOW THESE TWO
IS LIKELY TO TAKE A HIT 4HE ANNUAL LOAN GROWTH FOR 0&# SALVAGE THEIR PAST PERFORMANCE WI
AND 2%# COULD FALL FROM THE PER CENT RECORDED Ekramul Haque ekramul@valueresearch.in
28 Wealth Insight December 2015
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ANALYSTS
DIARY
Yes, this is a bull market
For every industry that is down, two are commanding premium valuations.
There is scope for discovering value as well.
HE )NDIAN STOCK MARKET OFFERS A MIXED BAG OF SEE THE TABLES 4HAT MEANS MARKETS ARE WILLING TO PAY
4 INDUSTRIES n SOME THAT ARE DOING WELL OTHERS THAT
ARE BITING THE DUST 6ALUATIONS ARE A
COMMON INDICATOR OF HOW MUCH A SECTOR IS IN
UP MORE FOR HIGHER GROWTH THAN REMAIN RISK
OFF
4HE PREMIUM LOT IS THE CRME DE LA CRME OF
)NDIA )NC 4HESE ARE THE INDUSTRIES WITH SALES
DEMAND 4HERE ARE THREE DISTINCT VALUATION GROWTH EARNINGS GROWTH AND MOMENTUM ON
GROUPS VISIBLE IN THE MARKETS TODAY THEIR SIDE 4HEY ARE THE TOAST OF THE
4O GET A CLEARER PICTURE OF WHERE EACH MARKETS AND INVESTORS ALIKE
INDUSTRY STANDS WE SEGREGATED THEM 4HE PREMIUM LOT IS INHABITED WITH
BASED ON 0% VALUATIONS 4HE INDUSTRIES MUCH OF THE USUAL SUSPECTS n MEDIA
TRADING AT A 0% OF OR ABOVE MAKE THE &-#' PHARMA AND TELECOM 3URPRISE
PREMIUM LOT 4HOSE TRADING AT OR BELOW ENTRANTS INCLUDE CEMENT AND INDUSTRIALS
BELONG TO THE DOWN
AND
OUT LOT !ND THE 4HOUGH THE HOUSING SECTOR IS DOWN CEMENT
REMAINING CONSTITUTE THE IN
BETWEENERS STOCKS HAVE RALLIED ON THE BACK OF THE
4HE RESULTS ARE REMARKABLE 4HE PREMIUM LOT GOVERNMENTS @(OUSING FOR !LL AND @3MART #ITIES
BEATS THE DOWN
AND
OUT CATEGORY BY A CLEAR MAJORITY SCHEMES )N INDUSTRIALS FALLING EARNINGS WITHOUT A
CORRESPONDING FALL IN SHARE PRICES HAS RESULTED IN HIGHER
Whats hot, whats not VALUATION MULTIPLES
The market has more industries in the premium lot, sig- 7ITHIN THE PREMIUM LOT MEDIA IS THE MOST EXPENSIVE
nalling rising valuations and hence a bullish sentiment AT TIMES EARNINGS ! CHARGED POLITICAL ENVIRONMENT
THE PREMIUM LOT (P/E ABOVE 25) AND A PENCHANT FOR )NDIANS TO ENJOY SOAPS HAVE CREATED
Industry P/E P/B Div. yield (%) RoE (%)
HIGH EARNINGS GROWTH FOR MEDIA COMPANIES 4HE
MARKETS LOVE MEDIAS PERFORMANCE TODAY DISPLACING
Media 42.6 6.3 0.8 14.7
&-#' THE TRADITIONAL MOST EXPENSIVE SECTOR
Consumers 32.4 11.9 1.8 36.6
4HEN THERE IS THE DOWN
AND
OUT LOT n THOSE COMPANIES
Industrials 31.9 2.4 1.0 7.5
THAT ARE NOT MARKET FAVOURITES AND DO NOT EXTOL ANY
Pharmaceuticals 31.4 5.8 0.6 18.4
ADMIRATION %NERGY IS THE MOST UNLOVED SECTOR &ALLING
Cement 26.5 2.6 1.0 9.7
CRUDE PRICES WHILE POSITIVE FOR SOME HAVE DISTURBED THE
Telecom 25.2 2.1 0.8 8.3
ECONOMICS OF OTHERS LIKE OIL EXPLORERS 4HERE IS NO
TELLING WHERE CRUDE WILL SETTLE GIVING LITTLE CLARITY ON
THE DOWN-AND-THE-OUT (P/E BELOW 15)
HOW MUCH EARNINGS OF DRILLERS AND THEIR ASSOCIATED
Industry P/E P/B Div. yield (%) RoE (%)
INDUSTRIES WILL FALL
Energy 10.6 1.1 2.6 10.8
5TILITIES AND METALS PICK THE SECOND AND THIRD MOST
Utilities 12.1 1.4 2.2 11.3
UNLOVED SPACES 7HILE ARBITRARY GOVERNMENT POLICIES
Metals & Mining 14.2 1.5 3.6 10.8
AND FREE DOLES HAVE WRECKED THE BOOKS OF UTILITIES METAL
COMPANIES REEL FROM THE GLOBAL CRASH IN PRICES FOLLOWING
THE IN-BETWEENERS
A SLOWDOWN IN #HINA
Industry P/E P/B Div. yield (%) RoE (%)
!ND THEN THERE ARE THE IN
BETWEENERS n INDUSTRIES
Banking 16.8 2.2 1.3 13.3
THAT BELONG TO NEITHER CAMP !UTOMOBILES TECHNOLOGY
Technology 18.8 4.9 2.0 26.0
AND BANKING TAKE THIS SPACE 4HIS IS A SPACE THAT HAS
Automobiles 18.9 3.4 1.0 18.2
SHOWN EARNINGS GROWTH ESPECIALLY IN AUTO AND
Infrastructure 19.6 4.4 0.6 22.4
TECHNOLOGY AND WHERE VALUATIONS HAVE NOT HIT THE ROOF
All data are for FY16E 6ALUE CAN BE FOUND HERE WI
Source: Kotak Institutional Equities report, November 9, 2015
Ekramul Haque ekramul@valueresearch.in
December 2015 Wealth Insight 29
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GENERALLY
SPEAKING
-BCPVSJOH VOEFSMBXT
The maze of labour laws in India has made it difficult for the country to
rejuvenate its manufacturing sector
VIVEK KAUL
&BSMJFS UIJT ZFBS JO "QSJM
XIJMF SMALL !ND GIVEN THIS 0ANAGARIYA UNDERSTANDS WHAT
ADDRESSING BUSINESSMEN AT A MEET ORGANISED BY THE THE REAL PROBLEM IS FOR )NDIAN MANUFACTURING
BUSINESS LOBBY #ONFEDERATION OF )NDIAN )NDUSTRIES !S "HAGWATI AND 0ANAGARIYA WRITE h4HE MINISTRY
#)) !RVIND 0ANAGARIYA THE 6ICE
#HAIRMAN OF THE OF LABOUR LISTS AS MANY AS FIFTY
TWO INDEPENDENT
.)4) !AYOG SAID h(ERE IS MY CHARGE TO YOU IF ) LOOK #ENTRAL GOVERNMENT !CTS IN THE AREA OF LABOUR
AROUND NONE OF YOU INVEST IN INDUSTRIES IN SECTORS !CCORDING TO !MIT -ITRA THE FINANCE MINISTER OF 7EST
THAT WOULD GENERATE LOTS OF EMPLOYMENT ALL OF YOU JUST "ENGAL AND A FORMER BUSINESS LOBBYIST THERE EXIST
RUN AWAY FROM HIRING PURPOSEv !S 0ANAGARIYA FURTHER ANOTHER STATE
LEVEL LAWS IN )NDIA 4HIS COUNT PLACES
SAID h%VERY YEAR MILLION ENTER THE LABOUR FORCE THE TOTAL NUMBER OF LABOUR LAWS IN )NDIA AT
7HAT IS YOUR PLAN FOR THE COUNTRY SO THAT MORE PEOPLE APPROXIMATELY v
ARE EMPLOYED 7E REALLY NEED TO THINK 9OU KNOW THE &URTHER THESE MULTITUDE OF LAWS ARE hNOT ENTIRELY
GROUND CONDITIONS WHY YOU ARE NOT CONSISTENT WITH ONE ANOTHER LEADING A
INVESTING IN SECTORS WHICH ARE MORE WIT TO REMARK THAT YOU CANNOT IMPLEMENT
LABOUR
INTENSIVE SUCH AS FOOD PROCESSING
THE CURE-ALL )NDIAN LABOUR LAWS PER CENT WITHOUT
ELECTRONIC ASSEMBLY LEATHER PRODUCTSv Success in VIOLATING PER CENT OF THEMv
0ANAGARIYA OF COURSE KNOWS THAT 4HIS SURFEIT OF LABOUR LAWS ESSENTIALLY
SUCCESS IN MANUFACTURING IS IMPORTANT manufacturing is ENSURES THAT MOST )NDIAN
FOR ANY COUNTRY TO SUCCEED ECONOMICALLY important to succeed MANUFACTURING FIRMS START OF SMALL AND
TO DRAW PEOPLE OUT OF POVERTY AND NOT
economically, to draw REMAIN SMALL 4AKE THE CASE OF THE
CONTINUE TO BE A DEVELOPING COUNTRY OR GARMENT MANUFACTURING INDUSTRY )NDIA
TO PUT IT MORE EUPHEMISTICALLY AN people out of poverty BARELY HAS ANY BIG FIRMS IN THIS SECTOR
EMERGING MARKET and not continue to be a !S 4 . .INAN WRITES IN HIS BOOK 4HE
!S -ATT 2IDDLEY WRITES IN 4HE
developing country 4URN OF THE 4ORTOISE 4HE #HALLENGE AND
%VOLUTION OF %VERYTHING h4O THIS DAY IT 0ROMISE OF )NDIAS &UTURE h2IGID LABOUR
IS VERY HARD FOR A COUNTRY TO BECOME A LAWS PREVENT FLEXIBILITY IN MANNING FOR A
KNOWLEDGE ECONOMY WITHOUT BEING AN AGRICULTURAL SEASONAL INDUSTRY AND HARDLY ANY LARGE
SCALE
SUCCESS AND THEN A MANUFACTURING SUCCESS FIRSTx )TS OPERATION EXISTS THAT COULD DELIVER ECONOMIES OF SCALE
THE PATH THAT "RITAIN AND !MERICA FOLLOWED AT A MORE 4HE COUNTRY HAS ONLY THREE OR FOUR GARMENT MAKERS
LEISURELY PACE IN THE EIGHTEENTH NINETEENTH AND WITH TURNOVER IN EXCESS OF MILLIONv
TWENTIETH CENTURYv 4HE LABOUR LAWS COME IN THE WAY )N FACT THINGS HAVE
!T THE SAME TIME 0ANAGARIYA WAS PERHAPS BATTING NOW REACHED A STAGE WHERE "ANGLADESH EXPORTS MORE
FOR THE CURRENT POLITICAL DISPENSATION THAT HE IS CLOSE GARMENTS THAN )NDIA )N "ANGLADESH EXPORTED
TO )N HIS BOOK )NDIAS 4RYST 7ITH $ESTINY WRITTEN GARMENTS WORTH BILLION )NDIA WAS AHEAD AT
WITH *AGDISH "HAGWATI HE EXPLAINS IN GREAT DETAIL BILLION "ETWEEN THEN AND WHILE "ANGLADESHS
WHY )NDIAN MANUFACTURING DOESNT SCALE UP OR WHY GARMENT EXPORTS JUMPED TO BILLION )NDIAS WENT UP
MOST FIRMS START OF SMALL AND CONTINUE TO REMAIN TO ONLY BILLION )NDIAS GARMENT EXPORTS ARE NOW
30 Wealth Insight December 2015
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GENERALLY
SPEAKING
WAY BEHIND THOSE OF "ANGLADESH #HINAS GARMENT INDUSTRY WOULD ADD MORE THAN MILLION JOBS 4HE
EXPORTS MEANWHILE JUMPED FROM BILLION TO NUMBER WOULD GROW TO A TOTAL OF MILLION JOBS IF
BILLION DURING THE SAME PERIOD )NDIA REACHED "ANGLADESHS EXPORT TARGET FOR
4HE TEXTILE INDUSTRY IN ORDER TO CATER TO EXPORT BILLION 4HAT TRANSLATES INTO MILLION ADDITIONAL JOBS
MARKETS NEEDS TO DELIVER LARGE ORDERS AT A QUICK PACE EVERY YEAR FOR THE NEXT FIVE YEARSv )N FACT THE GARMENT
!S -IHIR 3 3HARMA WRITES IN 2ESTART 4HE ,AST #HANCE MANUFACTURING SECTOR CAN EMPLOY A LARGE NUMBER OF
FOR THE )NDIAN %CONOMY h2EALLY LONG ASSEMBLY LINES WOMEN AS WELL
STILL MATTER IN TEXTILES IN SOME CASES PEOPLE CAN 4O CONCLUDE THERE IS A PROBLEM AND IT HAS A SOLUTION
SEQUENTIALLY WORK TO MAKE A PAIR OF TROUSERS IN LEAST 4HE SOLUTION IS WELL KNOWN IMPROVE THE LABOUR LAWS
TIME )N "ANGLADESH THE AVERAGE NUMBER OF PEOPLE IN A "UT NOTHING MAJOR HAS BEEN DONE ON THAT FRONT BY THE
FACTORY IS BETWEEN AND IN THE 3OUTH )NDIAN .ARENDRA -ODI GOVERNMENT
TEXTILES HUB OF 4IRUPUR ITS AROUND v !S .INAN PUTS IT h4HE GOVERNMENT IS UNWILLING TO
4HIS BEST EXPLAINS WHY EVEN "ANGLADESH HAS DO WHAT IT TAKES TO GET GARMENT EXPORTS TO TAKE OFF )T IS
OVERTAKEN )NDIA WHEN IT COMES TO GARMENT EXPORTS A TELLING ENOUGH COMMENT THAT THE COUNTRYS MOST
&URTHER GARMENT MANUFACTURING CAN CREATE A MASSIVE LABOUR
INTENSIVE LARGE INDUSTRY RECEIVED BETWEEN
NUMBER OF JOBS IN )NDIA !S .INAN WRITES h)NDIAS AND A TOTAL OF JUST BILLION AS FOREIGN
GARMENT EXPORT INDUSTRY EMPLOYS MILLION PEOPLEOR INVESTMENTv !ND THAT IS INDEED VERY SAD WI
ABOUT A MILLION JOBS FOR EVERY BILLION OF EXPORTSx Vivek Kaul is the author of the Easy Money trilogy. He can be reached
'ETTING TO THE SIZE OF "ANGLADESHS GARMENT EXPORT at vivek.kaul@gmail.com.
December 2015 Wealth Insight 31
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DIY
Essential checks on stocks
New additions to our Snapshot page give you a headstart in choosing
the right stocks to invest in
F YOU WERE INTERESTED IN THE STOCK OF A PREDICTION &ROM A COMPANYS FINAN
) A COMPANY COULD YOU QUICKLY
ANSWER THESE QUESTIONS WHICH ARE
AMONG THE MOST CRUCIAL ONES
CIALS IT MAY LOOK LIKELY THAT BANKRUPT
CY LOOMS BUT THE MANAGEMENT MAY
WELL SUCCEED IN IMPROVING MATTERS
z 7HAT IS THE LIKELIHOOD OF THIS
COMPANY BECOMING INSOLVENT Piotroski F-Score
z "Y FUNDAMENTAL MEASURES HOW )N THE 0IOTROSKI & 3CORE IS A COMPOSITE
WELL HAS THIS COMPANY DONE IN SCORE OF FINANCIAL HEALTH AN EASY TO
THE RECENT PAST USE SINGLE NUMBER THAT GIVES AN OVERALL
z )S THERE ANY CREATIVE ACCOUNTING FINANCIAL SCORE TO A COMPANY 3TOCKS
GOING ON IN THE COMPANYS ARE RATED ON A SCORE OF ZERO TO NINE
BOOKS IE SHOULD YOU SUSPECT BASED ON NINE PARAMETERS NINE BEING
THE COMPANY OF SOMEHOW TRYING THE BEST 3INCE THE SCORE IS BASED ON
TO SHOW BETTER FINANCIALS THAN RECENT PERFORMANCE WE CAN SAY IT REP
ARE JUSTIFIED RESENTS THE CURRENT FINANCIAL STRENGTH
5P TILL NOW THERE WAS NO EASY QUICK RELATIVE TO THE RECENT PAST
AND MEASURABLE WAY TO ANSWER THESE
QUESTIONS )F YOU ARE A VERY EXPERI Montiers C-Score
ENCED INVESTOR WITH A LOT OF TIME ON -ONTIERS # 3CORE IS A MOST INTEREST
YOUR HAND YOU COULD DO A GREAT DEAL OF ING MEASURE AND AS SOME INVESTORS
ORIGINAL RESEARCH AND COME UP WITH WOULD SAY A MOST CRUCIAL ONE IN )NDIA
SOME OPINIONS BUT THATS HARDLY A FEASI )T GIVES A LIKELIHOOD THAT A COMPANY
BLE METHOD FOR A PRACTICAL INVESTOR HAS BEEN DRESSING ITS BOOKS 7HEN
4HE 3NAPSHOT PAGE ON 6ALUE THEIR OPERATIONAL PARAMETERS WORSEN
2ESEARCH /NLINE SOLVES THIS PROBLEM )N AND THE STRESS STARTS SHOWING IN THE
OUR CONSTANT ENDEAVOUR TO MAKE IT FINANCIAL NUMBERS A LOT OF BUSINESSES
QUICKER EASIER AND SIMPLER FOR READERS TRY TO BE A LITTLE CREATIVE WITH THEIR
TO TAKE INVESTMENT DECISIONS WE HAVE ACCOUNTS SO THAT INVESTORS DONT TAKE
ADDED THREE MEASURES THAT ARE SIMPLY TO THEIR HEELS 7HAT WE HAVE HERE IS A
NOT AVAILABLE PUBLICLY AND FOR FREE TO PROBABILISTIC SCORE THAT MEASURES A
)NDIAN INVESTORS ABOUT )NDIAN COMPA COMPANYS RESEMBLANCE TO OTHER COM
NIES !S A MATTER OF FACT THIS IS A GLOBAL PANIES WHERE THE ACCOUNTING HAS BEEN
FIRST NOWHERE ELSE IN THE WORLD ARE CREATIVE 4HE HIGHER THE # 3CORE THE
THESE MEASUREMENTS AVAILABLE FOR FREE HIGHER IS THE PROBABILITY THAT SOME
BUT THATS A SEPARATE STORY THING IS SUSPECT
(ERE ARE THE THREE MEASURES THAT WE HAVE INTRODUCED
IN THE NEW @%SSENTIAL #HECKS PANEL THAT WE HAVE ADDED TO Fairly priced?
EACH OF 3TOCK 3NAPSHOT PAGES ON OUR WEBSITE AS !PART FROM THESE THREE GROUND BREAKING MEASURES THE
YOU CAN SEE IN THE ACCOMPANYING SCREENSHOT %SSENTIAL #HECKS SECTION ALSO CONTAINS FOUR CONVENTIONAL
MEASURES THAT TELL YOU WHETHER THE STOCK IS FAIRLY PRICED
The Altman Z-Score 4HESE ARE CURRENT 0% COMPARED TO THE FIVE YEAR RANGE
4HE !LTMAN : 3CORE IS A WIDELY USED MEASURE THAT CURRENT 0" COMPARED TO THE FIVE YEAR RANGE EARNINGS
APPLIES AN ALGORITHM THAT HAS BEEN FOUND TO HAVE USEFUL YIELD AND PRICE TO EARNINGS GROWTH RATIO 0%'
PREDICTIVE VALUE ON THE LIKELIHOOD OF A BUSINESS GOING 4OGETHER THESE CHECKS WILL ENSURE THAT YOUR RESEARCH
BANKRUPT +EEP IN MIND THAT THIS IS A LIKELIHOOD AND NOT EFFORTS IN ANY STOCK GET OFF TO A FLYING START WI
32 Wealth Insight December 2015
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H T
COVER STORY
SECTORS
TO BET ON
Five sectors that are doing better than the rest
Mohammed Ekramul Haque
W
E FIND OURSELVES IN THE TIMES OF FALLING HIGHLY POLITICISED ENVIRONMENT MEDIA COMPANIES ARE
INDUSTRIAL PRODUCTION THAT HIT ITS
MONTH LOW RAKING IT IN /NE POLITICAL PARTY LAMBASTING THE OTHER IS A
IN /CTOBER FALLING GLOBAL DEMAND AND CRASHING GOOD BUSINESS FOR NEWSPAPERS AND GENERATES COMPETING
COMMODITY PRICES 4HESE HAVE CAUGHT ENTIRE SECTORS IN ADS 4ECHNOLOGY IS HUMMING ALONG 4HE NEXT BIG THING
THEIR GRIP 4HE COMMODITY SECTOR IS DOWN MINING @THE INTERNET OF THINGS )O4 THAT AIMS TO MAKE ALL THINGS
COMPANIES ARE DOWN REAL ESTATE METALS AND CAPITAL SMART IS JUST AT ITS NASCENT STAGE 4HE AUTOMOBILE SECTOR
GOODS n ARE ALL DOWN TOO HAS PICKED UP SPEED IN THE RACE FOR THE HIGHEST
! GLOOMY PICTURE 9ET THERE IS A SMALL GROUP OF EARNINGS GAINS AND HAS ZOOMED AHEAD OF OTHER SECTORS
SECTORS THAT IS DOING WELL n SECTORS THAT HAVE SEEN SOME 4HIS STORY LOOKS AT SOME OF THE BEST
PERFORMING
OF THE BEST EARNINGS GROWTH NUMBERS IN RECENT MONTHS SECTORS IN THE ECONOMY TODAY AND ALSO THE TOP
0HARMA IS IN THE PINK OF HEALTH -ID
CAP PHARMA NAMES PERFORMING COMPANIES IN THEM 4HESE ARE THE INDUSTRIES
ARE PERFORMING SMARTER THAN THEIR LARGER PEERS )N A AND COMPANIES THAT ARE BUZZING TODAY 2EAD ON
December 2015 Wealth Insight 33
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COVER STORY
AUTOMOBILES
In top gear 19.2% 7.7%
EBITDA growth
(YoY)
Revenue growth
(YoY)
UTOMOBILE MANUFACTURERS ARE A HAPPY LOT THESE DAYS 0ASSENGER CARS SAW SALES JUMP PER CENT ACCORDING TO A
! RELEASE BY THE 3OCIETY OF )NDIAN !UTOMOBILE -ANUFACTURERS 3)!- MARKING THE TH CONSECUTIVE MONTHLY
IMPROVEMENT IN VEHICLE SALES 4HE INDUSTRYS AGGREGATE %")4$! GROWTH WAS THE HIGHEST AMONG MAJOR INDUSTRIES
,IGHT COMMERCIAL VEHICLES AND SCOOTERS SAW MOMENTUM PICK UP WHILE MEDIUM AND HEAVY COMMERCIAL VEHICLES
TRAILED -OTOR CYCLES AND TRACTORS SAW SUBDUED PERFORMANCE ESPECIALLY IN RURAL AREAS AFTER A WEAK MONSOON
MARUTI SUZUKI INDIA WHIZZING AHEAD All data as per TTM numbers. ROCE and debt to equity as per FY15 numbers.
)TS NOT A SURPRISE THEN THAT THE COUN OF THE FESTIVE SEASON SALES WILL BE HIGH
TRYS LARGEST PASSENGER VEHICLE MANUFAC ER 4HE THIRD QUARTER IS AMONG THE BEST 1,40,461 31.18
Market cap (` cr) P/E
TURER ENJOYS THE RESURGENCE IN AUTO FOR AUTO MANUFACTURERS IN THE COUNTRY
SALES -ARUTI REPORTED %")4$! GROWTH 4HE NEW RELEASE "ALENO IS DOING WELL Latest 5Y CAGR
OF PER CENT IN THE LAST MONTHS WHILE THE 3 #ROSS IS YET TO DELIVER Revenue
(` cr) 52,189 11.54
WHICH IS FANTASTIC CONSIDERING THAT THE -ARUTI OPENED .%8! SHOWROOMS
SECTOR SUFFERED THE WORST SLUMP IN A WITH MORE ADDITIONS PLANNED THIS EBITDA 8,973 39.62
(` cr)
DECADE JUST THREE YEARS AGO YEAR 2URAL )NDIA CONTINUES TO PUSH UP
#RITICAL TO AUTO SALES ARE VOLUME NUM VOLUME GROWTH AT TWICE THE RATE OF Net profit 4,505 44.38
(` cr)
BERS -ARUTI HAS REITERATED DOUBLE DIGIT URBAN VOLUMES
VOLUME GROWTH THIS YEAR 7ITH THE START -ARUTI COULD REPORT VOLUME GROWTH
Latest 5Y average
OF PER CENT #!'2 BETWEEN &9 AND
6000 Maruti Suzuki India Sensex EBITDA 14.62 13.50
&9 ACCORDING TO +OTAK 3ECURITIES margin (%)
4500 WITH ANNUAL EARNINGS PER SHARE Net 7.48 6.64
Sensex rebased to margin (%)
GROWTH PEGGED AT PER CENT !N
Price (`)
3000 companys stock price
INDUSTRY LEADING VOLUME GROWTH
1500 RoCE (%) 21.42 18.85
EXPECTED INTEREST RATE CUTS AND
0 IMPROVEMENT IN THE ECONOMY SHOULD Debt
to equity 0.03 0.07
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 KEEP -ARUTI IN HIGH GEAR
FORCE MOTORS SETTING OUT ON ITS OWN TRAX
2ACING NECK AND NECK IN THE %")4$! CIAL VEHICLE BRANDS AND THE "ALWAN AND
GROWTH GAME WITH -ARUTI IS THE COMMER THE /RCHARD ARE ITS TRACTORS 4,438 33.00
Market cap (` cr) P/E
CIAL VEHICLE MANUFACTURER &ORCE -OTORS 4WO PRIMARY VERTICALS DRIVE &ORCES
WHICH REPORTED AN %")4$! JUMP OF REVENUES 4HE AUTOMOTIVE VERTICAL BRINGS Latest 5Y CAGR
PER CENT IN THE LAST MONTHS IN PER CENT OF REVENUES AND COMPO Revenue
(` cr) 2,597 7.88
4HE LIGHT COMMERCIAL VEHICLE SEGMENT NENTS PER CENT &ORCE UNDERTAKES CON
IS &ORCES TERRAIN IT HAS A MARKET SHARE TRACT MANUFACTURING OF COMPONENTS FOR EBITDA 261
(` cr) 20.71
OF PER CENT )N THE SUB SEGMENT OF FIVE -ERCEDES AND "-7 ASSEMBLING ENGINES
TONNES IT HAS AN EVEN HIGHER SHARE OF FOR INSTANCE FOR THESE LUXURY CAR MANU Net profit 135 -45.48
(` cr)
PER CENT 4HE 4RAX THE 4RAVELLER AND THE FACTURERS IN THE COUNTRY .EW GROWTH
4RUMP COMPOSE THE COMPANYS COMMER DRIVERS &ORCE IS LOOKING AT INCLUDE OPPOR
Latest 5Y average
TUNITIES IN AMBULANCES SCHOOL BUSES FIRE
4000 Force Motors Sensex EBITDA 9.78 8.22
ENGINES AND SHUTTLE BUSES margin (%)
3000 &ORCE HIT ITS LIFETIME HIGH OF ` LAST Net
Sensex rebased to margin (%) 5.13 4.12
MONTH AND IS TRADING ONLY PER CENT
Price (`)
2000 companys stock price
LOWER FROM THE PEAK 4HE STOCK DOUBLED
1000 RoCE (%) 10.23 6.38
IN JUST FOUR MONTHS SINCE *ULY THIS YEAR
0 !LLOW EARNINGS TO DO SOME CATCHING UP Debt
to equity 0.01 0.02
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 BEFORE HITCHHIKING ON THIS "ALWAN
34 Wealth Insight December 2015
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COVER STORY
PHARMA
Going strong 16.0% 8.9%
EBITDA growth
(YoY)
Revenue growth
(YoY)
IGHT ON THE HEELS OF THE RESURGENT AUTO SECTOR PHARMA FOLLOWS WITH THE SECOND HIGHEST EARNINGS GROWTH OF
2 PER CENT 4HE 53 THE LARGEST MARKET IN THE WORLD FOR PHARMA COMPANIES OFFERED MIXED RESULTS /N THE ONE
HAND WHILE LARGE COMPANIES LIKE 3UN 0HARMA AND $R 2EDDYS FACE INCREASING HEAT FROM THE 53 &OOD AND $RUG
!DMINISTRATION 53&$! SMALLER ONES LIKE !LEMBIC AND 4ORRENT ARE DOING VERY WELL ! STRINGENT 53&$! IS NOT
)NDIAN PHARMAS ONLY HEADACHE $OMESTIC SALES SOFTENED FOR A NUMBER OF PLAYERS
TORRENT PHARMACEUTICALS BLOCKBUSTER GAINS All data as per TTM numbers. ROCE and debt to equity as per FY15 numbers.
4ORRENT 0HARMA TOPS THE PHARMA SEC LONG TERM SUSTAINABLE SALES OF ABOUT
TOR WITH EARNINGS GROWTH OF PER CENT MILLION OVER &9n )T ALSO HAS 25,856 19.68
Market cap (` cr) P/E
44- 9O9 4HIS IS HIGHER THAN EVEN FIVE MORE DRUGS THAT ARE GENERICS OF
THE INDUSTRY LEADER 3UN 0HARMA BLOCKBUSTERS INCLUDING THE INFAMOUS Latest 5Y CAGR
4ORRENT HAS FOUND ITS CALLING IN FOL 6IAGRA Revenue
(` cr) 5,831 27.54
LOWING THE EXPIRY OF REWARDING PATENTS /THER VERTICALS HOWEVER HAVE NOT
OF DRUGS WITH ANNUAL SALES WORTH BIL REPORTED STELLAR PERFORMANCE AS IN THE EBITDA 2,331 60.20
(` cr)
LION OR MORE 4ORRENT HAS THREE SUCH 53 )NDIA REVENUES WERE FLAT IN THE LAT
DRUGS n !BILIFY #YMBALTA AND .EXIUM EST QUARTER 9O9 WHEREAS ,ATIN Net profit 1,314 64.74
(` cr)
.OMURA 2ESEARCH SAYS THAT THEY CAN !MERICA AND REST OF THE WORLD REPORTED
GENERATE EXCESS REVENUES IN EXCESS OF DECLINE IN SALES Latest 5Y average
4HE 53 WILL CONTINUE TO DRIVE
2000 Torrent Pharma Sensex EBITDA 36.59 29.40
4ORRENTS FORTUNES FOR SOME TIME margin (%)
1500 2EVENUES FROM THE 53 ARE EXPECTED TO Net 22.05 18.00
GROW PER CENT #!'2 BETWEEN &9 margin (%)
Price (`)
1000
Sensex rebased to AND &9 SAYS .OMURA PUSHING THE
500 companys stock price RoCE (%) 26.98 31.23
OVERALL ANNUAL REVENUE RUN RATE TO PER
0 CENT %ARNINGS PER SHARE IS LIKELY TO GROW Debt
to equity 1.10 0.73
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 AT PER CENT #!'2 IN THIS PERIOD
ALEMBIC PHARMACEUTICALS LIMITED-COMPETITION GAINS
4ORRENT IS NOT THE ONLY )NDIAN COMPANY FILINGS WITH PENDING FOR APPROVAL
RAKING IT IN WITH G!BILIFY @G STANDS FOR !LEMBIC HAS A STRONG PRESENCE IN THE 12,399 24.81
Market cap (` cr) P/E
@GENERIC SALES !LEMBIC GIVES IT COMPA DOMESTIC BRANDED SPACE WHICH HAS SEEN
NY !LEMBIC SAW THE SECOND HIGHEST EARN ITS CONTRIBUTION TO TOTAL DOMESTIC SALES Latest 5Y CAGR
INGS GROWTH AT PER CENT DURING THE RISE FROM PER CENT IN &9 TO PER Revenue
(` cr) 2,603 20.33
LAST ONE YEAR CENT IN &9
,IMITED COMPETITION PRODUCTS ARE ITS 7ITH CLOSE TO TEN ANNUAL LAUNCHES PER EBITDA 680 44.09
(` cr)
BUZZWORD .OTABLE AMONG THEM ARE YEAR !LEMBICS 53 REVENUES COULD GROW
G!BILIFY G#ELEBREX G%XFORGE AND BY PER CENT #!'2 BETWEEN &9 AND Net profit 499 53.56
(` cr)
G-ICARDIS OUT OF WHICH THE FIRST TWO ARE &9 SAYS )#)#) 3ECURITIES 4HE DOMES
BLOCKBUSTER DRUGS !LEMBIC HAS !.$! TIC SPECIALTY SEGMENT IS SLATED TO GROW AT
Latest 5Y average
PER CENT #!'2 DURING THE SAME PERI
800 Alembic Pharma Sensex EBITDA 25.74 21.57
OD TAKING THE ANNUAL TOTAL REVENUE margin (%)
600 GROWTH TO PER CENT Net 18.95 15.06
!LEMBIC HAS A CLEAN BALANCE SHEET margin (%)
Price (`)
400
Sensex rebased to WITH THE DEBTEQUITY RATIO OF AND A
200 companys stock price RoCE (%) 37.54 37.71
RETURN ON CAPITAL EMPLOYED OF PER
0 CENT 'IVEN ITS GROWTH DRIVERS IT IS LIKELY Debt
to equity 0.30 0.28
Sep11 Jul12 May13 Mar14 Jan15 Nov15 TO KEEP BUZZING IN THE YEARS AHEAD
December 2015 Wealth Insight 35
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COVER STORY
TELECOM
Bracing for Jio 12.7% 5.2%
EBITDA growth
(YoY)
Revenue growth
(YoY)
HESE ARE TOUGH DAYS FOR TELECOM OPERATORS 0LENTY OF BAD PRESS WITH THE CALL DROP ISSUE NOW THREATENS TO
4 INVITE FINANCIAL PENALTIES 4HIS COMES RIGHT BEFORE THE LAUNCH OF 2ELIANCE *IO AN OPERATOR BELIEVED TO BE
CAPABLE OF CHANGING THE GAME "USINESS IN THE MEANTIME IS DOING WELL FOR TELECOM PLAYERS 4HE INDUSTRY
REPORTED THE THIRD HIGHEST GAINS IN %")4$! 44- AFTER THE AUTO AND THE PHARMA SECTORS (ERE ARE TWO VERY DIFFER
ENT COMPANIES FROM THE TELECOM SECTOR THAT HAVE REPORTED THE HIGHEST %")4$! GAINS THIS YEAR
IDEA CELLULAR COUNTING ON DATA All data as per TTM numbers. ROCE and debt to equity as per FY15 numbers.
)DEA IS THE COUNTRYS THIRD LARGEST WIRE
NESS FOR TELECOM OPERATORS "OTH
LESS OPERATOR WITH A REVENUE MARKET INCREASED PENETRATION AND NEW MOBILE 46,903 13.60
Market cap (` cr) P/E
SHARE OF AROUND PER CENT )T HAS SERVIC
LAUNCHES THAT OFFER ' SPEEDS HAVE
ES IN ALL TELECOM CIRCLES IN THE COUNTRY FUELLED THE DEMAND FOR DATA !LL PLAYERS Latest 5Y CAGR
)N THE LAST MONTHS )DEA REPORTED RECOGNISE THIS OPPORTUNITY AND ARE Revenue
(` cr) 33,878 16.96
%")4$! GROWTH OF PER CENT 44- n INVESTING IN INFRASTRUCTURE TO DEVELOP
MUCH HIGHER THAN INDUSTRY LEADER AND BOTH ' AND THE NEXT GENERATION ' EBITDA 12,578 31.27
(` cr)
GIANT "HARTI !IRTELS PER CENT THOUGH THROUGHOUT THE COUNTRY 4HE SECOND
THE LATTERS EARNINGS WERE AFFECTED BY QUARTER SAW DATA BRINGING CLOSE TO PER Net profit 3,449 55.68
(` cr)
OVERSEAS OPERATIONS CENT OF )DEAS REVENUES n UP BASIS
$ATA IS TURNING OUT TO BE A BIG BUSI
POINTS 9O9 Latest 5Y average
4HE BIGGEST THREAT THAT ESTABLISHED
250 Idea Cellular Sensex EBITDA 33.45 33.80
PLAYERS LIKE )DEA HAVE EVER FACED IN THE margin (%)
200 COUNTRY IS THE UPCOMING LAUNCH OF TELE
Net 10.17 9.23
COM SERVICES BY THE -UKESH !MBANI
margin (%)
Price (`)
150
Sensex rebased to CONTROLLED 2ELIANCE *IO .O ONE REALLY
100 companys stock price RoCE (%) 13.77 11.86
KNOWS WHAT KIND OF PRICING STRATEGIES
50 2ELIANCE WILL INDULGE IN TO GRAB MARKET Debt
to equity 1.17 1.13
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 SHARE FROM THE INCUMBENTS
BHARTI INFRATEL PLAYING THE TOWER GAME
4HE HIGH DECIBEL DISCUSSION ON THE CALL CENT AND )DEA PER CENT )NDUS HAS
DROP ISSUE AND THE GOVERNMENTS THREAT TOWERS AND ACCORDING TO "HARTI 70,025 31.55
Market cap (` cr) P/E
OF IMPOSING FINES IS MUSIC TO THE EARS OF )NFRATEL HAS A MARKET SHARE OF PER
TOWER OPERATORS LIKE "HARTI )NFRATEL )T CENT IN THE COUNTRY Latest 5Y CAGR
SIMPLY MEANS MORE TOWERS WILL BE NEED "HARTI )NFRATEL REPORTED %")4$! Revenue
(` cr) 11,949 6.83
ED TO COVER MORE AREA GROWTH OF PER CENT IN THE LAST TWELVE
"HARTI )NFRATEL AN INFRASTRUCTURE SUB MONTHS THE SECOND HIGHEST EARNINGS IN EBITDA 5,931 15.45
(` cr)
SIDIARY OF "HARTI !IRTEL OWNS PER CENT THE SECTOR AMONG LISTED PLAYERS )NFRATEL
OF )NDUS 4OWERS )NDUS IN TURN IS OWNED HAS NET CASH OF AROUND ` CRORE AS OF Net profit 2,219 36.67
(` cr)
BY THE TOP THREE '3- OPERATORS "HARTI 1 %")4$! MARGINS STAND AT PER
HOLDS PER CENT 6ODAFONE ALSO PER CENT 44- UP FROM PER CENT IN THE
Latest 5Y average
CORRESPONDING PERIOD LAST YEAR
500 Bharti Infratel Sensex EBITDA 47.47 46.54
4HE TOWER INDUSTRY IS SET TO ENTER A margin (%)
400 HIGH COMPETITIVE PHASE IN THE COMING Net 18.57 16.56
YEARS AS OPERATORS INCREASE INVESTMENTS marging (%)
Price (`)
300
Sensex rebased to IN TOWERS IN A BID TO IMPROVE CALL QUALITY
200 companys stock price RoCE (%) 16.31 13.06
AND ALSO TO DEVELOP A DEEPER PENETRATION
100 2ELIANCE *IOS ENTRY THREATENS TO SHAKE Debt
to equity 0.15 0.18
Dec12 Oct13 Aug14 Jun15 Nov15 UP THE TOWER INDUSTRY AS WELL
36 Wealth Insight December 2015
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COVER STORY
MEDIA
Magic of media 11.3% 10.3%
EBITDA growth
(YoY)
Revenue growth
(YoY)
CHARGED POLITICAL ENVIRONMENT IS GOOD NEWS FOR NEWSPAPER COMPANIES )T MEANS MORE ADS FROM RIVAL POLITI
! CAL PARTIES AS EACH SETS OUT TO OUTDO THE OTHER )TS NO SURPRISE THEN THAT THE MEDIA SECTOR HAS SEEN THE SEC
OND HIGHEST REVENUE GROWTH AFTER TECHNOLOGY .OT MANY INDUSTRIES CAN BOAST OF A DOUBLE
DIGIT REVENUE
GROWTH IN THE OTHERWISE SUBDUED ECONOMIC ENVIRONMENT
JAGRAN PRAKASHAN UP ON ADS All data as per TTM numbers. ROCE and debt to equity as per FY15 numbers.
*AGRAN 0RAKASHAN IS THE PUBLISHER OF $UNIYA AND MID DAY WHICH HAD
$AINIK *AGRAN COUNTED AS THE MOST REPORTED LOSSES FOR THE PAST TWO YEARS
READ NEWSPAPER IN THE WORLD HAVE TURNED BLACK 4HESE TWO PAPERS 4,904 18.10
Market cap (` cr) P/E
)N THE FIRST HALF OF THE CURRENT YEAR WHICH RESULTED IN LOSSES TO THE TUNE OF
*AGRAN REPORTED AN ACCELERATED ADVER ` CRORE IN &9 AND ` CRORE IN &9 Latest 5Y CAGR
TISEMENT REVENUE GROWTH OF PER CENT REPORTED AN OPERATING PROFIT OF ` Revenue
(` cr) 1,670 10.25
AS COMPARED TO THE PER CENT A YEAR CRORE IN 1
AGO )NDUSTRIES THAT CONTRIBUTED TO THE 0RINT AD REVENUES ARE ALSO DEPENDANT EBITDA 503 14.58
(` cr)
AD GROWTH IN THE LATEST QUARTER INCLUDE ON GOVERNMENT ADVERTISEMENTS REAL
THE RESURGENT AUTOMOBILE SECTOR WHITE ESTATE AND EDUCATION SECTORS ! STEADY Net profit 236 4.12
(` cr)
GOODS AND E COMMERCE SITES IMPROVEMENT IN THE ECONOMY IS LIKELY
4HE PUBLISHERS OTHER PAPERS .AI TO BOOST ADS FROM THESE SECTORS AS WELL
Latest 5Y average
*AGRAN 0RAKASHAN IS LIKELY TO REPORT
210 Jagran Prakashan Sensex EBITDA 26.43 27.74
REVENUE AND %")4$! GROWTH OF PER margin (%)
Sensex rebased to
170 companys stock price CENT AND PER CENT #!'2 RESPECTIVE Net 13.76 14.82
LY BETWEEN &9 AND SAYS A REPORT margin (%)
Price (`)
130
BY )#)#) 3ECURITIES 'IVEN HOW CHARGED
90 RoCE (%) 28.16 24.02
THE ENVIRONMENT HAS BECOME AND OUR
50 PENCHANT FOR SOAPS THIS INDUSTRY LOOKS Debt 0.57 0.53
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 to equity
LIKE A LONG
TERM PERFORMER
ZEE ENTERTAINMENT ENTERPRISES ADS, DRAMA, ACTION
7E )NDIANS LOVE OUR DAILY SOAPS 4HIS IS GAINS AND HIGHER PRICING !S IN PRINT
SOMETHING BROADCASTERS LIKE :EE ARE MEDIA E COMMERCE SITES AND &-#' COM 36,377 35.30
Market cap (` cr) P/E
EXPLOITING 4HE LAUNCH OF :EES 46 HAS PANIES LEAD AD GROWTH FROM THE FRONT
BOLSTERED AD REVENUES BY PER CENT 4HE COMPANY THOUGH DID SUFFER FROM Latest 5Y CAGR
9O9 IN THE LATEST QUARTER 7HAT ALSO SOME HICCUPS n STARTUP LOSSES ARISING OUT Revenue
(` cr) 5,436 16.82
PITCHED IN THE STRONG AD GROWTH WAS THE OF 46 RESULTED IN %")4$! MARGINS
COMPANYS IMPROVED MARKET SHARE IN CRASHING ABOUT BASIS POINTS 9O9 TO EBITDA 1,553 16.88
(` cr)
REGIONAL CHANNELS AND AN IMPROVING PER CENT IN 1 4HE COMPANY HAS GUID
INDUSTRY DYNAMICS %VEN EXCLUDING THE ED MARGINS OF PER CENT THIS YEAR /N Net profit 1,027 16.77
(` cr)
LAUNCH OF 46 :EE SAW ROBUST AD GROWTH THE PLUS SIDE THE SPORTS BUSINESS HAS
OF PER CENT 9O9 IN MARKET SHARE REMAINED IN BLACK AS IT HAS FOR THE PAST
Latest 5Y average
THREE QUARTERS
500 Zee Entertainment Sensex EBITDA 27.80 29.82
#ONTINUED MOMENTUM IN AD GROWTH margin (%)
400 WITH UPCOMING ' LAUNCHES AND FURTHER Net 18.89 19.67
DIGITISATION IN 0HASES ))) AND )6 SAYS A marging (%)
Price (`)
300
Sensex rebased to REPORT BY -OTILAL /SWAL IS EXPECTED TO
200 companys stock price RoCE (%) 27.48 29.06
RESULT IN EARNINGS PER SHARE GROWTH OF
100 PER CENT #!'2 BETWEEN &9 AND &9 Debt
to equity 0.00 0.00
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 :EES GOOD SHOW LOOKS SET TO CONTINUE
December 2015 Wealth Insight 37
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COVER STORY
TECHNOLOGY
Turn of the mid caps 4.34% 11.3% EBITDA growth
(YoY)
Revenue growth
(YoY)
ID SIZE TECHNOLOGY COMPANIES ARE BACK WITH A VENGEANCE REPORTING HIGHER EARNINGS GROWTH THAN THEIR
- LARGER PEERS !LL OF THE BIG PLAYERS OF THE TECHNOLOGY SECTOR HAVE REPORTED SINGLE DIGIT %")4$! GROWTH IN
THIS PERIOD n )NFOSYS WAS THE HIGHEST WITH PER CENT %")4$! GROWTH 44- FOLLOWED BY 7IPRO WHICH
SAW EARNINGS GROW PER CENT THE INDUSTRY LEADER 4#3 REPORTED FLAT %")4$! GROWTH 44- (ERE ARE TWO COMPA
NIES WITH TOP EARNINGS GROWTH IN THE TECHNOLOGY SPACE
TATA ELXSI EMBEDDED GROWTH All data as per TTM numbers. ROCE and debt to equity as per FY15 numbers.
4ATA %LXSI HAS SALES CLOSE TO ` CRORE TIONS WHICH BRINGS IN PER CENT OF REV
44- AND MARKET CAPITALISATION OF ENUES 4HE AUTOMOTIVE SEGMENT IS SET TO 5,602 42.36
Market cap (` cr) P/E
` CRORE )T DERIVES THE MAJORITY OF ITS GAIN FROM HIGHER ELECTRONIC USAGE IN
REVENUES PER CENT FROM THE SOFTWARE VEHICLES n UP FROM PER CENT OF THE TOTAL Latest 5Y CAGR
DIVISION 7ITHIN THE SOFTWARE VERTICAL VALUE OF THE CAR IN TO PER CENT AT Revenue
(` cr) 960 18.59
EMBEDDED SOFTWARE CONSTITUTES PER PRESENT 4HIS IS EXPECTED TO GO UP TO
CENT TO THE TOTAL REVENUES 7ITHIN THIS PER CENT BY 4HE BROADCAST SEGMENT EBITDA 226 44.08
(` cr)
VERTICAL ARE THREE MAIN REVENUE SOURCES IS EXPECTED TO GAIN FROM INCREASING SERV
AUTOMOTIVE WHICH BRINGS IN PER CENT ICES FROM OPERATORS Net profit 132 78.31
(` cr)
OF EMBEDDED REVENUES BROADCAST WHICH 4HE NEXT GROWTH DRIVERS INCLUDE THE
BRINGS IN PER CENT AND COMMUNICA @INTERNET OF THINGS SPACE THAT AIMS TO Latest 5Y average
CONNECT EVERYDAY DEVICES AND MAKE THEM
2400 Tata Elxsi Sensex EBITDA 23.55 21.41
SMART 4HESE INCLUDE SMART APPLIANCES margin (%)
1800 LIKE SMART 46S SMART HOMES SMART Net 13.78 11.71
TRANSPORTATION ETC 4ATA %LXSI IS EXPECT margin (%)
Price (`)
1200
Sensex rebased to ED TO POST ANNUAL REVENUE GROWTH OF
600 companys stock price RoCE (%) 60.02 40.93
PER CENT #!'2 AND 0!4 GROWTH OF PER
0 CENT #!'2 RESPECTIVELY OVER &9n Debt
to equity 0.00 0.10
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 -OTILAL /SWAL ESTIMATES
MINDTREE DIGITAL GAINS
'IVING 4ATA %LXSI COMPANY IN THE RACE QUARTER 1 (I TECH THE BIGGEST VERTI
FOR THE HIGHEST EARNINGS GROWTH IS CAL WHICH BRINGS IN PER CENT OF REV 12,409 22.51
Market cap (` cr) P/E
-INDTREE ANOTHER MID CAP FIRM WITH REV ENUE GREW AT A STRONG PER CENT n
ENUES OF ` CRORE &9 FASTEST SINCE THE FIRST QUARTER OF &9 Latest 5Y CAGR
-INDTREES TOP VERTICALS INCLUDE HI 7HAT IS CATAPULTING -INDTREE AHEAD OF Revenue
(` cr) 3,846 20.38
TECH AND MEDIA MANUFACTURING CON ITS PEERS IS THE OUTPERFORMANCE OF ITS DIG
SUMER PACKAGED GOODS #0' AND RETAIL ITAL VERTICAL WHICH CONSTITUTES PER EBITDA 829 25.48
(` cr)
AND "&3) WHICH TOGETHER ACCOUNT FOR CENT OF THE COMPANYS REVENUES AND IS
PER CENT OF THE REVENUES -ANUFACTURING CURRENTLY GROWING AT PER CENT 9O9 Net profit 551 23.74
(` cr)
AND "&3) REPORTED GROWTH OF PER CENT )N THE LATEST QUARTER 1 DIGITAL ACCOUNT
AND PER CENT RESPECTIVELY IN THE LATEST ED FOR HALF OF THE COMPANYS ORDERS AND
Latest 5Y average
ALSO WITNESSED DOUBLING OF THEIR SIZES
1600 Mindtree Sensex EBITDA 21.55 21.86
-INDTREES MANAGEMENT HAS GUIDED margin (%)
1200 THAT IT WILL BEAT .ASSCOM INDUSTRY REV Net 14.34 14.75
ENUE GUIDANCE OF n PER CENT THIS YEAR marging (%)
Price (`)
800
Sensex rebased to !CCORDING TO )#)#) 3ECURITIES -INDTREE
400 companys stock price RoCE (%) 37.76 37.62
IS LIKELY TO REPORT REVENUE AND 0!4
0 GROWTH OF PER CENT AND PER CENT Debt
to equity 0.00 0.01
Nov10 Nov11 Nov12 Nov13 Nov14 Nov15 RESPECTIVELY BETWEEN &9 AND &9 WI
38 Wealth Insight December 2015
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OFFBEAT
5IJTUJNFJUTEJGGFSFOU
It may not be. Given China-related recessionary concerns and the
commodity crisis, the bomb may already be ticking.
SANJEEV PANDIYA
.PTU NBSLFUNFO CFMJFWF JO UIF 0ROFITABILITY IN MOST COMMODITY SECTORS IS AT
PRINCIPLE OF REVERSION TO THE MEAN 7HAT GOES UP MUST HISTORIC LOWS REACHING THE POINT THAT DEBT SERVICING IS
COME DOWN AND ALL THAT &ROM THAT COMES THE OTHER POSSIBLE ONLY IF DEBT LEVELS ARE KEPT MODERATE 0EAK
OF
PATTERN AT THE TOP OF A MARKET COMES THIS CONSENSUS THE
CYCLE INVESTMENTS INCLUDING MERGERS AND
THAT @ITS DIFFERENT THIS TIME 4HIS IS TO SUSTAIN ACQUISITIONS ARE NOT GOING TO BE REPAID IF THEY HAVE
IRRATIONAL VALUATIONS TILL THE PARCEL HAS BEEN PASSED BEEN FUNDED WITH DEBT CURRENT PROFITABILITY DOES NOT
ONTO THE BIGGEST FOOLS THEN BAM 4HE BUBBLE POPS ALLOW FOR THAT 3O ANY INVESTMENTS MADE BETWEEN
AND THE DEAD RABBIT FALLS INTO YOUR LAP AND WILL SEE HAIRCUTS IN DEBT REPAYMENT 0RE
!S ) SAID THIS IS MOSTLY SEEN CLOSER TO A MARKET TOP BOOM INVESTMENTS WILL PULL THROUGH MAINLY BECAUSE
WHILE ) AM BRINGING THIS UP CLOSER TO WHAT LOOKS LIKE A HALF THE DEBT REPAYMENTS HAVE ALREADY BEEN MADE )N
MARKET TROUGH IF NOT A BOTTOM 3ENSIBLE PEOPLE ARE EVERY CASE IF A COMPANY IS PULLING THROUGH IT IS
TALKING ABOUT A GLOBAL RECESSION NEXT YEAR IE PER BECAUSE OF THE @PAST EQUITY EMBEDDED IN OLDER
CENT GLOBAL GROWTH WITH MANY ECONOMIES SLIPPING PROJECTS WHICH ARE STILL GENERATING FREE CASH FLOWS
INTO THE NEGATIVE TERRITORY 7HILE THE 53 SEEMS TO BE WHICH ARE BEING USED TO SUBSIDISE DEBT REPAYMENTS ON
COASTING ALONG #HINA COULD PULL THE WORLD INTO THE NEW PROJECTS ! RATIONAL DECISION
MAKER WOULD WANT
RECESSIONARY TERRITORY )N SMALL INCREMENTS MOST TO EVALUATE EACH PROJECT AND SEE WHETHER THAT
FORECASTS FOR GLOBAL GROWTH ARE SHIFTING DOWN TO PER PARTICULAR PROJECT IS MEETING ITS COST OF CAPITAL BUT IN
CENT AND IT WILL TAKE JUST SOME SMALL AFTERSHOCKS FROM THE REAL WORLD EACH COMPANY WILL WANT TO PROTECT ITS
#HINA TO BRING THE WORLD CRASHING DOWN INTO ITS FIRST @BABY WITH WHATEVER IT HAS 3O A (INDALCO WILL USE ITS
RECESSION AFTER THE GLOBAL FINANCIAL CRISIS OF 2ENUKOOT CASHFLOWS TO SUBSIDISE THE .OVELLIS
-OST TRADERS WOULD TEND TO BELIEVE THAT WHAT GOES ACQUISITION RATHER THAN EVALUATE WHETHER SAVING THE
DOWN MUST COME UP AND ALMOST ALL BABY WILL KILL THE MOTHER )N MEDICAL
MARKETS ARE AT OR BELOW THEIR LONG
TERM ETHICS IT HAS NOW BEEN CLEARLY
AVERAGE VALUATIONS WHETHER IN 0% OR
0"6 TERMS "OTTOM
FISHERS WOULD TEND
WARNING BELLS ESTABLISHED THAT THE LIFE OF THE @UNBORN
CHILD IS SECONDARY TO THE LIFE OF THE
TO BELIEVE THAT THE MARKET HAS BOTTOMED Global growth forecasts MOTHER "UT THE SAME PRINCIPLE IS NOT
BUT THEY WOULD DO WELL TO KEEP IN MIND are shifting down to 3 USED TO MANAGE THE BUSINESS CYCLE
THAT THE COMMODITY SUPERCYCLE HAS
TROUGHED BUT IT MAY NOT COME BACK
per cent. It will take just COMPANIES
4HIS HAS BEEN HAPPENING IN
EVEN SECTORS FOR TIME
-OST OF THE DAMAGE IS IN THE some small aftershocks IMMEMORIAL BUT THIS TIME IT IS
COMMODITY SECTOR WHICH HAS BEEN from China to bring the HAPPENING AT THE LEVEL OF COUNTRIES
DECIMATED BY THE #HINESE DEFLATIONn
DEPRESSION SCENARIO 4HE GLOBAL !LL
world crashing down WHICH IS GOING TO AFFECT MACRO
ECONOMICS -OST OF THE SURPLUS
#OMMODITIES )NDEX IS AT A
YEAR LOW into a recession. CAPACITY IN THE WORLD IS IN #HINA )N
BACK WHERE IT STARTED IN ALUMINIUM #HINA ACCOUNTS FOR PER
40 Wealth Insight December 2015
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OFFBEAT
CENT OF THE WORLD PRODUCTION WHILE THE WORLD SURPLUS ABOUT THE END OF THIS COMMODITY SUPERCYCLE /NE IT
IS ABOUT n PER CENT @3URPLUS IS DEFINED AS THAT MIGHT NOT BE PLAYED OUT COMPLETELY AT THE
PART OF WORLD CAPACITY WHICH MUST CLOSE DOWN TO MICROECONOMIC LEVEL AND TWO THE MACROECONOMIC
BRING SECTORAL PROFITS BACK TO THE POINT WHERE THEY CAN DIMENSIONS MIGHT SPIN OUT OF CONTROL INTO THE GEO
SERVICE THE COST OF CAPITAL WHICH NEEDLESS TO SAY POLITICAL SPACE WITH DISASTROUS CONSEQUENCES &OR
WOULD INCLUDE THE SERVICING OF DEBT )F THAT NUMBER MOST OF US THE FIRST IS OF IMPORTANCE WHILE THE
IS PER CENT IT MEANS SOME PER CENT OF #HINESE SECOND IS OF NOT MUCH INTEREST BECAUSE WE ARE ALL
CAPACITY MUST CLOSE DOWN )N A NORMAL FRAGMENTED DEAD ANYWAY
PERFECTLY COMPETITIVE @COMMODITISED SECTOR THIS 7ATCHING THIS PLAY OUT WILL GIVE US IMPORTANT
WOULD HAPPEN ON ITS OWN WITH BOTTOM PER CENT INSIGHTS INTO MAJOR TECTONIC MOVEMENTS IN THE
DROPPING OUT "UT THIS IS NOT GOING TO HAPPEN BECAUSE CURRENCY MARKETS /NE #HINAS OFFER OF A VIABLE
#HINAS DIRECTED INVESTMENT AND ITS CO
ORDINATED COUNTERBALANCE TO THE DOLLAR IN FACT AN ALTERNATE
MANOEUVRING WILL ENSURE THAT ITS WEAKEST PLAYERS WILL RESERVE CURRENCY WILL BE JUST ANOTHER 2AMLILA SHOW
RIDE OUT THE BOTTOM WHILE THE WEAK PLAYERS OF OTHER !FTER THE FIREWORKS THERE WILL BE NOTHING WORTH
COUNTRIES WILL CLOSE DOWN REPORTING EXCEPT THE FIREWORKS THEMSELVES !ND
3O IN ALUMINIUM IT IS THE !MERICAN !LCAN CLOSING OUTSIDERS LIKE THE -ARTIANS WILL NOT UNDERSTAND THE
DOWN ITS ICONIC
YEAR
OLD SMELTER CAPACITY )N STEEL POINT OF IT ALL ) MEAN WHY WOULD A COUNTRY FIGHT SO
IT IS %UROPEAN"RITISH STEEL PLANTS AND THE )NDIAN HARD TO BECOME A RESERVE CURRENCY AND
MINNOWS THAT ARE CLOSING DOWN WHILE SIMULTANEOUSLY TAKE ACTION TO DEVALUE
THE PEAK
OF
THE
CYCLE #HINESE THE CURRENCY OR SEE CAPITAL FLIGHT
INVESTMENTS WILL SURVIVE BECAUSE 7HY WOULD YOU WANT INVESTMENTS TO
#HINA WILL SUBSIDISE THE CARRYING COST
BAILING OUT COME IN AND HOLD YOUR DEAD DUCKS
OF ITS PLANTS 4HE NATURAL $ARWINIAN Chinas co-ordinated WHILE YOUR CURRENCY LOSES REPUTATION
LAW OF @SURVIVAL OF THE FITTEST WILL BE
manoeuvring will ensure AS A SAFE HAVEN BECAUSE OF A PREVAILING
VITIATED BECAUSE TOO MUCH OF THE CULTURE OF MALINVESTMENTS
CAPACITY THAT NEEDS TO BE MOTHBALLED that its weakest players ) AM SAYING ALL THIS ON THE
LIES IN THE HANDS OF AN @IRRATIONAL will ride out the bottom, PRESUMPTION THAT #HINA WILL GO THE
PLAYER 4HIS CAPACITY OVERHANG OF THE
while the weak players *APAN WAY BUT THAT MAY NOT BE TRUE
WEAK PLAYERS WHO REFUSE TO DIE WILL 4IME AND AGAIN IN THE PAST #HINA HAS
LIKELY ENSURE THAT THE RECOVERY IS WEAK of other countries will SHOWN GREATER VISION AND DILIGENCE
ANAEMIC AND SHORT
LIVED close down THAN EVEN THE BEST DEMOCRACY )F IT IS
4HE REGULAR INJECTIONS OF LIQUIDITY FACING THE MUSIC TODAY IT IS BECAUSE OF
WHETHER NEWLY PRINTED MONEY ALL CENTRALLY PLANNED POLICIES AND THEY
QUANTITATIVE EASING OR THE RECALL OF THEIR SAVINGS HAVE MANAGED TO PUSH BACK THE DAY OF RECKONING
PARKED ABROAD FOREX
RESERVES SELLING SHOULD IDEALLY BUT NOT FOREVER )F HISTORY IS ANY GUIDE #HINA WILL
BE USED TO PROMOTE CONSUMPTION WHICH WOULD BE COME BACK FASTER AND STRONGER IN ITS NEW
VALUE
ACCRETIVE "UT IT IS LIKELY TO GO INTO HOLDING UP CONSUMERIST AVATAR THAN ANY OF US WOULD GIVE THEM
ZOMBIE COMPANIES IN THE COMMODITY SECTORS WHICH CREDIT FOR )F IN THE PROCESS IT FINDS DEMAND FOR ITS
WILL BE VALUE
DESTRUCTIVE )F TOO MUCH OF THESE FOREX MORIBUND EXCESS CAPACITY IN VARIOUS COMMODITIES IT
RESERVES END UP IN MALINVESTMENTS IT COULD PUSH WOULD HAVE BELIED THE DOOMSAYERS YET AGAIN
#HINA INTO A DEPRESSION AND THE WORLD INTO A RECESSION %VENTUALLY IT IS JUST A DEBT PROBLEM $EBT
#HINA WOULD BE THE NEXT *APAN WITH ITS ZOMBIE STEEL DESTRUCTION CREATES CAPITAL LOSS AND DESTROYS INVESTOR
AND METALS SECTORS FOR EXAMPLE WHILE THE WORLD SENTIMENT WHICH IN TURN AFFECTS THE INVESTMENT
PASSES IT BY DEMAND )F THE RESULTANT SLACK IS PICKED UP BY AN
!N INCREASINGLY IRRELEVANT #HINA IS NOT JUST GOING UPTICK IN CONSUMER DEMAND THE WORLD WILL NOT
TO STEP BACK AND WATCH )T WILL BECOME A SERIOUS GEO
NOTICE THE CHANGE OF TRACKS
POLITICAL THREAT WHICH IF IT PRECIPITATES A COUPLE OF 3O FINALLY IT WILL BOIL DOWN AGAIN TO LEADERSHIP AND
SERIOUS WARS COULD CREATE ENOUGH DIVERSION AND HUMAN BEHAVIOUR 4HOSE WHO ARE WATCHING FOR THE RIGHT
DESTRUCTION TO THE POINT THAT THIS TIME THERE MIGHT SIGNALS WILL SEE THEM COMING AND BE ABLE TO JUMP OUT OF
NOT BE A 0LANET %ARTH WAITING FOR US AT THE END OF IT ALL THE WAY OR RIDE THE WAVE AS THE CASE MAY BE WI
3O THESE TWO MAJOR POINTS MUST BE KEPT IN MIND The author teaches, trades and writes at spandiya.blogspot.com.
December 2015 Wealth Insight 41
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STRAIGHT TALK
(PMEJOBOFXBWBUBS
The gold bond scheme converts a play on asset prices into an income +
asset price play. It is a step in the right direction.
ANAND TANDON
*OEJB JTUIFMBSHFTUDPOTVNFSPGHPME AFTER WHICH PRICES SOFTENED AGAIN
IN THE WORLD /N AVERAGE )NDIA IMPORTS BILLION !S AN AVERAGE IF ONE HAD INVESTED IN GOLD SINCE
WORTH OF GOLD A YEAR AMOUNTING TO ALMOST PER CENT ONWARDS FOR ANY EIGHT YEARS IN OUT OF THE PERIODS
OF THE TRADE BALANCE OF THE COUNTRY %CONOMISTS HAVE TILL ONE WOULD HAVE LOST VIS VIS INFLATION WHILE
LONG DERIDED THE TENDENCY OF PEOPLE TO USE GOLD AS A GAINING OVER THE REST OF THE PERIODS !LSO AVERAGED
SAVING INSTRUMENT $ESPITE THE EMERGENCE OF MANY OVER THE ENTIRE YEAR PERIOD GOLD RETURNS EXCEEDED
ALTERNATIVE INSTRUMENTS THE AVERAGE )NDIANS LOVE FOR INFLATION BY A BIT OVER PER CENT
GOLD CONTINUES UNABATED 'OVERNMENTS HAVE LONG TRIED
TO CONVERT GOLD INTO FINANCIAL SAVINGS IN THE HOPE THAT Gold bond
MONEY SAVED CAN BE MORE @PRODUCTIVELY USED $ESPITE 4HE RECENTLY ANNOUNCED GOLD BOND OFFERS AN INTEREST
THIS PHYSICAL GOLD HOLDINGS CONTINUE TO REMAIN A RATE OF PER CENT TO INVESTORS )SSUED WITH A TENOR OF
PREFERRED INVESTMENT OPTION )N THIS CONTEXT THE EIGHT YEARS THE REASON FOR THE EIGHT YEAR ANALYSIS IS IN
RECENTLY LAUNCHED GOLD BOND IS AN INTERESTING THE EARLIER PARAGRAPH THE INSTRUMENT HAS AN EXIT
INVESTMENT OPTION OPTION AFTER FIVE YEARS 4HE WAY IT WORKS IS THAT AN
INVESTOR WILL BUY A GOLD BOND REPRESENTING 8 GM OF
Gold does beat inflation much of the time GOLD AT THE MARKET PRICE OF GOLD ON THE DATE OF ISSUE
! KEY REQUIREMENT FOR ANY INVESTMENT METHOD TO BE /N REDEMPTION HE GETS A VALUE EQUAL TO PREVAILING
ATTRACTIVE IS THAT IT SHOULD BEAT INFLATION OVER THE LONG PRICE OF GOLD ON THE SALE DATE FOR THE 8 GM HE OWNS )N
TERM )NDIA TILL RECENTLY HAS SUFFERED FROM SUSTAINED OTHER WORDS THE BOND REPRESENTS A FIXED AMOUNT OF
INFLATIONARY PRESSURES /FTEN BANK DEPOSIT RATES HAVE PHYSICAL GOLD )N ADDITION WHILE HE HOLDS THE BOND IT
LAGGED BEHIND INFLATION DELIVERING NEGATIVE REAL CONTINUES TO PAY PER CENT PER ANNUM
RETURNS TO SAVERS
'OLD A PHYSICAL ASSET HAS Hedging the instrument
APPRECIATED OVER TIME THOUGH IN A &OR AN ISSUER TO OFFER THIS INSTRUMENT
PATCHY MANNER &OR EXAMPLE IF YOU HELD GOLD BOND THE ISSUER WOULD RECEIVE THE BOND VALUE
ONTO GOLD FOR A PERIOD OF EIGHT YEARS )LL FROM INVESTORS FOR A PERIOD OF EIGHT
EXPLAIN WHY EIGHT YEARS IN A WHILE
z Interest rate: 2.75 per YEARS )N RETURN THE ISSUER HAS TO PAY
STARTING ONWARDS RIGHT UNTIL cent COUPON RATE PER CENT AND PAY OUT
THE INVESTMENT WOULD HAVE z Tenor: Eight years (exit AN EQUIVALENT OF THE UPSIDE IF ANY IN
UNDERPERFORMED INFLATION 4HIS WAS ALSO GOLD PRICES OVER THAT PERIOD .OTE THAT
THE TIME WHEN MANY CENTRAL BANKS IN
option after five years) THE ISSUER WILL NOT ACTUALLY BUY THE GOLD
THE WORLD DECIDED TO PARE DOWN THEIR z Benefits: Annual )N EFFECT THE ISSUER HAS TO HEDGE HIS
GOLD HOLDINGS LEADING TO SOFT GOLD PRICES interest and value of POSITION BY CREATING A SYNTHETIC @BOUGHT
4HIS CHANGED POST AS GOLD CALL OPTION POSITION WITH THE MONEY
WITNESSED AN UNPRECEDENTED RISE IN
gold on the RECEIVED AND GENERATE INCOME USING THE
PRICES LEADING TO A FIVE FOLD INCREASE TILL redemption date REST TO PAY COUPON
42 Wealth Insight December 2015
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STRAIGHT TALK
)N THIS CASE THE ISSUER IS THE 'OVERNMENT OF )NDIA GOLD FOR THE LONG TERM FOR WHATEVER REASON SHOULD FIND
'O) &OR SAKE OF SIMPLICITY LET US ASSUME THAT 'O) THIS A NO
BRAINER )T CONVERTS A PLAY ON ASSET PRICES INTO
BORROWS EIGHT
YEAR MONEY AT PER CENT )T PAYS AN @INCOME ASSET PRICE PLAY !S A PURE INVESTMENT FOR
PER CENT TO HOLDERS OF GOLD BONDS )N OTHER WORDS INVESTORS WHO ACTIVELY ALLOCATE MONEY ACROSS ASSET
GOVERNMENT SAVES PER CENT PER CENT MINUS CLASSES ASSUMPTIONS ON THE DIRECTION OF GOLD PRICE WILL
PER CENT PER ANNUM WHICH IS WHAT IS AVAILABLE TO BE MORE IMPORTANT )F THE VIEW IS NEGATIVE ONE SHOULD
@PURCHASE A CALL OPTION ON GOLD STAY AWAY
! ROUGH CALCULATION SUGGESTS THAT AN OPTION ON GOLD 4HE DIRECT BENEFIT OF THIS PLAN IS THAT IT REDUCES
FOR EIGHT YEARS SHOULD BE VALUED AT ABOUT PER CENT OF REQUIREMENT TO IMPORT GOLD TO THE EXTENT OF
CURRENT PRICES #OMPENSATING FOR THE TIMING OF CASH
SUBSCRIPTION 4HIS WILL REDUCE PRESSURE ON FOREIGN
FLOWS IT IMPLIES THAT 'O) IS MAINTAINING ITS COST OF RESERVES !NOTHER BENEFIT IS THAT THIS BOND IS LIKELY TO
BORROWING AT THE CURRENT LEVEL BE A POPULAR GOVERNMENT SECURITY WITH RETAIL
)N THEORY THE GOVERNMENT COULD HAVE MADE THE BOND INVESTORS )T WILL WIDEN THE BASE OF GOVERNMENT
EVEN MORE ATTRACTIVE BY OFFERING THE FULL BENEFIT OF THE BORROWING n SOMETHING THAT THE 2") HAS ATTEMPTED
IMPLIED @CALL OPTION TO THE INVESTOR WITHOUT AN TIME AND AGAIN AND FAILED MISERABLY
ADDITIONAL COST 7HAT THAT WOULD MEAN IS THAT !S A MEANS OF GETTING MORE PEOPLE INTO FINANCIAL
INVESTORS WOULD NOT LOSE MONEY IF GOLD PRICES FELL BUT SAVINGS AS OPPOSED TO PHYSICAL SAVINGS IT IS A STEP IN
WOULD GAIN IF THEY ROSE 4HEY WOULD ADDITIONALLY GET THE RIGHT DIRECTION #OMPANIES LENDING AGAINST GOLD
THE COUPON RATE 4HIS MAY WELL HAVE RESULTED IN A VERY JEWELLERY MAY SUDDENLY FIND THEIR MARGINS UNDER
LARGE PORTION OF GOVERNMENT BORROWING TRANSFORMING THREAT AS LENDING AGAINST GOLD BONDS BECOMES LESS
INTO GOLD BONDS n PROBABLY NOT WHAT 'O) DESIRES RISKY AND LESS CUMBERSOME NO PHYSICAL
&OR THE GOVERNMENT A CUT IN INTEREST RATES ON THE INFRASTRUCTURE NEEDED TO VALUE GOLD OR STORE GOLD
LONG BOND WILL MEAN THAT THE PRICING OFFERED IS LESS ORNAMENTS (IGHER SAFETY FOR LENDERS WILL OPEN UP THE
ATTRACTIVE !DDITIONALLY IT REQUIRES THE 2") TO MARKET IN TERMS OF NEWER LENDERS OFFERING LOANS
CONSTANTLY HEDGE POSITIONS )T IS LIKELY THAT THE 2") WILL AGAINST SUCH BONDS
HEDGE ONLY PARTIALLY AND TAKE A POSITIONAL VIEW OR -ANY JEWELLERS AND GOLD
LOAN COMPANIES OFFER
ENGAGE IN @DELTA HEDGING n A DYNAMIC HEDGING METHOD @SAVING PLANS IN THE FORM OF SYSTEMATIC INVESTMENT IN
)N EITHER CASE GAINS OR LOSSES WILL DEPEND ON MARKET GOLD )F AVAILABLE ON TAP THESE BONDS HAVE THE POTENTIAL
THE TIMING SKILLS OF 2")S DEALING DESK TO ELIMINATE THESE DUBIOUS PRACTICES 4HE SCOPE TO
TRANSFORM SMALL SAVINGS AND BRING SMALL INVESTORS
Who should buy these bonds? INTO THE FORMAL SYSTEM IS EXTREMELY LARGE WI
!NYONE WHO IS A BULL ON GOLD PRICES OR PLANS TO HOLD Anand Tandon is an independent analyst.
December 2015 Wealth Insight 43
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THE CHARTIST
#BTFFGGFDU IBMMVDJOBUJPOT
The base effect can distort the real picture at times. The need is to go
beyond it and find out the real causes.
DEVANGSHU DATTA
$PSQPSBUFSFTVMUT JO +VMZo4FQUFNCFS "UT THE BASE EFFECT OVERSTATES THE DOWNTREND #RUDE
WERE RATHER DISAPPOINTING !CROSS A SAMPLE OF PRICES STARTED FALLING IN 3EPTEMBER TOWARDS THE END
ODD COMPANIES WITH A CUT
OFF MINIMUM SALES OF ` OF THE *ULYn3EPTEMBER QUARTER )N *ULY "RENT WAS
CRORE TOTAL SALES FELL BY PER CENT ,OOKING A LITTLE TRADING AT AROUND BARREL AND IT TRADED AT AROUND
DEEPER RAW MATERIAL COSTS FELL BY PER CENT AND THE COST IN LATE 3EPTEMBER 3O THE PRICES WERE PRETTY HIGH
OF PURCHASED GOODS FELL BY PER CENT )NTEREST OUTGO THROUGH THAT PERIOD AVERAGING ABOUT
INCREASED BY PER CENT .ET PROFITS DROPPED BY PER )N THE CORRESPONDING QUARTER OF *ULYn3EPTEMBER
CENT AND 0"$)4 WAS UP BY PER CENT PRICES AVERAGED AROUND ! PURE 9O9
4HE EASIEST AND MOST POPULAR WAY TO JUDGE TRENDS IN A COMPARISON WOULD SUGGEST THAT CRUDE WAS TRENDING
PARTICULAR VARIABLE IS TO COMPARE THE LATEST VALUES TO THE STEEPLY DOWN DUE TO THE BASE EFFECT !S THE PRICE CHART
VALUES TAKEN A YEAR AGO SOMETIMES A QUARTER AGO "UT INDICATES HOWEVER CRUDE PRICES HAVE ACTUALLY RANGE
IF THE INITIAL BASE VALUE IS UNUSUALLY HIGH OR LOW THAT TRADED AND MOVED MORE OR LESS SIDEWAYS SINCE
YEAR
ON
YEAR CHANGE MAY BE SOMEWHAT MISLEADING $UE *ANUARY WHEN THEY SEEMED TO HAVE HIT SOME SORT
TO THE POTENTIAL FOR DISTORTION TIME
SERIES VARIABLES SUCH OF BOTTOM IN THE RANGE OF n
AS INFLATION INDICES INDEX OF INDUSTRIAL PRODUCTION 4HE BASE EFFECT ALSO COMPLICATES THE WAY ANOTHER KEY
EXPORTS IMPORTS ETC MUST ALL BE TREATED WITH CAUTION ECONOMIC VARIABLE INFLATION LOOKS WHEN COMPARING
&OR EXAMPLE TAKE A LOOK AT CRUDE PRICES OVER THE PAST THOSE TWO QUARTERS 4AKE A LOOK AT THE CHART OF THE
COUPLE OF YEARS 4HE INTERNATIONAL PRICE OF OIL WAS 7HOLESALE 0RICE )NDEX 70)
AROUND BARREL OF "RENT
GRADE CRUDE BY .OVEMBER 4HE 70) STARTED FALLING IN THE *ULYn3EPTEMBER
DOWN FROM OVER BARREL IN EARLY 3O THE QUARTER PRECISELY BECAUSE OIL AND OTHER
TREND HAS VERY CLEARLY BEEN NEGATIVE COMMODITIES STARTED TO DROP IN PRICE )T HAS ACTUALLY
Movement of Brent crude ($/barrel) Movement of the WPI
44 Wealth Insight December 2015
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THE CHARTIST
Year-on-year change (%) in the WPI Movement of the rupee in dollar terms
MOVED UP SOMEWHAT SINCE &EBRUARY WHILE STAYING RANGED BETWEEN AND VERSUS THE 53$ WITH AN
WELL BELOW LEVELS "ETWEEN *ULY AND 3EPTEMBER AVERAGE VALUE OF )N *ULYn3EPTEMBER IT
THE 70) FELL FROM TO AVERAGED ABOUT ` WITH A MAXIMUMnMINIMUM RANGE
.OW LOOK AT THE 9O9 CHANGE OF THE 70) AND YOU GET A OF TO 3O THERE WAS A SIGNIFICANT CURRENCY
DIFFERENT IMPRESSION 4HE 70) CHANGE HAS BEEN IN THE DEPRECIATION OF ABOUT PER CENT
NEGATIVE TERRITORY FOR ALL OF CALENDAR YEAR (OWEVER .OW TAKE A LOOK AT THE AGGREGATED CORPORATE RESULTS
IF WE LOOK AT *ULYn3EPTEMBER IT APPEARS AS THOUGH AGAIN 3ALES FELL OVERALL BY PER CENT 4HIS IS PARTIALLY
THE TREND IS BOUNCING OFF A LOW ALTHOUGH IT REMAINS WELL EXPLAINED BY FALLING INFLATION THOUGH IT SUGGESTS A LACK
IN THE NEGATIVE TERRITORY 4HIS IS PROBABLY OVERSTATING OF DEMAND 2AW MATERIAL EXPENSES AND COST OF FINISHED
DEFLATIONARY TENDENCIES 7E ARE LIKELY TO SEE A BASE EFFECT GOODS FELL BY PER CENT AND PER CENT RESPECTIVELY n
OPERATING IN THE OPPOSITE DIRECTION SOON "Y *ANUARY AGAIN AT LEAST PARTIALLY EXPLAINED BY FALLING INFLATION
CRUDE WAS BOTTOMING OUT )T IS VERY LIKELY THAT 4HE BASE EFFECT WILL BE LESS PRONOUNCED WHEN
INVERSE BASE EFFECTS WILL BE VISIBLE IN *ANUARY /CTOBERn$ECEMBER THE CURRENT QUARTER IS
4HE 2") WHICH TRACKS THE #ONSUMER 0RICE )NDEX COMPARED TO /CTOBERn$ECEMBER BECAUSE THE
RATHER THAN THE 70) HAS CUT THE POLICY RATE SEVERAL DIFFERENCES BETWEEN CRUDE PRICES INFLATION ETC ARE LESS
TIMES BY ABOUT PER CENT "ETWEEN *ULYn3EPTEMBER PRONOUNCED #OST DIFFERENTIALS ARE LIKELY TO BE SMALLER IN
AND *ULYn3EPTEMBER THE POLICY RATE DROPPED THE NEXT QUARTER
BY PER CENT 4HAT WAS NOT FULLY TRANSMITTED BY THE 2ISING INTEREST COSTS ARE A CAUSE OF SERIOUS CONCERN IN
COMMERCIAL BANKING SYSTEM BUT INTEREST RATES DID COME THE CIRCUMSTANCES )F SALES HAVE NOT RISEN AND INTEREST
DOWN ACROSS THE BOARD RATES HAVE FALLEN WHY SHOULD INTEREST COSTS HAVE RISEN
4HERE IS ALSO A CURRENCY FACTOR THAT IS WORTH BEARING )NVESTMENT HAS NOT RISEN MUCH BANK CREDIT IS UP BY
IN MIND "ETWEEN *ULY AND 3EPTEMBER THE RUPEE ONLY PER CENT WHICH IS AMONG THE LOWEST LEVELS SEEN
Net profits of oil companies Net profits of power companies
December 2015 Wealth Insight 45
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THE CHARTIST
Net profits of infrastructure companies Net profits of IT companies
IN THE LAST YEARS 4HE INTEREST BURDEN GOING UP IN 4HE TOP FIVE GENERATED OVER PER CENT OF THE
THESE CIRCUMSTANCES IS PROBABLY A SIGN OF HIGHER INDUSTRY TURNOVER AND SAW PER CENT RISE IN NET
WORKING CAPITAL COSTS 4HAT IS A BAD SIGNAL INDEED PROFITS AND PER CENT RISE IN TURNOVER IN RUPEE
4HE FALL IN CRUDE PRICES WAS MATCHED BY SIMILAR FALLS TERMS /NCE YOU FACTOR IN THE CHANGES IN THE
IN THE PRICES OF GAS AND COAL )MPORTED COAL AND SPOT EXCHANGE RATE WITH THE RUPEE FALLING PER CENT THE
CARGOES OF ,.' BECAME CHEAPER #OAL DESPATCHES FROM PERFORMANCE IS MUCH LESS IMPRESSIVE
#OAL )NDIA ALSO IMPROVED 4HIS HAD INTERESTING IMPACTS 4HE PHARMA INDUSTRY IS ANOTHER KEY EXPORTER SO
ON THE ENERGY SECTOR RUPEE DEPRECIATION HAS SOME BEARING )T IS FACING
2EFINERIES AND MARKETERS DID BETTER THROUGH THE REGULATORY ISSUES WITH THE 53 &OOD AND $RUGS
QUARTER AS THEIR COSTS DROPPED )/# REDUCED LOSSES !DMINISTRATION GIVING NEGATIVE REPORTS ON MANY EXPORT
WHILE "0#, AND %SSAR /IL SAW EXPANDING PROFITS #RUDE
FACILITIES 0HARMA ALSO HAS ISSUES OF CONSOLIDATION AND
OIL PRODUCERS SAW REDUCED PROFITS ON THE OTHER HAND SEE LITIGATIONS REGARDING INTELLECTUAL PROPERTY
THE GRAPH ON THE PREVIOUS PAGE 4HE PICTURE IN THE COMMODITY SECTOR REFLECTS THE
4HE POWER GENERATION SECTOR WAS A MAJOR BENEFICIARY SHARP DROP IN PRICES AS WELL AS THE DROP IN DEMAND
OF LOWER FUEL COSTS AND BETTER SUPPLY %VERY MAJOR 3TEEL CEMENT AND NON
FERROUS METALS n ALL SAW SERIOUSLY
COMPANY SEEMS TO HAVE BENEFITED FROM TURNAROUNDS IN REDUCED PROFITS 4HE BASE EFFECT MIGHT BE EXAGGERATING
SEVERAL CASES SEE THE GRAPH ON THE PREVIOUS PAGE THE NEGATIVE IMPACT 7E WONT KNOW TILL THE NEXT QUARTER
!T THE SAME TIME THE INFRASTRUCTURE SECTOR APPEARED /VERALL THERE ARE SERIOUS ISSUES IN TERMS OF DEMAND
TO BE IN A BAD SHAPE 4HE COMPANIES IN THE SECTOR SHOWED AND SEVERAL SECTORS ARE FINDING IT HARD TO COPE WITH A
SIGNS OF DECLINING PROFITS AND ARE ALSO STRUGGLING WITH DIFFICULT ENVIRONMENT "UT WE WILL NOT BE ABLE TO ASSESS
HIGHER INTEREST COSTS -ORE DELEVERAGING IS REQUIRED THE SITUATION CLEARLY UNTIL THE BASE EFFECT EASES OFF WI
4HE )4 INDUSTRY DID REASONABLY WELL ON THE SURFACE The writer is an independent financial analyst.
Net profits of pharma companies Net profits of commodity sectors
46 Wealth Insight December 2015
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THOMAS RUSSO, Partner, Gardner Russo & Gardner VALUE GURU
Warren Buffett,
newspapers and more
This adjunct to the four-part interview published in the earlier issues of Wealth
Insight presents the remaining titbits of the conversation Ekramul Haque had
with Thomas A Russo, which are a bonus for any value investor
Are you a proponent of buy-and-hold-
forever like Buffett?
-Y PREFERENCE WOULD BE TO HAVE A
BUSINESS THAT CAN UNFOLD WITHOUT
MY NEED TO UNLOAD 4HAT REQUIRES
THAT THEY HAVE THE @CAPACITY TO
REINVEST AND THEY HAVE THE CULTURE
THAT GIVES MANAGEMENTS THE
@CAPACITY TO SUFFER AND THAT THEY
HAVE INTERNAL REDEPLOYMENT OF
CAPITAL IN A WAY THAT WILL DRIVE THE
GROWTH AND INTRINSIC VALUE ON A
PER SHARE BASIS ! COUPLE OF THINGS
IF THE BUSINESS SLOWS DOWN ITS
ORGANIC GROWTH SO THAT THEY CAN
BUY BACK STOCK AT A DISCOUNT FROM
INTRINSIC VALUE THAT WILL HELP KEEP
THE INVESTMENT FROM LANGUISHING
AND WE LIKE IT WHEN THAT HAPPENS
4HEN IF FOR SOME REASON THE
REINVESTMENT RATE DRIES UP OR
MANAGEMENT IN SOME WAY FAILS TO
CONTINUE TO DELIGHT US WE ARE
PERFECTLY WILLING TO SELL AND ) THINK
THAT IS WHAT YOU WOULD HAVE SEEN
US UNLOAD SHARES DURING THE
PERIOD OF TIME
How do you ensure Buffetts caveat
not to cut flowers and water weeds?
How do you identify value traps?
) FELL PREY TO VALUE TRAPS IN THE
WORLD OF NEWSPAPERS )N THE VALUE
TRAP IN THE WORLD OF NEWSPAPERS
THAT WE OWNED IN THE LATE S WAS
THAT THE EARNINGS ON WHICH THEY
SEEMED CHEAP WERE OVERSTATED BY A
CATEGORY OF OPERATING PROFITS AND
WAS AT RISK BECAUSE OF TECHNOLOGY )
REMEMBER AT THE TIME THAT
December 2015 Wealth Insight 47
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VALUE GURU
SOMEONE ASKED 7ARREN ABOUT NOT GONE BACK TO REDISCOVER THIS You bought MasterCard at 12 times
NEWSPAPERS AND HE SAID THAT HE INDUSTRY SINCE ) WAS BURNED AND ) one-year forward earnings. What is
LOVED THE BUSINESS 3OMEONE SAID SORT OF HAVE BEEN TWICE SHY BUT ) the maximum you are willing to pay?
THAT THE PUBLIC COMPANIES WERE AM PREPARED TO PAY AND ) AM How long will you wait for valuations
TRADING AT A LOWER PRICE THAN THE PREPARED TO PAY A LOT AND YOU to come down to those levels?
PRIVATE MARKET VALUE WHICH WAS UNDERSTAND THAT IF THEY END UP ) DID HAVE THE GREAT OPPORTUNITY IN
TEN TIMES %")4! AND HE SAID DELIVERING WHAT THEY DELIVER TO ESTABLISH A POSITION AT A
h7HAT MAKES YOU THINK THAT THAT IS WITHOUT PRINT SOME PER CENT OF TIME WHEN THE SHARES OF
A CERTAINTY v (E WAS RIGHT 4HE THE COST STRUCTURE GOES AWAY IF -ASTER#ARD COLLAPSED ALONGSIDE
MULTIPLE WENT DOWN OF WHAT YOU THEY ARE NO LONGER DELIVERING 6ISAS SHARE PRICE DUE TO THE
WOULD BE PREPARED TO PAY AT THE PRINT AND SO WE WILL SEE )T IS A $URBIN !MENDMENT THREATENED
SAME TIME AS THE %")4! THAT IT WAS VERY EXPENSIVE PROPOSITION SO REGULATION ON DEBIT INTERCHANGE
APPLIED TO WENT DOWN BECAUSE LONG AS IT IS STILL PRINTING FEES -ASTER#ARD SEEMED ILL TREATED
TECHNOLOGY THE INTERNET ERODED ANYTHING 4HE LAST EDITION THAT AT THE TIME BECAUSE SO MUCH MORE
THE ADVERTISING CLASS GETS PRINTED IS GOING TO BEAR THE OF ITS BUSINESS WAS INTERNATIONAL
-Y VALUE TRAP WAS THAT ) HAD SEEN ENTIRE COST OF THE PRINTERS UNION THAN 6ISA WHICH BY THE WAY DOES
THE NEWSPAPER BUSINESS OVER AND THE PRINTING MACHINE AND THE NOT EVEN OWN A %UROPEAN NETWORK
DECADES MIGRATE TO THE NEXT INK AND ALL THE REST 4HE OPERATING )T IS STILL A BANK CONSORTIUM FOR
GENERATION TECHNOLOGY SUCCESSFULLY 6ISA IN %UROPE -ASTER#ARD SOLVED
AND BY DOING SO RETAIN ITS VALUE )N THAT PROBLEM 4HEY OWN THE ENTIRE
THIS CASE THE UNWILLINGNESS OF THEM WORLD IN THEIR -ASTER#ARD
TO DEAL IN A FRIENDLY FASHION WITH FRANCHISE AND THEY ARE MORE
THE EARLY OVERTURES FROM !MAZON By the time the news- EXPOSED TO THE DEVELOPING AND
AND E"AY FOR EXAMPLE MEANT THAT papers realised that EMERGING MARKETS AND LESS
BY THE TIME THE NEWSPAPERS REALISED they needed to do EXPOSED TO DOMESTIC TROUBLES THAT
THAT THEY NEEDED TO DO SOMETHING
WITH THE TECHNOLOGY OF THE INTERNET
something with the AROSE BECAUSE OF THE $URBIN
!MENDMENT 4HEIR SHARES CAME
THAT THEY NO LONGER HAD ENOUGH technology of the inter- DOWN WITH AN EQUAL COLLAPSE AND
POWER TO COMMAND AN IMPORTANT net that they no longer THEY WERE INDEED TRADING AT
DEAL TO SURVIVE 4HAT WAS A VALUE had enough power to TIMES THE NEXT YEARS EARNINGS AT
TRAP FOR ME
) OFTEN THINK ABOUT THE FORTUNES
command an impor- THAT POINT
!T THAT POINT ) SPENT TIME WITH
OF THE PAST AS A GOOD INDICATION OF tant deal to survive. THE PERSON WHO WAS APPOINTED THE
WHETHER A BUSINESS HAS A #%/ WHO ) HAD KNOWN FROM YEARS
COMPETITIVE ADVANTAGE AND THERE IS AGO AT #ITIBANK NAMED !JAY
ALMOST NO BETTER BUSINESS IN COST OF THAT LAST PAPER WILL BE "ANGA )N FACT ) TELL PEOPLE ) OWNED
HISTORY TO SPIN WELL THAN WAS THE BECAUSE IT WILL ABSORB ALL #ITIBANK AND WE HAD A TERRIFIC
NEWSPAPER BUSINESS WHEN IT WAS THE FIXED COSTS OF PRINTING 4HAT IS INVESTMENT EVEN THOUGH IT WENT
THE ONLY MONOPOLY NEWSPAPER IN A AN EXAGGERATION BUT ) HAVE NOT DOWN IN PRICE BECAUSE ) GOT TO
GIVEN TOWN 4HEY HAD THE MOST SPENT THE TIME TO FIGURE THAT OUT KNOW !JAY AND BECAUSE OF THAT )
POWERFUL FRANCHISE MAYBE EVER AND "UFFETT IS CERTAINLY BUYING UP BOUGHT -ASTER#ARD SHARES WHEN
YET IT WAS BROKEN BY TECHNOLOGY ) NEWSPAPERS NOW BUT HE IS HE BECAME THE #%/ (E REALLY IS A
HELD SHARES IN THOSE INDUSTRIES AND CERTAINLY NOT PAYING TEN TIMES GIFTED LEADER AND HAS A GOLDEN
IT WAS A VALUE TRAP %")4$! (E IS PROBABLY PAYING ROLODEX ) THINK HE WORKED FOR
LESS THAN LIQUIDATION VALUE AND HE .ESTL IN FACT AT THE START OF HIS
But a number of publications like the KNOWS THAT HE COULD SELL THE CAREER IN )NDIA ) THINK HE IS ONE OF
NYT or FT are going the online route MACHINES TO 4AIWAN OR SOMEPLACE THE MOST CLEVER CONSCIENTIOUS
where they can now reach far greater IF HE NEEDED TO (E COULD SELL CAREFUL AND CREATIVE EXECUTIVES )
number of potential customers THEM AS SCRAP PROBABLY ) THINK AT KNOW AND SO WHEN THE SHARE PRICE
globally by subscription than they THE HEART HE HAS A BELIEF THAT COLLAPSED AND ) CERTIFIED THAT THE
could ever have done before? Does WHAT YOU SUGGEST THAT THE CONTENT GROWTH IN THE INTERNATIONAL MARKET
that not change the equation? MAY HAVE RESIDUAL VALUE AND HE REMAINED STRONG AND !JAY BECAME
)T IS A VERY GOOD QUESTION ) HAVE LIKES THE BUSINESSES THE #%/ ) BOUGHT SHARES ) DID NOT
48 Wealth Insight December 2015
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VALUE GURU
BUY UNTIL HE WAS APPOINTED #%/ THE INNOCENT WHO ARE AT RISK AND UNDERVALUED AND THERE IS A
BECAUSE PART OF THE STORY WAS THAT INSTEAD OF THAT IF YOU HAVE A MIGRATION FROM THE OVERVALUE TO
HE WOULD BE WILLING TO TAKE PAYMENT CARD THAT IS REFILLABLE AND THE UNDERVALUE THAT TAKES PLACE
-ASTER#ARDS @CAPACITY TO REINVEST YOU CAN USE THAT AS A PAYMENT DURING THE COURSE OF A YEAR ) DO
AND SUFFER THROUGH THE BURDEN OF DEVICE USING BIOMETRIC PROTECTION THAT WITH THE RECOGNITION THAT
REINVESTMENT (E HAS DONE THAT THE INTENDED BENEFICIARIES MUST ULTIMATELY ) STILL WANT TO HOLD
SINCE THE TIME HE JOINED (E HAS SIGN OFF 4HAT IS THE KIND OF WORK POSITIONS FOR THE LONG TERM BUT WE
INVESTED IN SEPARATE PROGRAMS THAT !JAY HAS UNDERWAY AND SINCE DO HAVE OPPORTUNITIES TO REBALANCE
MANY OF WHICH ARE RUN BY HE IS SO GLOBAL AND HE HAS SUCH A AND WE TRY TO TAKE ADVANTAGE OF
MILLENNIALS WHO WORK IN 3ILICON NETWORK AND THE ABILITY TO MEET THOSE ) DO THINK IT ADDS VALUE OVER
6ALLEY OUTSIDE OF THE MAIN WITH THE HEADS OF THOSE COUNTRIES TIME )T HAS NOT TRIGGERED MUCH
COMPANY COMING UP WITH NEW TO COME UP WITH PRODUCTS AND GET TAXATION 7E TEND TO BE VERY LOW
PAYMENT SYSTEMS AND PAYMENT FIRST MOVER ADVANTAGE AS IT COULD INTO TAXATION AND EVEN WITHIN THAT
SECURITY DEVICES AND ALL THE REST GET QUITE HIGH ) HAVE NOT SOLD THE REBALANCING IT DOES NOT SEEM TO
(E HAS INVESTED ENORMOUS SHARES 4HEY ARE AT A PER CENT BECOME BURDENSOME
AMOUNTS OFF HIS INCOME STATEMENT POSITION AND THE PROFITS HAVE GONE
TO DEVELOP PRODUCTS AND ATTRIBUTES UP SHARPLY WHICH ALLOWS ME TO Is there a threshold limit for a single
TO HIS NETWORK THAT ) THINK WILL PAY CONTINUE TO HOLD A POSITION BUT IT IS stock?
OFF HANDSOMELY FOR YEARS TO COME ) TEND TO CHECK OUT AROUND PER
4HE MEASURE BY WHICH HE IS CENT MAYBE THAT IS MY UNLUCKY
INVESTMENT SPENDING IS THE MEASURE NUMBER AND ) FIGURE ) MIGHT AS
BY WHICH HIS OPERATING MARGIN HAD WELL NOT GO ABOVE IT ) HAVE HELD
NOT GROWN DESPITE THE STRONG STOCKS IN TOBACCO COMPANIES FOR A
GROWTH OF REVENUES 4HERE HAS NOT LONG TIME AND THROUGH THAT
BEEN NEARLY ENOUGH OPERATING EXPERIENCE ) HAVE WITNESSED THE
LEVERAGE AS THERE SHOULD BE IN THAT FACT THAT THERE IS A CERTAIN AMOUNT
FIXED COST BUSINESS 4HAT IS MAINLY THAT ALWAYS REMAINS UNKNOWABLE
BECAUSE HE HAS BEEN SPENDING BACK 4HE TOBACCO INDUSTRY HAS ALWAYS
THE INCREASED OPERATING PROFITS THAT BEEN ABOUT ONE MORE LAWSUIT ONE
HAVE COME FROM SCALE AND GROWTH IN MORE WAY THE GOVERNMENT IS TAXING
VOLUME IN THE FORM OF INVESTMENT PEOPLE ONE MORE WAY OF DISRUPTING
IN NEW BUSINESSES ) SEE !JAY WHAT SEEMS TO BE FAIRLY CERTAIN AND
PARTNERING WITH GOVERNMENTS TO WITH THAT EXPERIENCE AND THOSE
INCREASE THE AMOUNT OF COMMERCE SCARS ) HAVE BECOME HUMBLED IN
DONE IN EACH COUNTRY BETWEEN MY BELIEF OF HOW DEEPLY ) CAN
ELECTRONIC PAYMENT RATHER THAN UNLIKELY THAT THEY HAVE GONE UP AS KNOW SOMETHING AND SO ) TAP OUT
CASH HARNESSING THE GOVERNMENTS FAST AS THE SHARE PRICE HAS AROUND TO PER CENT RARELY GO
DESIRE TO INCREASE THE TAX COLLECTION ABOVE AND IF ) DO ) TEND TO PARE
BECAUSE CASH TRANSACTIONS TEND TO How many stocks on average are you IN BACK
BE CORRUPT TRANSACTIONS 4HEY TEND comfortable holding? What is your
NOT TO BE REPORTED AND THEY DO NOT portfolio balancing strategy? What is your average holding period?
PAY TAX SO GOVERNMENTS ARE ALIGNED 9ES ) WOULD SAY THAT THE TOP TEN !LMOST EVERYTHING IN THE PORTFOLIO
WITH !JAY TO TRY TO SHIFT THE HOLDINGS ARE PER CENT ) HAVE A HAS BEEN HELD AT LEAST FOR FIVE YEARS
PAYMENTS TO INCREASE TAX COLLECTION HANDFUL OF SMALLER POSITIONS THAT -Y MOST RECENT SMALL PURCHASE OF
4HEY ALSO WANT TO SHIFT ALONG ARE BEING BUILT OR ARE BEING SOLD SOMETHING CALLED *#$ECAUX WHICH
WITH !JAYS NEW DEVELOPING AND DURING THE COURSE OF A YEAR ) IS A GLOBAL BILLBOARD ADVERTISER ) AM
PRODUCTS TO FIND PAYMENT SYSTEMS WILL PROBABLY REBALANCE THE QUITE FOND OF &AMILY CONTROLLED
THAT -ASTER#ARD PROVIDES AS FORMS PORTFOLIO AROUND POSITIONS THAT &RENCH BASED WITH A VERY HIGH
OF DISPERSING SOCIAL BENEFITS DOWN HAVE GONE UP AND HAVE BECOME SHARE PER CENT OF DEVELOPING AND
TO A NATIONS POOREST CITIZENS OVERWEIGHT WHILE THEY BECOME LESS EMERGING MARKETS WHERE THE USE OF
.ORMALLY THAT TODAY GOES OUT IN UNDERVALUE AND THEN ) HAVE BILLBOARDS AND ADVERTISING ON STREET
THE FORM OF A CHECK AND YOU CASH POSITIONS THAT BECOME UNDERWEIGHT FURNITURE AT AIRPORTS BECOME VERY
THAT CHECK TO PEOPLE WHO PREY UPON EVEN THOUGH THEY HAVE BECOME IMPORTANT BECAUSE OF THE MASS
December 2015 Wealth Insight 49
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VALUE GURU
AMOUNT OF TRAFFIC THAT YOU HAVE TO PARTNERED -OST RECENTLY ) AM ,OOMIS -R "UFFETTS LONG TIME
ENDURE IN THOSE MARKETS BILLBOARDS READING %RIK "RYNJOLFSSONS BOOK EDITOR FOR HIS ANNUAL REPORTS
PROMOTE PRODUCTS 4HE 3ECOND -ACHINE !GE 7ORK CAPTURED A REMARKABLE HISTORICAL
0ROGRESS AND 0ROSPERITY IN A PERSPECTIVE IN HER RECENTLY
How do you chill? 4IME OF "RILLIANT 4ECHNOLOGIES RELEASED 4AP $ANCING TO 7ORK
)NVESTMENT MANAGEMENT IS A UPON RECOMMENDATION FROM 7ARREN "UFFETT ON 0RACTICALLY
PRETTY UNRELENTING BUSINESS PORTFOLIO COMPANY #)% %VERYTHING ! MUST
REQUIRING READING AN ENORMOUS 2ICHEMONTS CHAIRMAN *OHANN READ &INALLY THE EXTRAORDINARY
AMOUNT OF BUSINESS RELATED 2UPERT *OHANN SUGGESTS THAT HIS REVELATIONS ABOUT THE ON GOING
MATERIALS INDUSTRY TRADE JOURNALS UNDERSTANDING OF WHAT 2ICHEMONT AGENCY COSTS BURDENING THE
NEWSPAPERS FROM AROUND THE NEEDS TO DO TO STAY RELEVANT TO ITS FINANCE INDUSTRY REVEALED BY
WORLD ETC (OWEVER ) DO LIKE TO LONG STANDING LUXURY GOODS CLIENTS -ICHAEL ,EWIS &LASH "OYS IS
FIND SOME TIME TO SPEND READING IS PARTLY LAID OUT AMONGST THE CLEARLY WORTH A SUMMER READ
MORE BROADLY ESPECIALLY OBSERVATIONS IN THIS MOST )N ADDITION ) TEND TO TRY TO
INTERESTING BOOKS 3OME OF THOSE REMARKABLE BOOK ABOUT THE DAWN CARVE OUT SOME TIME WHEN ) AM
BOOKS RECENTLY READ INCLUDE 4HE OF THE POST MACHINE AGE )N TRAVELLING THE WORLD FOR MYSELF )
%VERYTHING 3TORE *EFF "EZOS AND ADDITION ONE CANNOT IGNORE TRY TO VISIT ART MUSEUMS WHEN )
THE !GE OF !MAZON BY "RAD 3TONE "ERKSHIRE (ATHAWAY RELATED GO TO MAJOR MARKETS AS ) FIND THE
THE REMARKABLE STORY ABOUT *EFF BOOKS WITH A MOST RECENT NOD TO SORT OF FLOW OF ART AND THE ROLE OF
"EZOS AND THE INSATIABLE DESIRE FOR LAW PROFESSOR ,AWRENCE SOCIETY OF INTEREST AND IT IS
GROWTH INSIDE OF !MAZON ) ALSO #UNNINGHAMS REMARKABLE RECENT SOMETHING THAT ) FIND REWARDING )
ENJOYED THE RECENT BOOK $REAM RELEASE "ERKSHIRE "EYOND "UFFETT SPEND A FAIR AMOUNT OF TIME
"IG BY #RISTIANE #ORREA ON THE ' 4HE %NDURING 6ALUE OF 6ALUES )N ATHLETICALLY IN BOTH TENNIS AND
GROUP OF "RAZILIAN INVESTORS WITH ADDITION TO ,AWRENCE LESS SO WITH GOLF "UT MOST OF MY
WHOM "ERKSHIRE (ATHAWAY IS #UNNINGHAMS BOOK #AROL FREE TIME ) SPEND WITH FAMILY WI
REVISED EIGHTH EDITION This 220-page easy-to-read book has details
across savings and investment products. It also
tells you how to save tax smartly.
Updated
Take Control as of
JUNE
2015
SAVINGS AND INVESTMENT
1 Savings Bank Account
15
16
17
Rajiv Gandhi Equity Savings Scheme
Inflation Indexed Bonds
Mutual Funds
Manage your finances better with the 2 Bank Fixed Deposit
3 Company Deposits 18 Stocks and Equity
Savings and Investment Yearbook 19 National Pension System
2015-16. 4 Bank Recurring Deposit
5 Post Office Recurring Deposit 20 Unit Linked Insurance Plans Protection
6 Post Office Term Deposit 21 Health Insurance
Understand the difference among 22 Life Insurance
savings, investments and protection 7 Public Provident Fund
8 National Savings Certificate 23 Annuity
Know the savings and investment criteria 9 Kisan Vikas Patra
for each of the 20 mentioned products INCOME TAX
10 Sukanya Samriddhi Yojana 24 Income Tax Planning
Learn about the tax implications on ` 295 11 Senior Citizen Savings Scheme
every product 25 Tax Planning Strategies
12 Post Office Monthly Income Scheme
Get answers to all your usual concerns 13 RBI Savings Bond ANNEXURE AND RESOURCES
on liquidity, guarantees and 14 Capital Gain Tax Exemption Bond or VALUE RESEARCH ONLINE
investments risks 54 EC Bonds
Name (Mr/Mrs/Ms) E-mail
Address Cheque Number Date
Bank & Branch
Payable to Value Research, New Delhi * Add `30/- for non Delhi cheques
Phone
Mail it to Value Research, 5, Commercial Complex, Chitra Vihar, Delhi-110092, India
Buy online at at www.valueresearchonline.com/products
50 Wealth Insight December 2015
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
STOCK ANALYSTS
CHOICE
Our scorecard
O Performance
VER THE YEARS WE HAVE ANALYSED AND RECOMMENDED SEVER
AL STOCKS 4HE TABLE BELOW SHOWS OUR PERFORMANCE SINCE
*ULY 9ES WE HAVE A FEW FAILURES BUT WE ALSO HAVE Total returns* since July 2011
25.4% 11.8%
MANY SUCCESSFUL PICKS ! PORTFOLIO COMPRISING THE STOCKS BELOW
HAS DELIVERED AN )22 OF PER CENT INCLUDING DIVIDENDS
ASSUMING ONE HAD INVESTED ` IN EACH OF THE STOCKS AT THE
TIME OF THE RECOMMENDATION )N ALL ONE WOULD HAVE INVESTED
` 4HE CURRENT VALUE COMES TO ` INCLUDING DIVI
DENDS ON .OV WHEREAS INVESTING THE SAME AMOUNT IN Stock Analysts Choice CNX Nifty
THE .IFTY WOULD HAVE GENERATED ` INCLUDING DIVIDENDS
YIELDING PER CENT AS PER THE TOTAL RETURNS INDEX WI *As on November 16, 2015
Recommended Current Value of `10K
Recommendation date price (`) price (`) invested (`) Total return (% per annum)
Jul-11 Asian Paints 295.2 807.2 27,346 26.83
Bosch 6,916.9 19,375.0 28,010 27.24
Castrol India 244.5 439.7 17,985 15.93
Colgate-Palmolive 458.0 944.6 20,623 19.97
CRISIL 692.9 1,914.1 38,281 27.66
Cummins India 480.9 984.3 20,468 20.00
Exide Industries 149.5 148.1 9,910 1.21
ITC 184.9 346.4 18,740 17.49
Larsen & Toubro 1,095.0 1,355.7 12,380 6.20
Nestle India 3,887.9 5,978.9 15,378 11.41
NMDC 257.7 92.9 3,621 -16.86
Pidilite Industries 159.4 534.5 33,539 32.83
Titan Company 228.9 357.6 15,618 10.87
Aug-11 Lupin 460.6 1,827.0 39,670 38.08
Opto Circuits 213.0 13.0 608 -47.02
Sep-11 Bank of Baroda 151.6 174.4 11,499 4.15
Castrol India 254.4 439.7 17,282 15.47
Power Grid Corporation 102.7 129.9 12,650 8.04
Rural Electrification 173.2 235.7 13,605 12.73
Tata Coffee 70.5 92.7 13,148 7.12
Torrent Power 211.3 190.7 9,025 -1.19
Zee Entertainment Ent. 123.5 383.3 31,049 31.56
Oct-11 CMC# 858.4 2,032.3 23,674 25.67
Graphite India 77.5 72.5 9,355 2.42
Zylog Systems 196.7 3.1 155 -61.57
Returns for less than one year are absolute. Total returns include dividend income. Returns as on November 16, 2015. Transactional fees not taken into account.
#
CMC merged with TCS with effect from September 29, 2015
December 2015 Wealth Insight 51
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
STOCK ANALYSTS
CHOICE
Recommended Current Value of `10K
Recommendation date price (`) price (`) invested (`) Total return (% per annum)
Nov-11 Godrej Consumer Products 396.5 1,219.3 30,751 32.69
Tata Consultancy Services 1,086.6 2,387.8 21,974 24.68
Transformers & Rectifiers 197.0 180.0 9,136 -2.00
Dec-11 Gujarat State Petronet 92.2 123.8 13,435 8.69
Noida Toll Bridge 23.3 24.9 10,687 8.89
Tata Motors 179.5 403.6 24,503 24.88
Jan-12 GAIL 388.3 299.8 7,719 -3.95
Mahindra Lifespace 245.1 482.4 19,681 21.51
MRF 6,859.0 38,903.0 56,682 56.23
Mar-12 Bajaj Finance 828.2 5,240.0 70,232 66.60
Gabriel India 22.8 87.6 38,505 45.09
Opto Circuits 220.9 13.0 586 -52.85
Apr-12 Shriram Transport Finance 581.5 874.0 15,031 13.11
TTK Prestige 2,646.6 4,105.5 15,511 13.42
May-12 Bata India 422.7 470.8 11,136 3.86
GSK Consumer Healthcare 2,770.2 5,842.0 21,090 24.26
Swaraj Engines 394.9 933.0 23,626 33.75
Jun-12 Ajanta Pharma 75.4 1,357.3 180,002 129.54
Elecon Engineering 53.3 79.0 14,826 14.46
Kirloskar Pneumatic 470.0 530.0 11,277 5.88
Aug-12 Hero Motocorp 2,082.0 2,583.0 12,406 9.98
Supreme Industries 236.7 625.9 26,448 37.09
VST Industries 1,694.8 1,624.9 9,589 2.39
Sep-12 Amara Raja Batteries 195.1 898.2 46,036 61.14
Redington India 71.5 114.0 15,955 16.64
Oct-12 Lupin 567.4 1,827.0 32,202 45.43
MindTree 343.8 1,454.1 42,290 60.38
Solar Industries 983.7 3,280.0 33,358 47.48
Nov-12 Grindwell Norton 260.0 713.1 27,432 41.06
KPIT Technologies 120.1 155.5 12,953 9.61
Mcleod Russel 306.0 177.0 5,784 -14.35
Dec-12 City Union Bank 53.1 85.6 17,412 19.11
Petronet LNG 157.5 209.6 13,305 11.33
Wockhardt 1,646.6 1,538.0 9,341 -1.53
Feb-13 Balkrishna Industries 290.3 636.7 21,931 32.69
KEC International 63.8 146.5 22,980 35.23
Torrent Pharmaceuticals 365.4 1,528.6 41,833 69.18
Mar-13 Emami 410.2 1,001.6 24,414 39.96
Gruh Finance 107.8 244.9 22,708 36.44
Returns for less than one year are absolute. Total returns include dividend income. Returns as on November 16, 2015. Transactional fees not taken into account.
52 Wealth Insight December 2015
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STOCK ANALYSTS
CHOICE
Recommended Current Value of `10K
Recommendation date price (`) price (`) invested (`) Total return (% per annum)
Apr-13 Berger Paints India 96.2 221.3 23,011 37.55
Innoventive Industries 103.2 4.2 408 -69.93
May-13 Kaveri Seed Company 251.7 404.2 16,055 21.37
Navneet Education 57.3 88.5 15,445 22.33
V-Guard Industries 485.1 888.0 18,307 27.45
Aug-13 Cairn India 295.7 133.3 4,508 -25.62
Indraprastha Gas 308.9 474.1 15,350 22.47
Nesco 729.9 1,665.0 22,812 43.16
Nov-13 Bajaj Corp 237.5 424.1 17,858 35.92
HCL Technologies 580.6 857.4 14,767 23.35
Dec-13 Voltas 89.4 263.2 29,451 73.32
Feb-14 J&K Bank 135.2 86.6 6,401 -20.44
Tata Consultancy Services 2,213.1 2,387.8 10,788 7.12
Mar-14 Cummins India 433.5 984.3 22,708 63.65
Swaraj Engines 621.6 933.0 15,010 32.83
Apr-14 AIA Engineering 559.9 937.1 16,736 37.38
Godrej Consumer Products 763.8 1,219.3 15,962 33.23
May-14 Rallis India 167.1 198.0 11,849 12.81
Titan Company 255.7 357.6 13,986 24.65
Jun-14 Finolex Cables 164.0 263.0 16,036 38.56
NBCC Ltd. 297.0 913.0 30,741 114.47
Aug-14 Gateway Distriparks 231.5 329.0 14,211 32.63
GMDC 153.9 75.4 4,896 -38.67
V-Guard Industries 656.9 888.0 13,518 26.33
Sep-14 Finolex Industries 296.8 301.0 10,143 3.64
Hindustan Media Ventures 155.1 276.8 17,849 60.61
Oct-14 Mahindra Holidays & Resorts 298.6 390.0 13,063 26.85
Tata Coffee 93.4 92.7 9,930 0.52
Nov-14 Infosys 966.3 1,062.1 10,990 9.91
Tata Motors 482.2 403.6 8,745 -16.32
Jan-15 Apollo Tyres 207.9 161.7 7,778 -22.22
Mar-15 Ipca Laboratories 680.9 732.8 10,763 7.63
Voltas 256.3 263.2 10,269 2.69
Apr-15 Astral Poly Technik 449.0 411.0 9,155 -8.45
VST Tillers Tractors 1,379.8 1,352.0 9,798 -2.01
May-15 Just Dial 1,253.4 805.1 6,423 -35.77
Shriram Transport Finance 1,099.3 874.0 7,951 -20.49
PORTFOLIO TOTAL 19,82,057 25.45%
Returns for less than one year are absolute. Total returns include dividend income. Returns as on November 16, 2015. Transactional fees not taken into account.
December 2015 Wealth Insight 53
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STOCK
IDEAS
Ideas to delve deeper
S
OUND INVESTMENT METHODS OUTLAST CYCLES AND THEM TO YOUR PORTFOLIO %ACH STOCK IDEA EXPLAINS THE
FADS AND GENERATE PROFITS OVER THE LONG RUN REASON BEHIND THE STOCK AND ITS SUITABILITY TO INVESTORS
6ALUE 2ESEARCH PRESENTS STOCK IDEAS BASED ON WHICH OVER TIME WILL HELP YOU DEVELOP YOUR OWN
TIME TESTED PRINCIPALS THAT HAVE BEEN VALIDATED INVESTING RULES !S WE WILL BE EVOLVING SUCH MODELS AND
FOR EVERY TYPE OF INVESTOR IMPLEMENTING CHANGES TO THE METHODOLOGY TO BE IN LINE
)N EACH ISSUE WE SHARE A LISTING OF ATTRACTIVE STOCKS WITH ECONOMIC AND MARKET CYCLES THE LIST WILL BE
BASED ON OBJECTIVE PRINCIPLES OF SOUND INVESTMENT 7E DYNAMIC AND UPDATED PERIODICALLY
APPLY STOCK FILTERS CAREFULLY CRAFTED BY 6ALUE 2ESEARCH )N THE FOLLOWING PAGES OF @3TOCK )DEAS WE PRESENT
ANALYSTS ON THE UNIVERSE OF )NDIAN STOCKS TO IDENTIFY FIVE STOCK IDEAS THAT COLLECTIVELY LIST UNIQUE STOCKS
THESE ATTRACTIVE STOCKS 4HE FILTERS ARE DEVISED TO THAT HAVE STRONG REASONS TO FIND A WAY INTO YOUR
IDENTIFY STOCKS OF THE FOLLOWING KIND PORTFOLIO 7ITH THESE YOU WILL BE WELL EQUIPPED TO
!TTRACTIVE BLUE CHIPS SELECT STOCKS TO BUILD YOUR OWN PORTFOLIO )F YOU THINK
#OMPANIES WITH MOATS THAT THIS IS A LOT OF HARD WORK YOU CAN GET STARTED WITH
3TOCKS AVAILABLE AT A STEEP DISCOUNT TO BOOK VALUE THE STOCK IDEAS AND WITH TIME UNDERSTAND THE WAY THE
(IGH DIVIDEND YIELD STOCKS IDEAS ARE SHAPING TO MAKE YOUR OWN JUDGEMENT ON
'ROWTH STOCKS AVAILABLE AT REASONABLE PRICES STOCK SELECTION 'REAT INVESTMENTS ARE NOT EASY TO
7E BELIEVE THAT STOCKS LISTED IN THIS SECTION ARE A GOOD FIND BUT PRACTICE PATIENCE AND SOUND PRINCIPLES ARE
STARTING POINT TO START A CLOSE SCRUTINY BEFORE ADDING ALL THAT YOU NEED
Glossary
Current ratio. It is the ratio of a companys current assets (the most liquid Debt-equity ratio (DE Ratio). The debt-equity ratio is calculated as the ratio
assets, such as cash and cash equivalents, account receivables, etc.) to its current of total outstanding borrowings of the company to its total equity capital. The DE
liabilities (liabilities that are closest to maturity and hence need to be paid back ratio essentially tells which companies use excessive leverage to achieve growth.
first). By comparing the latter with the former, an investor can get an idea of how Conventionally, the DE ratio of less than two is considered safe.
liquid a companys assets are. Return on equity (RoE). This is measured by taking profit after tax as a per-
However, in certain circumstances, a high current ratio could be due to the fact centage of net worth of the company. It indicates how efficiently the company has
that the company is facing problems in recovering its receivables. Alternatively, it been able to utilise investors money.
could be facing a problem in selling its inventory, which is why the current ratio may
Net worth. Net worth is the net value of the company that shareholders can claim
be unusually high.
in case of a bankruptcy. It is composed of broadly the equity capital and the
Universe companies (867). We have revised our universe. We checked if the reserves held by a company. One risk in using this indicator is that companies
companies traded on all the days for the last two quarters. We considered the com- could potentially inflate this figure by issuing more equity at regular intervals.
panies with a market capitalisation of more than `400 crore. Stock return (stk return). Stock return is calculated by taking the percentage
Price to book value (P/BV). Price to book value is the ratio of the price of a change in the price of the stock adjusted for bonus or split.
stock to the book value per share of the company. It shows how much premium Dividend yield (yield). This is defined as the percentage of the dividend paid
investors are willing to pay for the underlying net assets of the company. per share to the current market price of the stock. Since the denominator in this
Price to earnings (P/E). The price-to-earnings ratio, or the P/E ratio, is sim- ratio is the market price, a stocks dividend yield changes every day.
ply the ratio of the price of a stock to its earnings per share. It shows in multiples Price-earnings to growth (PEG). This ratio demonstrates how high a price we are
how much investors are willing to pay for the earnings. The thumb rule of valuing a paying for the growth that we are purchasing. It is the ratio of price to eanings to EPS
stock is that a high-growth stock will have a high P/E ratio, while a value stock will growth of the stock. In all our analyses, we have taken five-year historic EPS growth.
have a relatively lower P/E ratio.
Dividend payout ratio (DPR). This is the total dividend paid to the sharehold-
Earnings per share (EPS). Earnings per share, or EPS, is calculated by divid- ers as a percentage of net profit
ing the companys net profit with the total number of outstanding shares.
Operating profit margin (OPM). OPM is operating profit as a percentage of
Net sales. This is simply the income that a company derives by net sales.
selling the goods and services that it produces.
Net profit margin (NPM). NPM is the net profit as a percentage of total
The downside of taking sales as an indicator of growth is that it may not be income (sales plus other income)
matched by a similarly scintillating bottom-line performance. A company may be Growth Value
earning revenue at a high rate. But if it is doing so by incurring a very high cost,
Stock style. It indicates the style of the
the bottom line may not grow in proportion to the growth in the top line.
stock. It is derived from a combination of Large
the stocks valuation growth or value
Interest coverage ratio (ICR). This indicator is generally used to gauge whether a and its market capitalisation large, mid
company has the ability to service its debt. The interest coverage ratio is calculated as and small. For example, on the right we
Mid
the ratio of operating profit to interest outgo. A company with ICR of more than two have shown the stock style of a large-cap
implies that it can service more than twice its current interest charges. growth stock. Small
54 Wealth Insight December 2015
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STOCK
IDEAS
Attractive blue chips
B
LUE CHIP STOCKS ARE SHARES IN PURCHASE BLUE CHIPS AT ANY RATE AND
THE LARGEST MOST VALUATION )T IS FOR THIS REASON THAT
CONSISTENTLY PROFITABLE AND WE HAVE INCLUDED STOCKS WITH FIVE
MOST PRESTIGIOUS YEAR AVERAGE RETURN ON EQUITY OF
COMPANIES 4HESE STOCKS COMMAND A
VALUATION PREMIUM BECAUSE OF THEIR
MORE THAN PER CENT WITHOUT
DECLINING MORE THAN PER CENT IN A
REASONS TO INVEST
CONSISTENCY AND THE FACT THAT THESE YEAR AND PRICE TO EARNINGS GROWTH
Liquidity
STOCKS HAVE ALREADY BEEN DISCOVERED 0%' OF LESS THAN 4HIS MONTHS Large companies in
/UR STOCK SELECTION IS BASED ON LIST HAS FOUR NEW ENTRANTS 4HEY ARE respective businesses
STOCKS THAT HAVE OVER A PER CENT AS FOLLOWS !MARA 2AJA "ATTERIES Strong balance sheets
#!'2 ON %03 OVER THE PAST FIVE $IVIS ,ABS %ICHER -OTORS AND
YEARS DEBT EQUITY RATIO OF LESS THAN :ENSAR 4ECHNOLOGIES WI Liked by institutions
TWO AND INTEREST COVERAGE RATIO OF
MORE THAN TWO 4HERE IS A BELIEF
THAT SUCH STOCKS ARE LESS RISKY AS THE FILTERS
COMPARED TO SMALLER STOCKS WHICH Companies with a capitalisation of above `4,086 crore
IS TRUE TO A CERTAIN EXTENT BECAUSE
Annual earnings growth of more than 20 per cent over the past five years
THE INTRINSIC RISK IS LOW AS MANY OF
THESE HAVE HIGH MARKET SHARES AND Debt-equity ratio of less than two
STRONG BALANCE SHEETS Interest coverage ratio should be more than two
(OWEVER BLINDLY BUYING A BLUE Five-year average return on equity above 20 per cent
CHIP IRRESPECTIVE OF THE VALUATIONS
Average ROE should not have fallen more than 20 per cent in any year
MAY CAUSE MORE HARM THAN GOOD
4HE RISK OF CAPITAL LOSS MAY PEG of less than 1.5
ACTUALLY BE HEIGHTENED WHEN YOU
Attractive blue chips
Stock Debt-equity Int coverage RoE avg EPS growth Mkt cap Share 52-week
Company style P/E PEG ratio ratio 5Y (%) 5Y (%) (` cr) price (`) high/low (`)
Adani Ports & SEZ 22.74 0.80 1.66 3.1 24.22 28.37 56,423 272 375-262
Port
Ajanta Pharma 34.10 0.59 0.09 78.0 32.82 58.20 11,744 1,335 1,720-842
Pharmaceuticals & Drugs
Amara Raja Batteries 33.70 1.32 0.04 2531.5 29.50 25.57 15,141 886 1,132-693
Batteries
Atul 19.95 0.70 0.29 13.7 21.69 28.42 4,849 1,635 1,805-1,034
Chemicals
Britannia Industries 47.88 0.90 0.12 247.0 49.88 53.16 34,131 2,845 3,435-1,576
Consumer Food
Divis Laboratories 30.32 1.35 0.01 373.6 26.44 22.49 29,971 1,129 1,242-787
Pharmaceuticals & Drugs
Dr. Reddys Laboratories 24.46 0.25 0.44 27.8 24.40 97.55 59,715 3,501 4,383-3,010
Pharmaceuticals & Drugs
December 2015 Wealth Insight 55
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STOCK
IDEAS
Stock Debt-equity Int coverage RoE avg EPS growth Mkt cap Share 52-week
Company style P/E PEG ratio ratio 5Y (%) 5Y (%) (` cr) price (`) high/low (`)
Eicher Motors 50.24 1.27 0.02 102.5 27.14 39.52 41,514 15,295 21618-13725
Automobiles-Trucks/Lcv
HCL Technologies
IT - Software
16.39 0.41 0.05 70.1 31.02 39.57 118,039 839 1,058-725
Hexaware Technologies
IT - Software
20.28 0.71 0.00 230.6 23.91 28.65 7,729 256 335-191
Kajaria Ceramics
Ceramics/Marble/Granite
33.67 1.05 0.33 9.6 28.09 32.19 6,809 857 925-541
Mindtree
IT - Software
22.51 0.87 0.00 6909.0 27.51 25.84 12,409 1,480 1,605-1,112
TCS
IT - Software
22.31 1.05 0.01 253.4 41.57 21.21 464,278 2,375 2,810-2,348
Torrent Pharmaceuticals
Pharmaceuticals & Drugs
19.68 0.56 1.10 6.4 32.26 34.93 25,856 1,528 1,720-941
Vakrangee
IT - Software
21.91 0.42 0.44 7.5 22.41 52.08 7,596 144 172-87
Zensar Technologies
IT - Software 14.25 0.71 0.15 33.8 31.45 20.16 4,400 989 1,020-564
Data as on November 16, 2015. Growth rates are all annualised. Indicates new entrants.
High dividend-yield stocks
F
ALLING MARKETS GIVE LITTLE PROFITABLE OPPORTUNITIES OR NEW
ROOM FOR CAPITAL PROJECTS TO INVEST IN /R MAYBE ITS
APPRECIATION (OWEVER PROFITS HAVE ZOOMED DUE TO A
INVESTORS CAN BENEFIT BY TEMPORARY DIP IN COSTS
INVESTING IN COMPANIES THAT PAY
DIVIDENDS (IGH DIVIDEND PAYING
"LINDLY CHASING THE CURRENT YIELD
WOULD BE A RECIPE FOR DISASTER 7HEN
REASONS TO INVEST
STOCKS WITH SOLID FUNDAMENTALS ARE A LOOKING FOR HIGH DIVIDEND YIELD
Cushion against volatility
SAFE WAY TO GENERATE A SOLID RETURN IN STOCKS LOOK FOR COMPANIES WITH A Higher total return
THE MARKET "UT PICKING A STOCK THAT SUSTAINED DIVIDEND PAYOUT 7E Generate regular
BOASTS OF THE HIGHEST DIVIDEND YIELD SHORTLISTED COMPANIES WITH SUSTAINED tax-free income
DOES NOT HELP 9OU NEED TO GO DEEPER PER SHARE DIVIDEND KEEPING IN MIND
AND EXAMINE THE REASONS BEHIND THE THE FACT THAT YIELD SHOOTS UP WHEN THE
HIGH DIVIDEND PAYOUT -ANY TIMES A
COMPANY THAT PAYS HEALTHY DIVIDENDS
CAN HAVE WEAK FUNDAMENTALS WHICH
WILL KEEP THE STOCK PRICE DOWN
THE FILTERS
Stocks with sustained per share dividend and amount over the past five years
&OR INSTANCE THE COMPANY COULD
HAVE BEEN DISTRIBUTING THE PROFITS Dividend payout ratio of less than 40 per cent
BECAUSE OF AN EXTRAORDINARY INCOME Stocks with a current dividend yield of more than 3 per cent
OR BECAUSE THERE IS DEARTH OF
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STOCK
IDEAS
SHARE PRICE DROPS 7E ALSO FACTORED IN DIVIDEND PAID AS PER CENT OF TOTAL
A DIVIDEND YIELD DIVIDEND PER SHARE PROFITS CAN PUT THE FUTURE GROWTH OF
AS PER CENT OF SHARE PRICE OF PER THE COMPANY IN DARK AS THE
CENT AND THE COMPANYS PAYOUT RATIO COMPANIES ARE LEFT WITH LESS FUNDS TO
BEFORE MAKING THE FINAL LIST REINVEST ALTHOUGH MATURE COMPANIES
! VERY HIGH DIVIDEND PAYOUT RATIO MAY AFFORD TO DO SO WI
High dividend yield
Stock Dividend Dividend Dividend pay- Avg div Mkt cap Share 52-week
Company style P/E PEG per share (`) yield (%) out ratio (%) 5Y (%) (` cr) price (`) high/low (`)
Chambal Fertilisers 7.19 2.33 1.90 3.38 26.70 19.00 2,337 56 77-54
Fertilizers
Gujarat Industries Power
Power Generation/Distribution
8.68 7.23 2.50 3.36 29.94 25.00 1,127 75 94-66
GMDC
Mining & Minerals
6.85 4.68 3.00 4.02 19.07 150.00 2,372 75 152-61
Hinduja Global Solutions
BPO/ITeS
6.95 1.28 20.00 4.35 25.11 200.00 953 460 699-407
Hindustan Zinc
Metal - Non Ferrous
7.10 0.47 4.40 3.05 22.73 144.00 60,908 144 190-117
JM Financial
Finance - Investment
9.22 0.54 1.35 3.30 32.01 89.00 3,222 41 59-39
NALCO
Aluminium Products
8.63 7.32 1.75 4.76 34.12 26.00 9,484 37 63-28
Neyveli Lignite
Power Generation/Distribution
7.84 1.56 2.80 3.53 29.74 27.00 13,296 79 94-65
Power Finance
Finance Term Lending
4.60 0.27 9.10 4.10 20.01 72.20 29,312 222 316-185
PTC India
Power Generation/Distribution
8.78 0.53 2.20 3.50 25.41 17.60 1,859 63 105-50
Rashtriya Chem. & Fert.
Fertilizers
9.92 3.57 1.80 3.83 28.80 14.60 2,593 47 75-40
REC
Finance Term Lending
4.19 0.21 10.70 4.53 19.77 86.90 23,329 236 371-211
SJVN
Power Generation/Distribution 7.85 0.76 1.05 3.68 25.90 9.46 11,810 29 30-22
Karnataka Bank
Bank - Private 5.17 0.38 5.00 4.02 20.87 39.00 2,342 124 158-108
Tourism Finance Corp
Finance Term Lending 7.42 0.89 1.80 3.17 24.14 13.20 458 57 96-44
Data as on November 16, 2015. Growth rates are all annualised. Indicates new entrants.
December 2015 Wealth Insight 57
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STOCK
IDEAS
Discount to book value
E
VERYONE LOVES A GOOD BY SUBTRACTING DEBT AND OTHER
BARGAIN 7HO DOESNT LIABILITIES FROM ASSETS &AMED
ENJOY FINDING SOMETHING INVESTORS LIKE THE LATE "ENJAMIN
THEY WANTED ON SALE "UT 'RAHAM USED BOOK VALUE AS A GAUGE
BARGAINS CAN MANY TIMES LAND YOU OF LIQUIDATION VALUE "UYING A REASONS TO INVEST
INTO A SITUATION WHERE YOU BUY A LOT STOCK BELOW BOOK CAN PROVIDE WHAT Really cheap
OF THINGS THAT YOU DONT WANT OR 'RAHAM CALLED A @MARGIN OF SAFETY
NEED 6ALUE INVESTORS HUNTING FOR ! STOCK TRADING NEAR OR BELOW
Relatively undervalued
INEXPENSIVE STOCKS OFTEN FACE A BOOK VALUE IS OF MOST INTEREST SINCE Companies with assets
DAUNTING CHALLENGE IN BULL MARKETS SUCH A COMPANY CAN BE BOUGHT FOR
3INCE THE MARKET HAS ALREADY RUN CLOSE TO OR BETTER YET LESS THAN WHAT
UP SIGNIFICANTLY IT IS DIFFICULT TO IT IS WORTH 4HE LIST BELOW COMPRISES
SPOT VALUE BUYS THE STOCKS THAT MEET OUR CRITERIA WI
4HE IDEA OF @VALUE CAN DIFFER
FROM PERSON TO PERSON &OR
INSTANCE FOR SOME INVESTORS THE
PER CENT LESS THAN THE BOOK VALUE
THE FILTERS
PER SHARE WOULD SEEM TO BE A Price at least 10 per cent below the book value
DISCOUNT WHILE MANY MAY FIND OUR Return on net worth of more than 10 per cent in the most recent year
PER CENT FIGURE CONSERVATIVE Debt-equity ratio of less than 1.5 per cent
7HAT INVESTORS NEED TO UNDERSTAND
IS THAT BOOK VALUE IS A MEASURE OF Companies must have a five-year earnings growth of more than 10 per cent
SHAREHOLDER EQUITY AND IS DERIVED
Discount to book value
Stock Dividend Debt-equity Mkt cap Share 52-week
Company style P/B P/E PEG yield (%) ratio (%) RoE (%) (` cr) price (`) high/low (`)
Noida Toll Bridge 0.84 5.35 0.25 12.12 0.04 16.14 461 25 37-23
Engineering - Construction
GE Shipping 0.73 5.85 0.49 2.76 0.88 10.54 5,999 398 422-327
Shipping
Karnataka Bank 0.65 5.17 0.38 4.02 0.31 14.03 2,342 124 158-108
Bank - Private
Prices as on November 16, 2015. Growth rates are all annualised. Indicates new entrants.
Reasonably priced growth stocks
G
ROWTH AT A REASONABLE PRICE GROWTH AND VALUE INVESTING SEEKS
'!20 IS A COMBINATION OF COMPANIES HAVING THEIR PRICES BELOW
BOTH GROWTH AND VALUE THEIR INTRINSIC VALUE GROWTH AT A
INVESTING 4HIS STRATEGY REASONABLE PRICE AS A STRATEGY HUNTS
WAS POPULARISED BY 0ETER ,YNCH FOR STOCKS THAT HAVE BOTH GROWTH
7HILE A GROWTH STRATEGY IS MORE POTENTIAL AND ARE ALSO TRADING AT A
FOCUSED ON A COMPANYS EARNINGS REASONABLE PRICE ! TYPICAL '!20
58 Wealth Insight December 2015
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STOCK
IDEAS
INVESTOR SEEKS TO INVEST IN GOOD PRICE
COMPANIES THAT HAVE HAD A POSITIVE 4HIS MONTHS LIST HAS NEW
PERFORMANCE OVER THE PAST FEW YEARS STOCKS WHICH PROVIDE AMPLE OPTIONS
AND ALSO HAVE POSITIVE PROJECTIONS TO INVESTORS WI
! SOLID BENCHMARK TO SPOT A '!20
STOCK IS THE 0%' RATIO OR THE
REASONS TO INVEST
PRICEEARNINGS GROWTH RATIO 0%' THE FILTERS All-weather investment
SHOWS THE RATIO BETWEEN A Earnings growth of: style
COMPANYS 0% RATIO VALUATION AND At least 20 per cent in the past Works in all markets
ITS EXPECTED EARNINGS GROWTH RATE five years Companies with strong
OVER THE NEXT SEVERAL YEARS ! '!20 At least 20 per cent in the trailing 12 fundamentals
INVESTOR WOULD SEEK OUT STOCKS THAT months YOY
HAVE A 0%' OF ONE OR LESS WHICH At least 20 per cent in latest quarter Greater stability vis-a-vis
HELPS FIND REASONABLY PRICED STOCKS YOY value or growth
'!20 INVESTING MEETS AN
Stocks with a price-to-earning (P/E) of
ADMIRABLE SET OF CRITERIA IN FINDING
less than 15
COMPANIES WITH GOOD GROWTH
PROSPECTS AND MINIMAL RISK AND A
Reasonably priced growth stocks
Stock Industry Quarterly EPS TTM EPS EPS growth Mrkt cap Share 52-week
Company style P/E P/E PEG growth (%) growth (%) 5Y (%) (` cr) price (`) high/low (`)
BPCL 9.56 12.72 0.27 119.3 45.9 35.2 64,958 898 987-622
Refineries
Garware-Wall Ropes
Textile
14.48 23.19 0.68 41.6 49.7 21.3 759 347 387-145
Genus Power Infra
Electronics - Components
10.20 26.51 0.18 1158.6 76.8 55.8 847 33 39-20
Hindustan Media Ven
Printing And Publishing
12.40 18.07 0.41 43.1 33.7 29.9 2,012 274 290-193
Indiabulls Real Estate
Construction - Real Estate
8.25 25.84 0.26 84.9 112.5 31.4 2,786 60 87-41
JK Tyre & Industries
Tyres & Allied
5.06 10.19 0.19 40.0 107.0 26.7 2,196 97 163-78
Manali Petrochemicals
Petrochemicals
10.17 9.67 0.48 26.8 53.2 21.0 563 33 37-13
MBL Infrastructures
Engineering - Construction
10.11 22.59 0.40 45.2 55.7 25.4 856 206 330-170
MRF
Tyres & Allied
10.30 10.19 0.30 45.4 74.1 34.6 16,105 37,974 46405-31374
Nandan Denim
Textile 9.58 23.19 0.29 30.5 31.3 33.0 566 124 174-44
Pokarna
Ceramics/Marble/Granite 13.92 25.42 0.23 241.9 125.5 60.9 633 1,020 1,425-501
December 2015 Wealth Insight 59
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STOCK
IDEAS
Stock Industry Quarterly EPS TTM EPS EPS growth Mrkt cap Share 52-week
Company style P/E P/E PEG growth (%) growth (%) 5Y (%) (` cr) price (`) high/low (`)
PTC India FinServices 6.86 18.98 0.18 454.0 40.9 37.3 2,355 42 73-37
Finance - NBFC
R Systems International
IT - Software
8.14 19.39 0.20 186.7 56.1 39.9 865 68 100-59
Technocraft Industries
Steel & Iron Products
9.48 19.36 0.38 34.2 27.9 25.2 728 231 285-149
Lakshmi Vilas Bank
Bank - Private
9.63 18.91 0.35 41.8 78.4 27.4 1,519 85 111-64
TVS Srichakra
Tyres & Allied
13.11 10.19 0.35 86.9 109.5 37.3 2,073 2,707 3,249-1,408
Welspun India
Textile
11.70 23.19 0.28 32.6 31.5 41.2 7,492 746 963-293
Yes Bank
Bank - Private
13.97 18.91 0.55 25.7 27.2 25.4 31,473 751 910-590
Zensar Technologies
IT - Software
14.25 19.39 0.71 34.1 33.1 20.2 4,400 989 1,020-564
Data as on November 16, 2015. Growth rates are all annualised. Indicates new entrants.
Companies with moats
I
N OUR TH ANNIVERSARY ISSUE IN NESSES MAY NOT NECESSARILY BE AVAIL
*ULY WE FOCUSED ON COMPA ABLE AT CHEAP PRICES (OWEVER THEIR
NIES WITH MOATS 4HE MOAT CON GROWTH PROSPECTS ARE SUCH THAT THEY
CEPT AS POPULARISED BY THE LEG COMMAND PREMIUM VALUATIONS
ENDARY INVESTOR 7ARREN "UFFETT -OAT INVESTING IS A VERY SOPHISTI REASONS TO INVEST
ARE COMPANIES WITH COMPETITIVE CATED INVESTMENT STYLE
Solid fundamentals
ADVANTAGE DERIVED FROM THEIR SCALE 4HE FOLLOWING LIST IS A STATUS
BRAND OR SOME OTHER REASON AND UPDATE ON THE COMPANIES WITH Easy to understand
SHOW THE ABILITY TO TRANSLATE THEIR MOAT 'IVEN THE CURRENT STATE OF THE Market leader
ADVANTAGE INTO GROWING THE BUSI )NDIAN MARKET VALUATIONS OF SOME
Brand recall
NESS AND PROFITS AND STAYING AHEAD OF THESE STOCKS ARE ATTRACTIVE AND
OF THE COMPETITION 7IDE MOAT BUSI WORTH CONSIDERING TO INVEST WI
Moat companies
Stock TTM earning EPS 1Y return (%) Market Share 52-week
Company style P/E PEG RONW (%) growth (%) growth 5Y (%) over Sensex* cap (` cr) price (`) high/low (`)
Asian Paints
Paints
49.20 3.63 32.51 19.62 13.55 27.52 76,913 802 925-675
BHEL
Electric Equipment
46.93 -1.68 4.31 -67.46 -27.96 -19.43 43,641 178 300-176
60 Wealth Insight December 2015
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
STOCK
IDEAS
Stock TTM earning EPS 1Y return (%) Market Share 52-week
Company style P/E PEG RONW (%) growth (%) growth 5Y(%) over Sensex* cap (` cr) price (`) high/low (`)
Bharti Airtel
Telecommunication
23.28 -3.70 7.53 49.66 -6.29 -5.33 134,273 336 452-316
Bosch
Auto Ancillary
57.46 10.71 19.61 -2.86 5.37 23.82 60,185 19,168 27,989-16,650
Castrol India
Lubricants
35.53 6.53 76.04 29.38 5.44 6.64 21,546 436 544-416
Coal India
Mining & Minerals
15.14 2.06 33.17 -5.12 7.36 1.03 209,135 331 447-301
Colgate-Palmolive
Household & Personal Products
45.60 10.04 81.59 11.00 4.54 3.98 25,798 949 1,099-851
CRISIL
Ratings
51.22 7.74 35.25 0.12 6.62 6.91 13,773 1,926 2,365-1,772
Cummins India
Diesel Engines
35.71 5.65 28.83 11.00 6.33 26.89 27,886 1,006 1,247-810
Exide Industries
Batteries
22.96 -7.12 17.06 4.87 -3.22 -0.29 12,538 148 207-136
Hero MotoCorp
Automobile
20.20 5.17 38.62 7.35 3.90 -3.74 52,147 2,611 3,272-2,252
Hindustan Unilever
Household & Personal Products
39.57 2.89 117.12 7.84 13.70 11.78 169,810 785 979-744
ITC
Cigarettes/Tobacco
28.01 1.79 33.21 4.51 15.61 0.03 271,544 338 410-295
Larsen & Toubro
Engineering - Construction
27.85 3.77 12.78 -11.78 7.38 -8.13 126,384 1,357 1,893-1,326
Maruti Suzuki
Automobiles - Passenger Cars
31.18 2.53 16.55 45.04 12.34 47.48 140,461 4,650 4,763-3,250
Nestle India
Consumer Food
81.67 -135.31 45.51 -38.03 -0.60 2.88 57,694 5,984 7,500-5,499
NMDC
Mining & Minerals
7.60 -73.22 20.58 -32.10 -0.10 -32.86 36,158 91 155-90
Pidilite Industries
Chemicals
43.97 2.79 24.09 31.64 15.78 36.88 27,358 534 638-415
Titan Company
Diamond & Jewellery
45.40 2.85 29.12 -11.02 15.91 4.08 31,885 359 448-303
Zee Entertainment
TV Broadcasting
35.30 2.50 31.21 18.48 14.11 8.95 36,377 379 440-300
Data as on November 16, 2015. Growth rates are all annualised. *Return over Sensex means stock return less Sensex return.
December 2015 Wealth Insight 61
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
WORDS WORTH
NOW
Indias economic growth is likely to be at
7.5% this year and [we will] achieve a
growth rate of 8% plus next year.
NARENDRA MODI Prime Minister of India, The Economic Times, November 16, 2015
Today everybody wants to make steel and Chinas economy is still coping
sell wherever they can. It is a capital- with the complicated
intensive industry. In order to minimise internal and external
their fixed cost, steel companies across the environment,
world are maintaining their volumes... and considerable
their governments are supporting them by downward pressure
way of indirect subsidies... Our government and the temporary
needs to take steps to avoid unfair pain of deep
competition... There is no level-playing reforms.
field for the domestic industry to compete. XI JINPING President of China, Business
Standard, November 19, 2015
SESHAGIRI RAO Joint MD, JSW Steel, Business Line,
November 16, 2015
Whatever Reliance does, I think what the prime [On acquiring
it does on a scale that is minister [Narendra Reifencom] It will enable
always big and impactful. Modi] is doing is Apollo to improve its mix
That is exactly what setting the stage for of distribution channels
Reliance is planning to do long-term growth in in Germany and Europe
in the telecom India. And you do that and aid in increasing the
sector... by taking some tough visibility of Apollo and
SUNIL MITTAL decisions... He is not Vredestein tyres in
Chairman, Bharti Airtel, making short-term offline and especially
The Financial Express,
November 17, 2015 decisions to get instant fast growing online retail
gratification. space.
TOM NIDES Vice-Chairman, Morgan NEERAJ KANWAR Vice-Chairman and MD,
Stanley, The Economic Times, November Apollo Tyres, The Economic Times, November
18, 2015 17, 2015
The Lok Sabha has passed it [GST]. The day it is discussed and put to vote in
the Rajya Sabha, I have not the least doubt that it will be approved. we have
the numbers on our side. In fact, elections like Bihar wont adversely impact
GST. the best beneficiary of GST is going to be Bihar as it is a completely
consuming state and does not produce any industrial products.
ARUN JAITLEY Finance Minister, Business Line, November 18, 2015
62 Wealth Insight December 2015
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
Subscription copy of Sivaramakrishnan KV [ksgsrk@gmail.com]. Redistribution prohibited.
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