WI June19

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June 2019
Volume XII, Number 12 27 COVER STORY
EDITORIAL POLICY
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Research, is not just limited to
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own as well.
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obtained by speaking to a wide
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INDIA’S MOST CONSISTENT

Read, learn and earn – and let’s
grow and evolve as we undertake
this voyage together.
Editor
Dhirendra Kumar
Senior Associate Editor
Vibhu Vats
WEALTH CREATORS
Research & Analysis
Danish Khanna, Jugal
Harpalani, Rajan Gulati
and Yash Rohra
Data Support
Sandeep Nambiar
47 STOCK ADVISOR
Design
Kiran Sindhwal
Mukul Ojha
Production
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WORDS WORTH WISDOM
Editor: Dhirendra Kumar.
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Total pages 64, including cover

John D Rockefeller
When to sell a stock
4 Wealth Insight June 2019

Columns
7 42 INTERVIEW
EDIT
by DHIRENDRA
KUMAR
‘A high margin
Electing to of safety is the
build wealth
After long decades, we have a
national configuration where one can
essence of value
look at the future with genuine hope investing’
Mrinal Singh
Deputy CIO - Equity
36 ICICI Prudential AMC
MAINSTREET
by SAURABH
MUKHERJEA
The endgame
Time to prepare for the
end of accommodative
monetary policy in the US
38
STRAIGHT 10 STOCK BUZZ
Low margins, high
TALK
Three high-quality stocks gains
by ANAND TANDON
Why does RBI 12 MARKET COMPASS
50 STOCK SCREEN
need capital? Quality stocks available
The high reserves
Index watch
maintained by the RBI Big moves cheap
have a limited purpose Reasonably priced
Institutional moves
Promoters in action growth stocks
40 Pledging tracker Discount to book value
TAKING STOCK High dividend-yield
by MALINI BHUPTA 22 ANALYST’S DIARY
stocks
The double-edged sword Attractive blue chips
Assessing the
C-suite risk Self-sustaining growth
While it is hard to evaluate
corporate-governance standards, Appreciating depreciation 62 WORDS WORTH NOW
managements tend to send out Reinvigorating R&D

signals in many forms that
investors can pick up
DISCLAIMER
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June 2019 Wealth Insight 5

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EDIT
Electing to build wealth

After long decades, we have a national configuration
where one can look at the future with genuine hope
DHIRENDRA KUMAR
What a wonderful time to talk about The last five years have been an interesting journey,
wealth-building investments! Five, 10 or even 20 years with plenty of highs and some lows as well. There
is the kind of horizon that wealth-building have been moments of doubt, as well as those of
investments take to mature, and that’s the kind of euphoria. The ‘glass is half empty’ crowd can point to
long-term horizon that the Indian electorate has also many problems with the economy and with
started looking at. In our cover story of the month, businesses, with most of them being real problems.
we are presenting a selection of companies that, at As equity investors, we are acutely aware of most of
one stage, looked like nothing businesses but them. But what matters is not where you are at this
eventually turned out to be great wealth builders. moment, but where you were and the direction in
These are inspiring stories, and investors can learn which you are moving.
much from them. However, the thing about long and tough journeys
Five years ago, on the morning of May 17, 2014, I is that often, it’s better to periodically look back and
wrote a hurried article on Value Research Online note how far we have come along rather than look
with the headline ‘Good Morning, India’. It started ahead and get overwhelmed by how far one has to go.
with these lines: I’ve seen that this is a common experience when
The people of India have delivered a ‘no regrets, no people start investing with a big financial goal in
excuses’ result. We want the job done, we have chosen mind, such as their own retirement. Once you start
the man to do it, and given him everything he needs... heading for your goal, then, after a while, a look-back
It further stated: shows how far one has come.
Of course, at this point there is no shortage of The last five years are that backward glance that
those who seem to be hoping that Modi will fail and gives confidence. Five years ago, I would hardly have
India will sink back into a morass of despair. It’s believed possible how much would get done in terms
hardly a secret now that this breed of people dominate of cleaning up the past laying the foundation of
TV studios and other media in Delhi. Fortunately, at future growth. From GST to the NPA clean-up to the
this point, they look like the jackals that howl in the bankruptcy laws to the tax-theft clean-up and so
jungle when a lion or a tiger is nearby. Over the next many other things, each pain point of the economy is
five years, India will face a lot of opposition from like a bitter medicine that will go towards curing the
these people, but I’m sure that over time their self- disease in the system.
importance will wither, as will their numbers. It’s a great time in India to understand how short-
It’s a new morning in India, the end of governments term difficulties can be the root of long-term gains.
whose only job seemed to be to survive, no matter After long decades, we have a national configuration
what the damage to the country. We have moved on to where one can look at the future with genuine hope.
a real government, which is an experience that only It’s a great time to be an investor and participate in
some of us have had, and that to on a limited scale in this wealth-building project.
some states.

WORDS WORTH Best quotes of
WISDOM John D Rockefeller
‘The way to make

money is to buy when
blood is running in
the streets’
John D Rockefeller, born in 1839, was the founder of the Standard Oil Company, which at one time
controlled 90 per cent of the US oil market. Later it was broken into 34 companies, with ExxonMobil
and Chevron being the most notable names today. Rockefeller was the richest American of his time.
He didn’t just amass wealth but also engaged in many philanthropic activities. He died in 1937.

WORDS WORTH
WISDOM
Do you know the only thing that gives me A friendship founded on

pleasure? It’s to see my dividends coming in. business is better than a
business founded on
friendship.
I believe that thrift is essential to well-
ordered living.
I would rather hire a man with
enthusiasm than a man who
He who works all day has no time to make knows everything.
money.
The ability to deal with people is

as purchasable a commodity as
Don’t be afraid to give up the good sugar or coffee and I will pay
to go for the great. more for that ability than for any
other under the sun.
Charity is injurious unless it

A man’s wealth must be determined by the helps the recipient to
relation of his desires and expenditures to his become independent of it.
income. If he feels rich on ten dollars, and has
everything else he desires, he really is rich.
I can think of nothing less
pleasurable than a life devoted
I do not think there is any other to pleasure.
quality so essential to success of
any kind as the quality of
Giving should be entered
perseverance. It overcomes almost into in just the same way as
everything, even nature. investing. Giving is investing.
The person who starts out simply with the idea The road to happiness lies in two
of getting rich won’t succeed; you must have a simple principles; find what it is
larger ambition. There is no mystery in business that interests you and that you
success. If you do each day’s task successfully, can do well, and when you find it
and stay faithfully within these natural put your whole soul into it every
operations of commercial laws which I talk so bit of energy and ambition and
much about, and keep your head clear, you will natural ability you have.
come out all right.

STOCK
BUZZ
Three high-quality stocks

Twitter is full of chatter of all kind. Why not stocks then? We came across a
tweet by Vivek @equitree which has attracted quite some attention. Here are
a few responses that Vivek’s tweet has got.
Vivek omnamhshivayah @MKharigowda

Follow
@equitree
There is no stock like that., Bank FD is d
“3 high quality stocks” that you’d only option
like to invest for the period of 10+
years without any worry about the Meet Shah @ms89_meet
market fluctuations. Prem Watsa, Deepak Parekh & Sanjay
Gupta
37 Retweets 166 Likes
Murali Narasimhan @muralinarsimhan

Vivek @equitree hahaha......this is like Vidya Balan’s epic
Thanks to everyone.... for your par- dialogue....entertainment, entertainment
ticipation :) and entertainment
Sachin Shah @SachinS38985066

Ameya Damle @ameyadamle
ongc, tata motors, yes bank
ITC, Whirlpool and Icici life Sir we look
forward to hear the same from you too!!
purshottam pant @purutech
Noble Meshak @noblemeshak1
bank bees cmp 3012 target 10000,
Rbl, itc, idfc first,.. And yours ji Nifty bees 1197 target 3600 to 4000,
Gold bees 2825 target 6000, Over all
capital sud go 3x ....in 10 yr.
Mohit Preet Singh @mohitpreet As per past ..cagr for index is 15%
HDFC Bank, kotak bank and Bajaj
finance. I do sip in these stocks every Fundamental_Blaster @Ankur14111978
month irrespective of stock price No stock is safe....
D Bhattacharyya @DPB_Teacher
ITC, NESTLE, PIDILITE, Next 3 - AP, Nil Gandhi @gandhinil186

BajFin, Havells Never buy any stock about which people
talks a lot.. it’s already overvalued.
Raja Rajamanickam @RRAJA4344
Nifty 50, Nifty Next 50, Nasdaq 100 Mr Rookie @sahilynwa
Everyone is typing the recent best per-

@BhagwaanUvacha
forming stocks. Give 6 months to small-
caps rally and these names will change
PSP Projects, Tejas Networks, One more
but still researching it.

MARKET
C MPASS INDEX WATCH
S&P BSE Auto

The auto sector is going through a slowdown. The S&P BSE Auto index has underperformed the Sensex in
the last one year. Due to a mega one-time write-down of assets in Q3 at Tata Motors, the aggregate P/E of
the index has jumped. Still the P/B of the index is at a 39 per cent discount to its five-year median of 4.0.
The dividend yield of the index is 48 basis points higher than its five-year median.
BSE Auto Sensex Median
Index movement Price to earnings (P/E)
30000 150
24000 120
18000 90
12000 60
6000 30
22.2
0 0
Apr ’14 Apr ’15 Apr ’16 Apr ’17 Apr ’18 Apr ’19 Apr ’14 Apr ’15 Apr ’16 Apr ’17 Apr ’18 Apr ’19
Price to book value (P/B) Dividend yield

5 2.0%
4.0
4 1.6
3 1.2
0.9
2 0.8
1 0.4
0 0
Apr ’14 Apr ’15 Apr ’16 Apr ’17 Apr ’18 Apr ’19 Apr ’14 Apr ’15 Apr ’16 Apr ’17 Apr ’18 Apr ’19
Key numbers Top gainers/losers Valuations and dividend

Dividend
Company name P/E P/B yield (%)
157.3
Company name M-cap (` cr) 1Y change (%)
Bajaj Auto 84,796 3.6 Apollo Tyres 15.1 1.03 1.67
Bosch 50,064 -7.5 Ashok Leyland 13.2 3.33 2.87
Price to earnings Cummins India 19,396 -8.4 Bajaj Auto 18.1 3.95 2.04
-19.4
2.44
Exide Industries 17,497 Balkrishna Industries 19.9 3.50 0.98
Maruti Suzuki India 1,95,897 -24.6 Bharat Forge 24.4 4.29 0.98
TVS Motor Company 22,001 -25.1 Bosch 30.6 5.75 0.59
Price to book Mahindra & Mahindra 75,916 -27.5 Cummins India 26.1 4.58 2.15
MRF 22,704 -28.7 Eicher Motors 23.8 5.89 0.57
1.37
Dividend yield (%)
Balkrishna Industries
Hero MotoCorp
Eicher Motors
15,384
49,860
54,364
-30.6
-31.3
-36.9
Exide Industries
Hero MotoCorp
Mahindra & Mahindra
21.0
14.6
15.3
2.90
3.82
2.30
1.15
3.79
1.22
Apollo Tyres 10,131 -37.2 Maruti Suzuki India 25.9 4.66 1.22
7.5 -37.6
Bharat Forge 21,140 Motherson Sumi Systems 22.4 3.42 1.23
Tata Motors 48,969 -43.1 MRF 20.0 2.08 0.11
Market cap Ashok Leyland 24,042 -45.5 Tata Motors – 0.78 0.00
(` lakh cr) Motherson Sumi Systems 37,327 -45.6 TVS Motor Company 31.3 6.95 0.71

MARKET
BIG MOVES C MPASS
Large caps Price to earnings Net profit (` crore)

3M returns (%) 3Y avg RoE (%) 3Y earnings growth (%) 3M price (`) movement
33.8 – -316
1555
Interglobe Aviation
Jet Airway’s suspension of operations is an opportunity for
the company. It has already starting adding to its capacities. 74.3 -154.2 1162
16.5 – -28757
Tata Motors
While the company’s numbers were disappointing, a hike in
promoter stake boosted the stock price. 11.4 -252.6 155
180
14.8 – -18643
Punjab National Bank
The bank sold its 12.9 per cent stake in PNB Housing. Also,
-13.0 -322.2
70
ICRA upgraded the outlook for the bank. 80
9.8 8 16013
Indian Oil Corp. 143
In unison with BPCL, the company acquired 100 per cent
stake in Abu Dhabi Onshore Block 1. 18.8 1.0 130
6.8 7 4058
Indiabulls Housing Finance 618
The company announced merger with Lakshmi Vilas Bank
and fund-raising plans for the current financial year. 27.5 19.9 660
5.8 26 1732
Dr. Reddy’s Lab 2652
A key plant that contributes a large share of sales in the
US came under the USFDA scanner. 12.2 -11.6 2805
-8.1 22 2310
Motherson Sumi Systems 122
A slowdown in domestic and international auto sales is
likely to impact the company’s profitability. 32.4 13.4 133
-8.4 21 1720
Yes Bank 169
The bank reported a net loss of `1,506 crore for the March 2019
quarter. 18.8 -12.2
155
-16.2 22 1503
Zee Entertainment
Reliance Mutual Fund sold Zee’s pledged shares worth `410
crore, while the promoters are still looking for a stake sale. 26.4 21.7 408
342
-21.4 – -14801
Vodafone Idea 18
The company’s rights issue of `25,000 crore was priced
at steep discount to the prevailing stock price. -3.6 -285.8 14
Our large-cap universe has 89 large companies, making the top 70 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in the last three months.
Data as on May 13, 2019.

MARKET
C MPASS BIG MOVES
Mid caps Price to earnings Net profit (` crore)

118
53.6 – -326
Spicejet
Amidst Jet Airway’s suspension of operations, the company
increased its fleet and added new international destinations. 0.0 -202.5
77
49.2
1348
Aavas Financiers 61 176
The company’s net profit doubled year on year, to `51.3
crore, in the March quarter. 15.8 – 904
28.3 14 1013
Edelweiss Financial Services 164
A Canadian private-equity firm is to invest `1,800 crore
in the company’s NBFC arm. 13.1 44.6 128
27.0 75 –
Adani Gas 97
The company got a licence to operate in 13 cities and
towns. 16.8 – 124
25.8 24 486
Reliance Nippon Life Asset Management 189
Reliance Capital has invited Nippon Life Insurance to buy its
entire 42.88 per cent stake in the AMC. 23.9 –
150
23.2 15 1047
IIFL Holdings 330
NCLT approved the demerger of IIFL holdings into IIFL
Finance, IIFL Wealth and IIFL Securities. 21.6 24.2 406
16.9 – -4784
Bank of Maharashtra 13
The bank posted a profit of `72 crore in Q4, driven by a
jump in interest income and reduced NPAs. -11.2 -462.2 15
15.2 11 765
Dilip Buildcon 468
The company was declared the lowest bidder by NHAI
for a highway-laning project in Maharashtra. 27.3 51.4
406
4.5 – -2268
Adani Power 37
The company was allowed a tariff hike by the regulator.
-72.4 -307.5 38
-16.5 12 585
Sterlite Technologies 178
China Mobile, one of the largest procurers of fibre-optic cable,
lowered its buying price. 27.2 53.5 214
Our mid-cap universe has 207 mid-sized companies, making the next 20 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in the last three months.
Data as on May 13, 2019.

MARKET
BIG MOVES C MPASS
Small caps Price to earnings Net profit (` crore)

126.4 – -8
63 Moons Technologies
73
The Supreme Court set aside the Centre’s decision to merge
the National Spot Exchange (NSEL) with the company. 4.0 -145.3 166
96.9 – -378
3
Jaiprakash Power Ventures
The Supreme Court’s quashing of RBI’s February 2018 circular on
the resolution of bad loans came as a breather for the company. -12.8 -37.2 2
83.0 9 492
PC Jeweller
15.9 3.8
A foreign portfolio investor purchased more than 2 per 65
cent stake in the company. 119
66.2 – -1722 6
Suzlon Energy
The company sold stake in one of its subsidiaries to reduce
debt. 0.0 -211.8 3
48.4 – -415
CG Power & Industrial Solutions 24
While the lenders invoked their pledged shares, Sunil Mittal
of Airtel acquired 5 per cent stake in the company. -18.6 -256.0 35
8.2 9 84
Indo Count Inds. 34
The stock moved up and down amidst a volatile market.
32.2 -24.8 37
-37.6
224
Jet Airways India – -4244
Unable to pay its lenders back, the company has shut
operations. A resolution is still not in sight. 0.0 -234.9 139
-44.6 2 928
Reliance Power 10
The lenders sold the company’s pledged shares.
4.8 -5.8 6
-59.2 21 27
203
Eveready Industries
The promoter holding in the company declined due to
invocation of pledged shares by the lenders. 23.7 -25.4
83
-61.0 – 1009
6
Reliance Communications
The lenders invoked the company’s pledged shares and
sought ways to recover debt. -51.6 19.7
2
Our small-cap universe (minimum market capitalisation `500 crore) has 656 small-cap companies, making the last 10 per cent of the total market capitalisation. The list mentions the stocks that have
fluctuated most wildly in the last three months. Data as on May 13, 2019.

MARKET
C MPASS
Institutional
moves
Here are top five companies
across market caps in which
mutual funds and foreign
institutions have significantly
changed their holdings over
the last quarter
Data between December 2018 and March 2019. The numbers denote % of equity.
Mutual funds FIIs

Increase in stake
Large caps Change Change
Company name Sector Mar ’19 Dec ’18 (%) Company name Sector Mar ’19 Dec ’18 (%)
NTPC Power 15.4 12.7 2.7 SBI Life Insurance Insurance 14.1 4.9 9.2
ICICI Prudential Life Insurance 5.9 3.9 2.1 DLF Realty 21.3 16.8 4.5
Larsen & Toubro Infrastructure 16.6 15.0 1.6 Yes Bank Banking 40.3 36.2 4.2
Axis Bank Banking 15.4 13.9 1.4 Zee Entertainment Media 45.0 41.5 3.4
ACC Cement 10.3 8.9 1.3 Axis Bank Banking 49.6 47.2 2.4
Mid caps Change Change

Sheela Foam FMCG 17.0 9.7 7.3 RBL Bank Banking 22.2 15.9 6.2
Emami FMCG 13.2 7.5 5.7 Endurance Technologies Automobiles 15.7 10.0 5.7
Relaxo Footwears FMCG 6.1 2.2 3.9 Manappuram Finance Finance 44.2 39.4 4.7
Tube Investments Automobiles 18.3 14.7 3.6 Astral Poly Technik Plastic Products 21.9 18.3 3.6
Jubilant FoodWorks FMCG 9.7 6.7 3.0 Aarti Industries Chemicals 7.4 4.5 3.0
Small caps Change Change

Indo Rama Synthetics Textile 5.6 0.0 5.6 Lakshmi Vilas Bank Banking 16.6 4.4 12.2
Bajaj Consumer Care FMCG 8.4 5.1 3.3 Hindustan Foods FMCG 9.9 0.0 9.9
Balrampur Chini Mills Agri 4.7 1.4 3.3 Reliance Capital Finance 24.4 16.5 7.9
Unichem Laboratories Healthcare 5.5 2.4 3.1 Matrimony.com IT 26.1 18.9 7.3
Sanghi Industries Cement 11.8 8.8 3.0 Just Dial Miscellaneous 47.7 40.4 7.3

MARKET
C MPASS
Mutual funds FIIs

Decrease in stake
Large caps Change Change
Eicher Motors Automobiles 4.1 5.9 -1.8 Hindalco Industries Non-Ferrous Metals 23.7 25.7 -2.0
Punjab National Bank Banking 4.6 6.1 -1.6 Hero MotoCorp Automobiles 38.2 40.0 -1.8
Bajaj Auto Automobiles 2.2 3.6 -1.4 Mahindra & Mahindra Automobiles 31.3 33.0 -1.7
UPL Chemicals 7.5 8.9 -1.4 Lupin Healthcare 25.9 27.4 -1.5
Dr. Reddys Laboratories Healthcare 9.1 10.4 -1.3 Grasim Industries Diversified 20.0 21.2 -1.2
Mid caps Change Change

Union Bank of India Banking 5.5 8.0 -2.5 Apollo Hospitals Healthcare 44.3 47.1 -2.9
NIIT Technologies IT 14.0 16.3 -2.3 Ashok Leyland Automobiles 19.1 21.9 -2.8
LIC Housing Finance Finance 4.9 7.1 -2.2 Natco Pharma Healthcare 21.4 23.8 -2.4
Manappuram Finance Finance 3.2 5.1 -1.8 Oriental Bank Banking 1.9 4.2 -2.3
PVR Media 12.3 14.0 -1.7 Thermax Capital Goods 11.9 14.2 -2.3
Small caps Change Change

Matrimony.com IT 0.2 9.1 -8.9 Hathway Cable Telecom 2.0 16.7 -14.6
Eveready Industries Automobiles 4.4 11.6 -7.2 Birlasoft IT 33.8 46.6 -12.8
Hathway Cable Telecom 0.0 6.3 -6.3 Den Networks Media 0.7 12.6 -11.9
GIC Housing Finance Finance 1.2 5.5 -4.2 Tourism Finance Corp Finance 4.2 11.9 -7.7
HSIL Ceramics 18.2 22.1 -3.9 DHFL Finance 17.7 22.3 -4.6
Top 10 holdings of mutual funds Top 10 holdings of FIIs

Market % of Amount Market % of Amount
cap equity invested cap equity invested
Company name Sector (` cr) held (` cr) Company name Sector (` cr) held (` cr)
Equitas Holdings Finance 4,281 35.9 1,536 HDFC Finance 332,435 72.4 2,40,816
Ashoka Buildcon Infrastructure 3,291 31.6 1040 Bharat Financial Finance 12,530 61.3 7,675
Max Financial Services Finance 11,100 30.9 3,427 Indiabulls Housing Finance 29,764 56.2 16,725
KNR Construction Infrastructure 3,255 29.6 963 IndusInd Bank Banking 86,856 53.5 46,494
NCC Infrastructure 5,757 28.3 1,629 Shriram Transport Finance Finance 23,058 50.9 11,746
CG Power Capital Goods 2,331 28.1 656 Axis Bank Banking 1,88,749 49.6 93,657
ITD Cementation Infrastructure 1,943 28.0 544 Just Dial Miscellaneous 3,658 47.7 1,745
ICICI Bank Banking 2,48,112 27.9 69,273 Care Ratings Ratings 2,762 46.7 1,289
Khadim India Retailing 690 27.0 186 TeamLease Services Miscellaneous 5,033 45.1 2,268
Repco Home Finance Finance 2,493 24.9 619 Zee Entertainment Media 35,567 45.0 15,991

MARKET
C MPASS
Promoters in action
Here are some companies in which the promoters have raised or reduced
their stakes, thus indicating how positive they are about their companies
Rise in promoter stake
Companies where the promoter stake in Q3 was at least 25 per cent and has risen by at least 3 per cent in Q4
Promoters’ stake (%) Increase in promoter 3M
Company name Sector M-cap (` cr) Mar-19 Dec-18 holdings (% pt) return (%)
Den Networks Media & Entertainment 2,959 86.5 36.5 50.1 -13.7
Hathway Cable & Datacom Telecom 4,762 94.1 45.5 48.6 7.5
IDBI Bank Bank 27,541 97.5 52.0 45.4 -21.2
Apollo Tricoat Tubes Trading 529 61.4 49.2 12.2 35.2
Oriental Bank of Commerce Bank 12,907 87.6 77.2 10.4 15.1
Syndicate Bank Bank 9,058 84.7 76.2 8.5 3.0
Union Bank Of India Bank 12,535 74.3 67.4 6.8 0.1
Corporation Bank Bank 14,356 93.5 86.8 6.7 -20.8
Allahabad Bank Bank 16,804 85.8 79.4 6.4 -2.7
Andhra Bank Bank 7,222 90.9 84.8 6.0 -2.6
JTEKT India Automobile & Ancillaries 2,428 75.0 69.3 5.8 8.6
CEBBCO Automobile & Ancillaries 157 60.7 55.2 5.5 -11.3
Punjab National Bank Bank 39,779 75.4 70.2 5.2 17.7
Inspirisys Solutions IT 173 65.0 60.0 5.0 10.0
Tata Metaliks Iron & Steel 1,696 55.1 50.1 5.0 3.3
Apollo Pipes Finance 534 47.1 42.1 5.0 24.9
Manaksia Trading 245 67.9 63.0 5.0 1.4
Krebs Biochemicals & Industries Healthcare 155 64.7 59.8 4.9 5.5
Veritas (India) Trading 140 65.2 60.5 4.8 -2.4
United Bank of India Bank 8,059 96.8 92.3 4.6 0.3
PG Electroplast Consumer Durables 122 66.5 62.0 4.6 -11.5
Lloyds Metals & Energy Iron & Steel 245 63.8 59.3 4.5 -9.5
GTPL Hathway Media & Entertainment 714 78.8 74.4 4.5 -23.1
Capital India Finance Finance 1,368 73.0 68.6 4.5 35.3
Bank Of India Bank 28,689 87.1 83.1 4.0 5.9
JK Tyre & Industries Automobile & Ancillaries 1,959 56.2 52.5 3.8 -7.4
Srikalahasthi Pipes Automobile & Ancillaries 842 47.7 44.0 3.7 7.4
Minda Corporation Automobile & Ancillaries 2,768 68.0 64.7 3.3 -2.8
Central Bank of India Bank 12,908 91.2 88.0 3.2 -15.7
Data as on May 21, 2019
Fall in promoter stake

Companies where the promoter stake in Q3 was at least 25 per cent and has fallen by at least 3 per cent in Q4
Promoters’ stake (%) Decrease in promoter 3M
Reliance Communications Telecom 548 22.0 53.1 -31.1 -68.7
CG Power & Industrial Solutions Capital Goods 2,363 12.8 34.4 -21.6 21.2
Dalmia Bharat Construction Materials 21,011 54.3 74.9 -20.6 -3.3

MARKET
C MPASS
Promoters’ stake (%) Decrease in promoter 3M
Reliance Power Power 1,860 56.3 75.0 18.7 -38.2
Galaxy Cloud Kitchens Media & Entertainment 135 40.4 57.0 16.5 -13.6
SBI Life Insurance Company Insurance 65,500 69.8 84.1 14.3 17.7
Godrej Industries Chemicals 15,894 61.3 74.7 13.4 -1.0
Bharat Road Network Infrastructure 800 53.8 65.1 11.3 -1.2
Sheela Foam FMCG 5,971 75.0 85.7 10.7 -6.3
Shalimar Paints Chemicals 418 52.5 63.1 10.6 34.2
Emami FMCG 16,501 62.7 72.7 10.0 -8.6
Advanced Enzyme Technologies Healthcare 2,011 57.3 67.3 10.0 15.3
Zee Media Corporation Media & Entertainment 629 57.7 67.0 9.3 -9.6
Bliss GVS Pharma Healthcare 1,752 41.6 50.5 8.9 1.2
Reliance Infrastructure Power 3,066 41.0 49.3 8.3 -5.0
Gujarat Apollo Industries Capital Goods 173 56.5 64.1 7.7 -4.1
Endurance Technologies Automobile & Ancillaries 16,168 75.0 82.5 7.5 -9.5
Bajaj Consumer Care FMCG 4,947 60.0 66.9 6.8 -3.1
Indo Rama Synthetics Textile 636 63.3 70.0 6.8 3.3
Mac Charles Hospitality 375 75.0 81.7 6.7 -5.0
Siti Networks Media & Entertainment 262 65.7 72.2 6.6 -9.9
Autoline Industries Automobile & Ancillaries 127 29.7 36.1 6.4 -11.7
ZF Steering Gear Automobile & Ancillaries 443 67.4 73.7 6.3 -27.0
SV Global Mill Miscellaneous 104 68.9 74.8 5.9 1.2
Ruchi Soya Industries FMCG 222 28.1 33.9 5.8 13.0
Zydus Wellness FMCG 7,320 67.6 72.5 4.9 2.4
National Aluminium Company Non - Ferrous Metals 9,132 52.0 56.8 4.8 1.9
Reliance Capital Finance 3,033 47.5 52.2 4.8 -24.5
HDFC Life Insurance Co Ltd Insurance 80,697 76.1 80.7 4.6 13.1
Kiran Vyapar Miscellaneous 267 71.1 74.8 3.7 1.7
ICICI Prudential Life Insurance Company Insurance 49,965 75.0 78.7 3.7 10.2
Zee Entertainment Enterprises Media & Entertainment 33,425 38.2 41.6 3.4 -22.0
Aarti Industries Chemicals 14,864 49.4 52.7 3.4 24.0
AGC Networks Telecom 302 64.3 67.7 3.4 8.6
BC Power Controls Non - Ferrous Metals 223 54.3 57.6 3.3 2.2
Relaxo Footwears FMCG 10,079 71.0 74.2 3.2 11.9
Bharat Electronics Capital Goods 23,537 58.8 61.9 3.1 25.0
DLF Realty 37,743 71.9 75.0 3.0 3.3
Jubilant FoodWorks FMCG 17,201 41.9 44.9 3.0 -1.1

MARKET
C MPASS
Pledging tracker
In the following companies, promoter pledging has shown a marked rise or
fall between December 2018 and March 2019
P
romoter pledging is an important analytical
parameter. When promoters pledge shares, they
keep shares as collateral with a financial
institution, such as a bank, to raise money. It’s just like
mortgaging something for money.
Pledging is not always bad. Many times promoters
pledge their stake for sound business reasons and later
release their pledged shares. But pledging takes an ugly
turn when the pledged stake is high and the promoter
is unable to pay back the dues. This may force the
financing institution to sell the pledged stake, which
can result in a sudden fall in the stock price.
Generally speaking, a high pledged stake also
indicates a bad management. Investors should stay
away from companies that have high levels of pledging.
The first table below mentions companies in which The second table mentions companies in which
pledging has gone up by 10 per cent or more in the last pledging has gone down by 10 per cent and the current
quarter and the promoter stake is at least 25 per cent. promoter stake is at least 25 per cent. WI
Increase in pledging
M-cap Pledged stake (%) Increase in Promoter 3M stock Debt to
Company name Sector (` crore) Mar-19 Dec-18 pledging (% pt) stake (%) return (%) Z-Score F-Score equity
Sandur Manganese Mining 776 55.2 0.0 55.2 72.5 -2.3 7.5 9.0 0.0
RMG Alloy Steel Iron & Steel 478 53.7 0.0 53.7 55.9 -24.0 -2.1 6.0 -1.6
Talwalkars Healthclubs Miscellaneous 317 77.3 40.6 36.7 37.7 -4.4 4.0 6.0 0.9
Tourism Finance Corp Finance 909 34.1 0.0 34.1 51.6 -16.8 - - -
Srikalahasthi Pipes Automobile & Ancillaries 843 31.5 0.0 31.5 47.7 3.6 3.2 5.0 0.3
JK Tyre & Industries Automobile & Ancillaries 2,028 28.9 0.0 28.9 56.2 -4.4 1.6 4.0 3.0
Visaka Industries Construction Materials 549 31.7 6.1 25.7 41.7 1.6 4.8 7.0 0.5
AGC Networks Telecom 297 33.7 10.6 23.1 64.3 3.3 1.0 9.0 1.6
Reliance Capital Finance 2,715 96.9 74.6 22.4 47.5 -22.6 - - -
Zee Media Corporation Media & Entertainment 643 93.8 73.4 20.5 57.7 -2.4 4.8 9.0 0.2
Electrosteel Castings Automobile & Ancillaries 726 35.7 15.9 19.7 50.6 -5.0 1.0 6.0 0.7
ISMT Iron & Steel 101 91.2 72.8 18.5 51.6 9.5 -0.5 6.0 -2.6
Prabhat Dairy FMCG 641 59.9 41.5 18.4 50.1 15.1 4.3 7.0 0.3
Jai Balaji Industries Iron & Steel 268 92.9 76.0 16.9 58.4 75.2 -1.0 4.0 -2.5
MSP Steel & Power Iron & Steel 366 100.0 83.2 16.8 41.6 -8.7 1.6 7.0 1.3
Arvind Smartspaces Realty 383 16.9 0.2 16.7 59.6 -1.6 3.0 4.0 0.7
Reliance Infrastructure Power 2,644 98.3 83.6 14.8 41.0 -10.5 -0.2 9.0 3.9
Seya Industries Chemicals 1,071 14.5 0.0 14.5 74.5 -11.4 2.6 5.0 0.7
Zuari Agro Chemicals Chemicals 647 17.1 4.4 12.7 65.0 -15.6 0.9 9.0 3.1
Dish TV India Media & Entertainment 5,717 94.6 82.1 12.6 58.0 -4.6 0.1 3.0 0.5

MARKET
C MPASS
M-cap Pledged stake (%) Increase in Promoter 3M stock Debt to
Setco Automotive Automobile & Ancillaries 317 77.9 65.6 12.2 59.2 -20.6 1.9 7.0 2.2
Star Paper Mills Paper 172 59.2 48.3 10.9 45.6 1.8 2.8 5.0 0.0
LG Balakrishnan Automobile & Ancillaries 1,081 10.6 0.0 10.6 48.0 -14.3 4.4 7.0 0.2
Reliance Home Finance Finance 902 31.8 21.6 10.2 74.9 -22.2 - - -
.HVRUDP,QGXVWULHV 'LYHUVLÀHG
Data as on May 13, 2019. Minimum market cap `100 crore. For explanations of Z-Score and F-Score, see the key terms in the ‘Stock Screen’ section.
Decrease in pledging
M-cap Pledged stake (%) Decrease in Promoter 3M stock Debt to
Dalmia Bharat Construction Materials 20,731 0.0 68.1 68.1 54.3 -0.3 0.0 0.0 2.0
V2 Retail Retailing 827 4.4 71.0 66.6 51.1 -4.1 12.7 6.0 0.0
Indo-National Automobile & Ancillaries 188 0.0 50.3 50.3 74.9 -20.2 2.4 6.0 0.3
Sundaram Finance Finance 1,121 0.0 49.6 49.6 53.3 -11.7 – – –
Uttam Value Steels Iron & Steel 126 0.0 47.0 47.0 46.1 0.0 -0.8 3.0 -1.3
Tata Teleservices Telecom 528 0.0 35.0 35.0 74.4 -8.2 -34.0 3.0 -1.1
Ruchi Soya Industries FMCG 220 26.9 61.4 34.5 28.1 9.3 -1.0 3.0 -1.6
Riddhi Siddhi Gluco Biols Trading 180 0.0 30.9 30.9 74.8 -15.7 1.7 5.0 0.3
Satin Creditcare Network Finance 1,544 26.3 52.9 26.6 27.9 34.1 – – –
Olectra Greentech Electricals 1,711 12.2 35.2 23.0 59.9 6.9 10.7 4.0 0.4
Lloyds Metals & Energy Iron & Steel 243 0.0 21.9 21.9 63.8 -5.9 1.6 8.0 0.3
Hotel Leela Venture Hospitality 545 76.6 93.6 17.0 47.3 -31.7 -1.0 4.0 9.8
Granules India Healthcare 2,775 43.4 60.4 17.0 42.9 27.2 3.3 2.0 0.8
CEBBCO Automobile & Ancillaries 152 84.0 99.8 15.8 60.7 -16.9 -0.6 2.0 -2.6
DCM Textile 105 0.0 15.8 15.8 48.5 -13.2 2.3 5.0 1.6
Nath Bio-Genes Agri 762 15.9 31.1 15.2 40.7 18.5 6.8 5.0 0.1
Suyog Telematics Miscellaneous 398 24.8 39.3 14.5 49.6 81.5 8.2 6.0 0.9
Bharat Road Network Infrastructure 812 22.2 35.7 13.6 53.8 4.5 2.0 7.0 1.0
KG Denim Textile 110 0.0 13.3 13.3 58.6 -4.8 2.1 4.0 1.7
Zee Learn Education & Training 805 82.7 95.5 12.7 57.2 -9.2 3.4 7.0 0.7
Strides Pharma Healthcare 3,921 16.3 28.9 12.6 31.2 8.0 1.9 6.0 1.0
Prakash Industries Iron & Steel 1,118 52.7 64.6 12.0 39.3 -20.9 3.1 7.0 0.3
Next Mediaworks Media & Entertainment 107 29.0 39.5 10.5 61.9 -23.0 -0.2 4.0 2.9
Data as on May 13, 2019. Minimum market cap `100 crore. For explanations of Z-Score and F-Score, see the key terms in the ‘Stock Screen’ section.
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ANALYST’S
DIARY
The double-edged sword

Causing the profits to increase and decrease sharply with respect to sales,
operating leverage can cut both ways
R
ecently, Hero Motocorp and Eicher Motors, two in the company’s sale will generally not lead to a
of India’s largest automobile manufacturers, substantial increase in its operating income.
blamed weak operating leverage for a fall in Investors should compare operating leverage
their operating margins. What’s operating leverage? between companies in the same industry as some
Simply stated, operating leverage measures the industries have higher fixed costs than others. For
degree to which a firm or a project can increase its example, manufacturing firms have a higher
operating income by increasing its revenues. It is used proportion of fixed costs, whereas services companies
to quantify a company’s operating risk. This risk generally have a higher proportion of variable costs.
arises due to the structure of fixed and variable costs. By paying close attention to operating leverage, a
A company with high operating leverage has company’s profitability can be forecast if the sales are
proportionately higher fixed costs on account of land, ascertained reasonably. However, finding a company’s
buildings, plant and machinery. Once these costs are operating leverage accurately is not easy. Since
taken care of, any increase in sales can quickly companies are not required to disclose their per-unit
translate into profits. However, if sales fall, the variable cost, operating leverage is just an educated
reverse is also true. guess. Also, a company’s pricing, product mix and
On the other hand, low operating leverage indicates input costs are subject to change every year.
that a company’s variable costs, such as employee Here are some companies with high operating
expenses, advertisements and promotions, are larger leverage (more than three) in the last three years. Given
in proportion. This implies that a significant increase that, their profits are prone to fluctuations. WI
Swinging margins
Market Operating leverage (times) Operating margin (%) Net sales growth (%)
Company name Sector cap (` cr) Latest Older Oldest Latest Older Oldest Latest Older Oldest
Sun Pharma Healthcare 1,00,808 3.3 3.8 4.7 18.4 15.6 31.1 8.3 -15.2 16.1
Vodafone Idea Telecom 40,230 11.2 9.7 53.5 -28.4 -8.3 6.7 30.9 -20.5 -1.0
Bata India Retailing 16,866 4.6 5.1 3.9 13.9 10.3 8.5 10.7 5.7 3.7
Ipca Laboratories Healthcare 11,706 6.4 16.2 13.2 12.7 7.4 7.8 15.3 -0.4 12.0
EIH Hospitality 9,725 8.6 12.8 7.4 12.5 5.6 9.1 19.8 -3.2 -3.8
GE Power India Infrastructure 6,006 7.6 5.2 28.4 10.9 3.5 -2.4 47.0 -37.2 -2.6
Gujarat Alkalies Chemicals 3,776 4.2 8.0 6.7 32.9 19.8 15.8 26.3 3.8 22.2
Bombay Dyeing Textile 2,287 3.1 3.3 14.9 38.0 20.7 12.7 66.4 38.4 4.0
Kirloskar Oil Engines Capital Goods 2,262 4.5 357.5 3.3 6.7 5.0 7.1 10.4 -0.1 20.8
Indiabulls Integrated Miscellaneous 2,240 8.4 145.3 3.3 -16.5 9.8 1.5 -26.6 4.2 -27.9
International Paper Paper 1,558 7.7 7.1 69.5 21.8 12.3 8.5 12.9 7.8 1.1
National Peroxide Chemicals 1,483 3.2 5.2 26.5 58.5 33.5 23.1 52.4 12.0 11.1
Kirloskar Brothers Capital Goods 1,226 3.7 5.3 3.4 5.2 4.2 3.0 9.7 9.8 4.0
Panacea Biotec Healthcare 1,120 12.5 268.4 145.1 -9.0 8.4 1.7 -15.2 1.5 -11.5
Jaiprakash Associates Const. Materials 1,051 10.7 14.6 29.1 3.9 2.4 -11.5 6.8 -8.2 -25.9
Sarda Energy & Minerals Iron & Steel 917 3.8 3.9 4.4 21.4 14.1 9.7 22.9 18.5 4.1
Marksans Pharma Healthcare 886 10.6 12.9 12.1 9.5 6.1 2.6 6.0 13.3 -7.1
Thirumalai Chemicals Chemicals 784 8.9 4.1 7.6 13.4 19.7 11.8 -3.9 27.6 8.9
Ester Industries Plastic Products 587 4.3 14.3 8.0 7.3 4.3 1.6 27.4 14.8 -8.8
Operating leverage is for the last three years and calculated on a trailing 12-month basis using the latest-available numbers as of March 2019 or December 2018, as the case may be. Operating
margin exludes other income. Data as on May 14, 2019.

ANALYST’S
DIARY
Self-sustaining growth
A company’s reliance on internally generated funds for incurring capital
expenditure shows the strength of its business model
I
f a company is able to achieve earnings growth by each of the last five years. These filters ensured that
using internally generated funds, that signifies the quality of growth is good and value-accretive and
the strength of its business model. Internally the capital structure is well-shaped. The table below
generated funds, retained earnings for example, are lists the companies that made the cut.
the cheapest and easily available funding source for Three companies stand out in this list: Havells,
companies. Moreover, using such funds, companies Indraprastha Gas and Solar Industries. While the
can continue their growth momentum, without industries in which these companies operate require
raising any additional debt or equity and without a heavy capex, they have still managed to take care
impairing its capital structure. of it through internally generated funds.
We zeroed in on companies that have registered Havells is a fast-moving electrical-goods and
earnings and sales growth aided by capital power-distribution-equipment manufacturer. It has
expenditure over the last five years. This capex was seen volume growth across categories, fuelled by
incurred using internally generated funds. continued investments. Indraprastha Gas is a leading
Further, we specifically looked for companies whose natural-gas distributor. It has witnessed volume
total debt went down, with no dilution in equity share growth due to surging petrol and diesel prices. Solar
capital. The companies should have returns on the Industries manufacturers explosives that mainly
capital employed and equity of above 15 per cent in cater to the mining sector. WI
Deep pockets
5Y capex 5Y decrease 5Y sales 5Y EPS 5Y decrease
M-cap incurred in debt growth growth in debt/ 5Y median 5Y median
Company name Sector (` cr) (` cr) (` cr) (%, CAGR) (%, CAGR) equity (times) Debt/equity ROE (%) ROCE (%)
Havells India Engineering 45,972 2,219 938 13.8 11.0 0.60 0.03 22.1 26.0
Indraprastha Gas Energy 21,816 1,435 352 10.1 11.2 0.20 0.00 19.5 30.1
GHCL Chemicals 2,380 1,125 164 6.5 14.1 1.71 0.82 26.8 20.5
KRBL FMCG 7,650 825 134 3.9 9.3 0.78 0.54 23.5 19.5
KPR Mills Textiles 4,349 789 314 5.7 13.5 0.77 0.41 20.3 18.2
Solar Industries Explosives 9,629 676 4 12.8 11.8 0.29 0.44 22.5 22.7
Bodal Chemicals Chemicals 1,388 356 191 3.5 1.6 3.87 0.26 44.5 37.2
Kansai Nerolac Paints Paints 22,392 324 33 8.0 13.4 0.04 0.01 18.2 26.2
Kalyani Steels Metals 829 321 31 2.9 8.5 0.29 0.22 19.1 21.4
Avanti Feeds FMCG 4,797 288 49 15.9 21.5 0.31 0.01 46.4 64.0
Bliss GVS Pharma Healthcare 1,667 223 55 22.5 10.6 0.38 0.22 19.7 24.6
Balaji Amines Chemicals 1,370 214 110 9.2 29.8 0.98 0.33 22.7 23.5
Gabriel India Automobile 2,053 208 56 7.8 13.3 0.21 0.02 19.7 26.9
Indian Energy Exchange Financial 4,619 131 3 10.7 10.4 0.01 0.00 47.0 71.3
Sterling Tools Engineering 968 119 31 10.0 22.1 0.51 0.14 21.7 24.9
Bharat Rasayan Chemicals 1,721 98 15 16.3 32.2 1.31 0.43 31.4 27.4
Galaxy Surfactants FMCG 3,620 92 69 11.4 2.5 0.88 0.48 25.2 23.4
Metropolis Healthcare Healthcare 4,733 80 15 12.0 15.0 0.06 0.00 26.2 40.1
VIP Industries Plastic packaging goods 6,155 65 16 10.8 20.9 0.06 0.00 21.2 28.5
Grauer & Weil Chemicals 1,086 50 89 7.0 11.1 0.48 0.02 18.0 23.2

ANALYST’S
DIARY
Appreciating depreciation
The depreciation expense on a company’s books requires finer scrutiny
D
epreciation is a non-cash expense as it doesn’t which is visible in the wide difference (at least 5 per
result in an actual cash outgo. This makes many cent) between their PBDT (profit before depreciation
investors dismiss it in their analysis. But that and tax) and PBT (profit before tax) margins. In these
could be a mistake. The capital assets that are companies, fixed assets are also growing by at least 15
depreciated have to be replaced at some point and this per cent annually. So, they will continue to have a high
will result in a ‘tangible’ expenditure eventually. depreciation outgo in the foreseeable future. This will
The companies listed below have high depreciation, keep their profits in check. WI
Depreciation is the only constant

Market cap TTM PBDT TTM PBT 5Y median PBDT 5Y median PBT Difference in Growth in fixed
Company name Sector (` cr) margin (%) margin (%) margin (A, %) margin (B, %) margin (A - B, %) assets (%, CAGR)
Power Grid Corporation Power 95,136 63.2 32.6 66.3 37.0 29.3 17
Dish TV India Media & Entertainment 5,238 23.4 0.7 23.4 0.7 22.7 38
Vodafone Idea Telecom 35,345 -3.9 -42.0 21.2 0.3 20.9 17
IRB Infrastructure Infrastructure 4,019 32.8 24.4 34.2 17.8 16.4 35
Gujarat State Petronet Gas Transmission 9,944 77.6 67.8 83.7 67.8 16.0 17
Jindal Steel & Power Iron & Steel 15,921 11.4 0.8 8.8 -6.0 14.8 26
Wonderla Holidays Hospitality 1,701 43.2 28.9 43.2 28.9 14.3 34
Prime Focus Media & Entertainment 1,686 5.7 -6.0 5.7 -8.0 13.7 24
Jaiprakash Power Power 1,625 1.8 -11.3 1.8 -11.3 13.1 20
Emami FMCG 17,079 27.5 15.3 28.1 16.5 11.6 23
Biocon Healthcare 31,497 30.1 22.0 28.3 17.0 11.3 19
Phoenix Mills Realty 9,505 32.3 20.2 25.4 15.2 10.2 18
Vedanta Non - Ferrous Metals 60,349 26.7 18.8 25.3 15.8 9.6 101
Torrent Power Power 11,523 19.4 10.1 19.4 10.1 9.3 16
Delta Corp Miscellaneous 5,119 35.9 32.1 30.4 21.5 8.9 30
Entertainment Network Media & Entertainment 2,193 23.3 12.7 25.3 17.2 8.1 18
Cipla Healthcare 44,334 18.4 11.7 19.3 11.7 7.6 20
Reliance Power Power 1,633 20.0 11.2 21.1 13.6 7.5 33
Nava Bharat Ventures Power 1,640 36.1 27.0 19.1 12.1 7.0 34
MM Forgings Automobile & Ancillaries 1,207 18.8 13.1 20.0 13.1 7.0 16
Zen Technologies IT 536 21.4 15.7 7.0 0.3 6.7 19
Zee Media Corporation Media & Entertainment 598 26.8 19.5 21.6 15.0 6.7 23
Heidelberg Cement India Construction Materials 4,017 20.4 15.7 13.0 6.5 6.5 15
Reliance Infrastructure Power 2,756 -5.8 -13.1 9.9 3.7 6.3 20
Mahindra Holidays Hospitality 2,733 19.4 14.0 23.9 18.3 5.6 17
Poly Medicure Healthcare 1,721 23.5 17.3 23.5 18.0 5.5 22
Monte Carlo Fashions Textile 636 21.5 18.6 20.8 15.4 5.4 15
%LUOD&RUSRUDWLRQ 'LYHUVLÀHG
Jubilant FoodWorks FMCG 16,367 18.4 14.0 13.0 7.8 5.3 15
KNR Construction Infrastructure 3,255 21.5 13.2 18.4 13.2 5.2 30
Orient Cement Construction Materials 2,086 8.2 3.0 8.2 3.2 5.1 15
Emami Paper Mills Paper 962 8.7 4.1 7.1 2.0 5.0 16
La Opala RG Construction Materials 2,186 46.2 40.3 41.9 36.9 5.0 16
Min market cap `500 crore. TTM: Trailing 12 months. PBDT: Profit before depreciation and tax. PBT: Profit before tax. Data as on May 16, 2019.

ANALYST’S
DIARY
Reinvigorating R&D
Indian companies must invest more in research and development if
they aspire to compete on a global level
“I R&D expenditure as per cent of GDP

nnovation distinguishes between a leader and
a follower,” said Steve Jobs. How much is India
China z
5.0 z India z
Israel z
Japan z
Korea z
USA Linear (India)
investing in innovation? Listed Indian
companies (above the market cap of `500 crore) spent 4.5
`8,400 crore on R&D (0.65 per cent of the aggregate 4.0
sales of the companies spending on R&D) in FY18 as 3.5
against `7,965 crore in FY14 – barely an increase of 3.0
one per cent year on year. 2.5
As revealed by the National Economic Survey 2.0
2017–18 (see the accompanying graph), India’s R&D 1.5
spend has been stagnant at 0.7 per cent of GDP for
1.0
the last two decades. This is in stark contrast to other
0.5
countries. The most notable is our neighbour China,
0
which took off after spending less than India at one
7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0
point, depicting how we have been a net consumer of
knowledge rather than net producers. The survey has Log GDP per capita PPP 2011 dollars
also reiterated the need for the private sector to Source: UNESCO, World Economic Outlook (WEO), National Science Foundation (NSF)
increase investments in R&D if we want to compete
on a global level.
Nevertheless, bucking the trend, several pharma
R&D stars
companies in India have stepped up their spending M-cap R&D as % of R&D as a % of 5Y sales growth
on R&D. Their continuous investments in R&D have Company name (` cr) sales (Mar ‘18) total 5Y sales (%, CAGR)
resulted in India emerging as the largest provider of Zen Technologies 540 33.0 24.3 1.0
generic drugs across the world. At present, India Suven Life Sciences 3,231 14.4 14.2 19.4
caters to around 50 per cent of the global demand for SPARC 3,827 34.3 12.0 -2.0
various vaccines, 40 per cent of generic demand in Piramal Enterprises* 42,680 5.4 8.6 12.4
the US and 25 per cent of all medicines in the UK Biocon 31,950 6.9 7.6 10.7
(source: India Brand Equity Federation).
Dr. Reddys Laboratories 47,020 5.8 6.1 3.7
We delved into the companies of the listed
Nath Bio-Genes 743 4.1 5.7 6.8
universe (above `500 crore market capitalisation) and
Indoco Remedies 1,704 6.3 5.1 10.6
their five-year aggregated R&D spend as a percentage
of aggregated sales. We wanted to see if this Cadila Healthcare 26,924 2.7 4.1 13.4
expenditure has translated into higher sales for these Caplin Point 2,503 4.4 3.2 36.0
companies. We found that nine out of 10 companies Data as on May 15, 2019
* Sales only for the pharmaceuticals segment
on our list of the top 10 R&D spenders are from the All companies are from the pharma sector, except Zen Technologies, which is from the
pharma sector (see the table), suggesting the higher defence sector
R&D expenditure pharma companies incur.
Interestingly, the one outlier in the list (Zen for quite some time. Given that there is enough
Technologies) has reported the highest R&D headroom for improvement, several income-tax
expenditure as per cent of sales. incentives, including deduction on R&D equipment and
deduction on recurring expenses on research are
Conclusion expected to provide a major fillip to R&D activities. In
Even though India’s R&D expenditure may seem far addition, initiatives like the Ucchatar Avishkar Yojana
behind, R&D activities have reaped some rewards, (setting up research parks in institutes like IIT), linking
considering that the pharmaceutical industry has been teaching with research, etc., will also likely contribute
commanding a major share in the world of medicines positively to the R&D in India. WI

ANALYST’S
DIARY
Low margins, high gains

A low net profit margin isn’t a concern if the return on equity is high
U
sually investors yearn for high net margins. turnover (sales per unit of the capital employed);
But a low net margin doesn’t necessarily mean strength of the business model and management; and
that the company can’t give good returns. So, efficiency of operations.
one should see margins in conjunction with return However, ROE can be misleading at times. It may
on equity (ROE), i.e., profit generated on be propped up by high debt, which puts a company’s
shareholders’ equity. The list below mentions some solvency at risk. Companies that exhibit this aspect
companies whose five-year average net margins are have been placed under the ‘watch-out’ header below.
less than 5 per cent but the ROE is greater than 15 The ‘average’ head lists companies whose debt levels
per cent in each of the five years. are just fine. Finally, there are companies that have
How can a company manage a high ROE with a low debt and high ROE. Such companies have an
low margin? It could be because of a high capital optimum capital structure. WI
Miniscule margins, robust ROEs

M-cap 5Y avg net 5Y median 5Y EPS growth Debt/equity Capital
Company name Sector (` cr) margin (%) ROE (%) (%, CAGR) (FY 18) turnover
Watch out
Hatsun Agro Products FMCG 11691 2.3 26.9 15.0 3.6 13.2
Sundaram-Clayton Automobile & Ancillaries 5282 3.1 31.2 11.2 3.5 8.1
TVS Motor Company Automobile & Ancillaries 23282 3.2 27.1 27.0 2.6 6.6
Jindal Worldwide Textile 1435 3.9 20.0 33.9 1.8 4.9
*XÀF%LRVFLHQFHV +HDOWKFDUH
-%0$XWR $XWRPRELOH $QFLOODULHV
Alicon Castalloy Automobile & Ancillaries 792 3.0 17.0 13.5 1.1 4.9
0RWKHUVRQ6XPL6\VWHPV $XWRPRELOH $QFLOODULHV
Average
%KDUDW3HWUROHXP&RUSRUDWLRQ &UXGH2LO
Minda Corporation Automobile & Ancillaries 2756 4.6 20.5 87.5 1.0 3.9
6XGDUVKDQ&KHPLFDO,QGXVWULHV &KHPLFDOV
DFM Foods FMCG 1270 4.8 25.2 29.8 0.9 5.5
6W\ODP,QGXVWULHV &RQVWUXFWLRQ0DWHULDOV
Siyaram Silk Mills Textile 1594 4.2 18.6 15.1 0.8 3.1
Weizmann Forex Finance 577 0.4 22.4 10.0 0.7 50.3
Optimum capital structure
4XHVV&RUS %XVLQHVVFRQVXOWDQF\
&DSDFLWH,QIUDSURMHFWV 5HDOW\
*RGUHM$JURYHW )0&*
Apex Frozen Foods Agri 857 4.1 38.4 32.2 0.3 8.4
Aegis Logistics Logistics 6862 3.6 20.9 42.6 0.3 7.3
Sakuma Exports Trading 669 1.1 25.0 42.5 0.2 21.3
$YHQXH6XSHUPDUWV 5HWDLOLQJ
6KHHOD)RDP )0&*
*DEULHO,QGLD $XWRPRELOH $QFLOODULHV
*0%UHZHULHV $OFRKRO
Capital turnover is calculated by dividing sales by equity. Data as on May 21, 2019.

India’s
most consistent
wealth
creators

Arriving at the Wealth 100
From removing short-term performers to taking care of the fundamentals,
here is what we did in order to arrive at our Wealth 100 list
I
n the stock market, real wealth Anyone who had invested in these some quality filters, if you are
is created when you hold onto a a decade ago is now sitting on interested in any of them, do full
good stock for the long term – 10 mega gains. These stocks are also research before buying them. Also,
years or even more. But in times of the most consistent wealth note that just because these stocks
crisis, this wisdom is forgotten. creators. There are many stocks have performed well in the past,
When blood is flowing in the that show a spurt from time to that doesn’t mean continuity of
streets, many investors panic and time based on some news or a performance in the future as well.
sell their stocks either to book any brief change in fundamentals. As If you do buy any stock from the
remaining gains or to ‘cut’ their soon as the buzz fizzles out, their Wealth 100 list, make sure you
losses. This investor behaviour is stock price also starts to move track its performance and
detrimental to wealth creation. south. Many sugar manufacturers fundamentals.
Good companies navigate suit this description. Their stocks While compiling the list, some
successfully through tough phases gain and fall on news. Even if they questions cropped up in our mind.
and deliver super returns for their create wealth for their investors, it Here is how we took care of them:
investors. Hence, it makes sense to isn’t lasting. The Wealth 100 list
find promising stocks and hold excludes such stocks. How to exclude short-term
them for the long term. Note that the stocks mentioned performers?
In this edition of Wealth in the list are not automatic In the process of arriving at the
Insight, we bring to you the most- recommendations. Though they Wealth 100 list, we wanted to
rewarding stocks of the decade. have been selected after applying eliminate stocks that have given
Short-term performers
M-cap Year of Highest gain 10Y returns M-cap Year of Highest gain 10Y returns
Company name (` cr) max gains within a year (%) (%, CAGR) Company Name (` cr) max gains within a year (%) (%, CAGR)
HEG 6759 2018 2186 28.7 Force Motors 2048 2011 466 36.2
Westlife Development 5783 2014 1974 92.1 Avanti Feeds 4877 2018 460 79.2
Phillips Carbon Black 2511 2018 1039 31.0 Muthoot Capital Services 1185 2018 452 39.9
Venkys 2818 2018 992 41.8 Minda Industries 9090 2018 438 46.8
Graphite India 7620 2018 917 23.9 Lumax Industries 1514 2018 419 33.9
Tasty Bite Eatables 2245 2011 906 82.8 Aurobindo Pharma 45092 2011 405 39.5
Johnson Controls 4946 2016 739 42.9 KEI Industries 3107 2016 401 39.6
Jamna Auto Industries 2084 2011 676 42.1 Rajesh Exports 20256 2011 372 37.0
Bajaj Electricals 5696 2011 662 28.4 Ceat 4188 2015 370 33.6
Tata Metaliks 1733 2018 662 23.8 Greenply Industries 1793 2011 366 28.4
VIP Industries 6081 2011 647 47.5 JK Cement 6557 2011 350 29.5
IFB Industries 3213 2016 637 39.3 Welspun India 5310 2011 349 34.9
Kitex Garments 650 2011 507 38.5 Maharashtra Scooters 4331 2011 341 45.5
Escorts 7955 2018 489 30.8 DFM Foods 1320 2017 336 44.4
Manappuram Finance 9781 2011 487 30.8 Vakrangee 6394 2011 311 53.0
<HDUUHIHUVWRWKHÀQDQFLDO\HDU'DWDDVRQ0D\
Nilkamal 1896 2011 476 35.5

dividends as well. Even though
they may look small in comparison
to the stock price, these small
amounts translate into big
differences in the long term. Just 2
per cent difference in compounding
over 20 years will lead to a
difference of 2.9 times in returns.
Ignoring total returns for some
companies can be a big mistake.
For instance, Accelya Kale
Solutions’ 10-year compounded
total returns stand at 65 per cent
versus price returns of just 38 per
cent. During the 10-year period, it
has paid dividends of more than
`340 a piece, which come out to be
around 10 times of its stock price
10 years ago. If Gabriel India’s
total dividend of `18 per share in
last 10 years had been reinvested
overall good returns due to short-
term performance over a period.
Even though in the company, it would have
translated into extra returns of 6
To do that, we analysed the yearly dividends may look per cent annually.
change in stock prices of the
contenders. We removed those small in What about the
stocks which have delivered more comparison to the fundamentals?
than 50 per cent of their total Focusing just on the short-term
gains over 10 years within a stock price, these movement of a stock, many
specific year. The table alongside
lists a few such names. Two of
small amounts investors ignore checking the
fundamental strength of a
these stand out. translate into big business. This often makes them
Westlife Development: In 2014, the
stock price of Westlife appreciated differences in the regret their choices. In order to
make the Wealth 100 list
23 times within nine months long term fundamentally sound, we applied
amidst thin volumes, leaving the following criterion: ROE
investors with limited buying should be more than 12 per cent in
opportunities. Since then, the There are many other at least eight out of the last 10
stock has not created any wealth companies, including the likes of years; or ROE should be rising in
for its investors. Its five-year Vakrangee, HEG and Graphite at least eight out of 10 years.
compounded returns stand at less India, that may appear on top of We used these criteria because
than 3 per cent as of April 30, 2019. the list of wealth compounders it is very difficult for a company to
But over 10 years, it still remains but they have also been top wealth generate constant or increasing
the best wealth-compounding destroyers in the past. return on equity in the long term.
stock in the Indian market. Long-term focus also removes the
Kitex Garments: Once the hottest How important are effect of cyclicality. The
stock in the market, Kitex is one of dividends? companies which are able to
the biggest wealth destroyers of Usually we focus on price returns sustain sluggish and tough periods
recent times. Still its 10-year total of a stock (how much the price of have a higher probability of
compounded returns stand at more a stock has appreciated during a repeating their performance. This
than 45 per cent. In the last three period). But that’s not the right also provides cushion to their
years, the stock has destroyed way to evaluate stock returns. investors during tough times.
investor wealth at an annual rate While evaluating returns, we So, here is the list of top 100
of more than 32 per cent. should give importance to most consistent wealth creators.

India’s
most consistent
wealth creators
RANK COMPANY SECTOR MARKET CAP TOTAL RETURNS (% PER ANNUM)
2019 2018 (` cr) 1Y 3Y 5Y 10Y
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MAIN STREET
The endgame
Time to prepare for the end of accommodative
monetary policy in the US
SAURABH MUKHERJEA
Over 50 years ago, Hyman Minsky and more generally through the higher cost of living).
famously said, “Stability leads to instability. The more In a hard-hitting new book The Rise of Finance:
stable things become and the longer things are stable, Causes, Consequences and Cures, Anantha Nageswaran
the more unstable they will be when the crisis hits.” and Gulzar Natarajan lay out some sobering facts with
We can’t think of a better demonstration of Minsky’s regards to the United States:
theory than what the Federal Reserve has been up to z“Credit market debt and the market value of equities
since December 21, 2018. Spooked by the correction in America were 212% of GDP in 1981 and 514% of
witnessed in US equity markets in December 2018, the GDP in 2014.
Fed did an abrupt turnaround in monetary policy (from zThe balance sheet of the Federal Reserve exploded
hiking rates to not hiking, from shrinking its balance from USD 200 billion to USD 4.5 trillion. Call that 23x
sheet to not shrinking it any more). In fact, if the US gain…
media is to be believed, the Fed is about to announce a zDuring the same years, the value of non-financial US
new variant of quantitative easing (see https://bit. corporate equities rose from USD 2.3 trillion to USD
ly/2LBnDA0). The Fed doesn’t seem to care that the 23.6 trillion. Call it 10.3x…
unemployment in America is at a 20-year low or that zThe median nominal income of US families increased
the equity and residential real-estate valuations in from USD 31,000 to USD 71,000 over the over the
America (as measured by P/E multiples and rental period. Call it 2.3x….
yields, respectively) are higher than they were prior to zThe average weekly wage of full-time workers in
the Lehman crisis. constant 1982 dollars was USD 330 per
The Fed’s behaviour is compounded week in 1987 and is currently USD 340.
by a US president who wants monetary The Fed’s Call it 1.03x.”
policy to be relaxed further and by cen- behaviour is As Western monetary policies continue
tral bankers across the world who are compounded by a to exacerbate pronounced inequalities,
falling over each other in trying to follow it feels like a matter of time before
the Fed. Thanks to these central bankers, US president who populist pressures force a withdrawal of
we are seeing IPOs at wonderful valua- wants monetary such monetary policies (labelled the
tions, for example, $3 billion for a coffee
policy to be ‘Greenspan put’ to celebrate the man
company in China (see https://reut. who led America up the garden path).
rs/2E7SE8x). relaxed further Whilst it is not possible for us to guess
and by central when such a policy reversal will take
Financialisation creates significant bankers across place, it is incumbent upon us to prepare
political risk for the West for it.
This sort of accommodation of financial the world who
markets further enriches the American are trying to Focusing on downside risk
elite and further taxes the ordinary Jane follow the Fed The most likely consequence of the
Doe (through more expensive real estate withdrawal of the Federal Reserve/

MAIN STREET
Greenspan put will be a sustained rise in the cost of

capital globally. The US 10-year government bond yield “If the Federal Reserve were to signal…
is the world’s risk-free rate. For nearly 40 years, this
the withdrawal of the Federal Reserve
rate has been falling (see https://bit.ly/2HgglO7). It
put on stock markets, much of the prob-
bottomed out at 1.5 per cent in August 2016 (down from
15.4 per cent in September 1981). To quote from our
lems associated with financial capitalism
November 19, 2018 piece: “This epic downward trend in – poor returns to labour, excessive…exec-
the world’s risk-free rate has defined most of our utive compensations, short-term invest-
careers. Had it not been for this downward trend, it is ment horizons, preference to financial
doubtful whether emerging-market equities or private over real investments, nvestor indiffer-
equity or real estate for that matter would be as big an ence to risk, build-up of public and pri-
asset class today as it has become.” (See https://bit. vate debt and systemic risk – would
ly/2w05Ojz) begin to sort themselves out…The rise of
From 1.5 per cent in August 2016, the US 10-year gov- finance has been too steep and has
ernment bond yield has risen to 2.5 per cent in April crossed the peak usefulness for many
2019. If one looks forward, there is good reason to
societies.”
believe that the US 10-year bond yield will rise towards
V Anantha Nageswaran & Gulzar Natarajan
5 per cent (which is where it was before the Lehman
The Rise of Finance: Causes, Consequences and Cures
crisis struck) if the political consensus in America
shifts against the accommodation of Wall Street at the
expense of Jane Doe. 3.
The longer-term consequence looks likely to be a
Such a rise in US interest rates will almost certainly drop in the price of land, real estate and fixed assets
have a corresponding impact on the cost of money in as the world and India gets accustomed to more
India. Assuming a similar rise in the cost of money in expensive capital. It is hard to gauge the full
India will take the Government of India 10-year bond consequences of such a readjustment in fixed-asset
yield nearer to 9-10 per cent (compared to the current prices. Perhaps it will lead to a renewal of interest in
7-8 per cent). How will that impact the Indian stock gold as a safe-harbour asset. Alternatively, it could
market? I see three layers of impact playing out: lead to greater household financial savings as
1.
The immediate consequence looks likely to be a shift highlighted in the preceding bullet.
in lending-market share from the NBFCs to private-
sector banks (especially private banks with strong Investment implications
CASA franchises). Given the issues already plaguing A straightforward style of investing in companies
the wholesale money market in India (IL&FS, Essel, which consistently generate double-digit revenue
debt mutual funds’ challenges, etc.), this shift in growth alongside delivering return of capital
market share in favour of private banks is already consistently in excess of the cost of capital typically
underway. A sustained rise in the US 10-year bond pushes us away from the sorts of companies which
yield could make this shift more long lasting. seem likely to suffer if the world readjusts to a
2.
The medium-term consequence looks likely to be a permanently higher cost of capital.
rise in household financial savings (India’s As shown in the both of my bestselling books, The
household savings rate has fallen sharply from 25 Unusual Billionaires (2016) and Coffee Can Investing:
per cent in FY10 to 17 per cent in FY17) and a drop the Low Risk Route to Stupendous Wealth (2018), our
in discretionary consumption (which has boomed portfolios tend to (a) correct much less than the broad-
over the last decade). Such a shift could create er market in the wake of a financial upheaval; and (b)
further issues for sectors like residential real estate recover more quickly than the broader market once the
and auto. The challenge could also extend to next upheaval has subsided.
rung down of discretionary consumption, for Worrying comes naturally to risk-averse investors
example, electricals, consumer durables. On the like us as we seek to ascertain when this extraordinary
other hand, the rise in household financial savings accommodation of financial markets by Western cen-
should help India’s banks (most of which are tral bankers will end. WI
struggling to attract deposits). Saurabh Mukherjea is the co-author of Coffee Can Investing and the
founder of Marcellus Investment Managers.

STRAIGHT TALK
Why does RBI need capital?

The high reserves maintained by the RBI have a limited purpose
ANAND TANDON
The Economic Capital Framework it to invest in interest-bearing instruments – govern-
Committee of the Reserve Bank of India – also referred ment bonds, foreign-currency investments, etc. This
to as the Jalan Committee – is expected to release its ensures that the bank makes a generous income. In the
report soon. The committee, chaired by Dr Bimal Jalan, year ended June 2018, the RBI earned net interest of
former RBI governor, was set up against the backdrop over `738 billion. Its pre-provision expenditure amount-
of a difference of views between the government and ed to `141 billion – leaving a large profit. Clearly, the
the previous RBI governor, Dr Urjit Patel, over the RBI does not need to dip into its reserves to keep its
appropriate level of RBI reserves. How much capital operations going.
does the RBI need?
Reserves against market risk
Capital is a buffer against risk Where RBI needs reserves is to take care of movements
Basel III, a global, voluntary regulatory framework on in its investment portfolio. To understand that, take a
bank capital adequacy recommends that banks main- look at a simplified balance sheet of the RBI.
tain at least 8 per cent capital to risk-weighted assets. The largest and most volatile component of the RBI’s
This capital is meant to manage volatility arising out asset book is its investments in foreign-currency assets.
of credit, market, operation, liquidity and other types The balance sheet of the RBI is computed in rupees. If
of risks that may adversely impact the ability of a bank the INR appreciates against, say, the USD, there will be
to continue its business. This figure of 8 per cent – a mark-to-market (MTM) loss when drawing up the bal-
stripped of all made-up economic arguments – is no ance sheet. Similarly, if rupee were to weaken, the
more than a ‘negotiated’ figure beyond which return on value of dollar investments rises in rupee terms (the
equity becomes unattractive in commercial banking. reporting currency), resulting in MTM profits.
While the RBI does not lend directly to corporates or India regularly maintains a current-account deficit
individuals, it is a regulator with powers devolved from financed through foreign-investment inflows.
the government to respond to volatility in banking, Consequently, rupee trades with a secular, negative
forex and money markets. Consequently, it is allowed to bias except when large investment flows temporarily
maintain its own reserves so that its interventions in reverse the trend. The highest annual appreciation that
markets can be swift and credible – market participants the INR has witnessed has been 8 per cent in FY08 and
should feel that the RBI would be able to enforce its will the highest monthly appreciation has been 13 per cent,
over the action of a few players. in June 2007. Against this, currency-fluctuation
reserves make up 19 per cent of the RBI’s balance sheet.
Making money out of thin air They have been rising over the years.
A country’s central bank has the unique ability to
‘print’ money (not only in the literal sense of currency RBI accounting – a matter of concern
notes but also electronically). A central bank, like the The RBI has another bit of quirkiness associated with
RBI, can ‘create’ money at apparently no cost/low cost its accounts. Indian accounting standards require
(in the case of actual currency notes or coins) and use companies to report MTM changes in their invest-

STRAIGHT TALK
RBI’s balance sheet as of June 2018

Liabilities (` billion) % of total Assets (` billion) % of total
Capital and other reserves 67 0 Foreign currency investment 26351 73

Contingency Fund (CF) 2549 7 Gold coin & bullion 1440 4
Currency and gold revaluation account (CGRA) 6916 19 INR Investments (RBI lending to govt) 6297 17
Bond and derivative revaluation Account 166 0 Other assets 2088 6
Sub total 9698 27
Other provisions 332 1
Surplus transferable to Govt of India 500 1
Total capital, reserves & provisions 10530 29
Deposits 6526 18
Currency in circulation 19120 53
Total 36176 36176
Source : RBI
ment portfolios through the profit-and-loss account. investments (largely government securities) of almost
The RBI chooses to make these changes directly in the `479 billion. Adjusted for losses in maintaining liquidity,
balance sheet. etc., the interest earned is `393 billion.
Importantly, the RBI Act requires that the profits of As against this, dividend budgeted for the release to
the RBI should be transferred to the government after the government was only `500 billion. Almost 80 per
expenses and provisions. If the RBI were to follow stan- cent of the dividend that the RBI transferred to the
dard accounting practices, it would possibly need spe- government came from the interest paid to the RBI by
cific government approval to credit its reserves from the government. If some part of RBI reserves could be
MTM profits. Instead, it is doing so without any such set off against GoI loans on the books of the RBI, the
approval, reflecting an institutional urge to fatten its government debt would fall. India has `68 trillion of
own balance sheet without executive scrutiny. internal debt. A 5 per cent reduction in this debt could be
achieved while leaving the RBI with reserves of over 18
All reserves are economically fungible per cent on its balance sheet, resulting in a wholly bene-
One argument made in favour of the RBI retaining ficial macroeconomic impact with no negative impact
‘excess reserves’ has been that its contingency fund on the RBI’s credibility.
(CF) is only 7 per cent. It is important to note that the Some naysayers argue that the reserves have been
divisions within reserves on the RBI’s balance sheet built up over years but then so has debt and setting off
are only accounting entries and in economic terms one against the other seems in no way iniquitous.
have no differentiation – they are fully fungible. Taken
together, reserves make up 27 per cent of the balance Need for a strict framework of accountability for
sheet – well beyond even the highest volatility that has government institutions
been experienced or can be modelled in the current or A key issue with any ‘independent’ body in India seems
foreseeable economic environment. to be that over time it forgets its original mandate and
In addition, though it may irk the mandarins at the starts to work for its own benefit. Most self-regulating
RBI to admit it, it is no more than a department of the organisations in India – the Chartered Accountants
government, with full financial powers of sovereign Association, Indian Medical Council (now superseded),
backing it. As such, it can never be short of capital in even the Supreme Court – have failed when it comes to
local currency terms. offering high transparency and a focus on the ‘greater
good’. The RBI is no exception. One hopes that the lat-
Can RBI’s reserves be used to cancel GoI borrowings? est committee – made up of several persons who come
As on balance-sheet reporting date, the RBI was holding from the same background as ones they seek to ‘regu-
investments in Government of India (GoI) securities to late’ – will keep good of the country as a higher-level
the tune of `6.3 trillion. In its income statement for June goal compared to institutional privilege WI
2018, the RBI reported interest earned from domestic Anand Tandon is an independent analyst.

TAKING STOCK
Assessing the C-suite risk

While it is hard to evaluate corporate-governance standards, managements
tend to send out signals in many forms that investors can pick up
MALINI BHUPTA
A few weeks ago I came across a poll he was bearish on a private bank because the bank’s
on Twitter on the biggest market risk that a corporate CEO never attended any earnings call or met with
balance sheet faces. The options were foreign-curren- analysts. According to him, this was a red flag coupled
cy fluctuations, interest rate, commodities and liquid- with all the other noise around the bank’s aggressive
ity. I was amused to find that while all kinds of other accounting practices and accretion of bad assets. He
operational risks were listed out, corporate gover- was proved right because the CEO had to step down in
nance didn’t feature anywhere on the list. When I April 2018 after the Reserve Bank of India raised
pointed it out, I was told that corporate governance doubts. There was much rumour-mongering in the
wasn’t a risk. I quote this incident because investors years preceding this development, but it was never
– both large and small – tend to live in denial when it taken seriously by the market. A management that
comes to this elephant in the room. does not bother to engage with stakeholders – inves-
Yes, nobody wants to talk about corporate gover- tors, customers and employees – is clearly busy doing
nance. This is perhaps because good governance com- other stuff.
prises countless practices and rules – analysts could Some promoters and their professional managers
end up looking for a pin in a haystack if they were to are particularly reticent when it comes to engaging
rate a company on this parameter. Therefore, not too with stakeholders and media – an exception is made
many of them invest time on this subject. But it by them while receiving lifetime achievement awards.
doesn’t mean that it isn’t a risk. To my mind, that is a poor strategy and tends to back-
Over the years, I have discovered some telltale signs fire more often than not. Take the example of Sun
that have never failed me when it comes to smelling Pharma, which was in the eye of a storm after
trouble. In one of his columns, as Bloomberg colum- Macquarie’s Andrew Peretti sent out a sales note last
nist and former investment banker, Matt Levine, cor- December, raising “serious corporate governance
rectly says that there are two ways to analyse a compa- issues” at the company. For years, there were mur-
ny. The first method is tedious and requires under- murs on related-party transactions and loans to other
standing the financials, in-depth knowledge of the entities by Sun Pharma, but neither did the manage-
industry and financial modelling. The other method ment nor the investor community ever confront the
for an effective professional analysis of a company’s elephant in the room.
stock involves talking to the company, he says. While What surprises me is that the first instinct of com-
no management would ever give any specific informa- panies and large investors is to suppress anything that
tion on the next quarter’s performance, the intangible could be remotely unpleasant. Yes, large institutional
takeaways can be invaluable. investors are equally guilty of brushing material facts
The latter is what interests me the most. Companies under the carpet so long as the stock price is rising.
that care of stakeholders and are passionate about I still remember Oppenheimer Funds’ letter to the
their business are inevitably better communicators Board of Infosys showing support for Dr Vishal Sikka.
than those riding a momentary wave. The author of the letter, Justin Leverenz, the portfolio
A couple of years ago, a fund manager told me that manager of Oppenheimer Developing Markets Fund,

TAKING STOCK
wrote, “We would strongly encourage the how always knows, and it is for this
Board of Directors to restrain divisions in Good governance reason that despite all the noise
the firm and contain inappropriate inter- comprises around some companies, their
ventions by non-executive founders. Let
Vishal do what he was hired to do, without
countless stock prices never quite go places.
Another kind of company to steer
distractions.” The fund at the time held 2.7 practices and clear from is the type that is focused
per cent in Infosys, which was significantly rules – analysts more on its stock price than its busi-
lower than what the non-executive promot-
ers held, who had built the company from
could end up ness. While these companies make
great news, they can be trouble-
scratch. Not only did Oppenheimer not care looking for a pin some. Just look back at some of the
about the concerns on serious lapses, but the in a haystack if cash-strapped companies on the
fund manager didn’t bother to explain why
he chose to cut stake within a couple of
they were to rate brink of insolvency and you will
find steady loud announcements
months of writing that letter in February a company on they have been making over the
2017. Antennas should have gone up when Dr this parameter years on potential deals they plan to
Sikka paraded the entire board of Infosys close in weeks. One such company
before media in 2017 and brazenly admitted has been attempting to sell assets
to lapses in governance by calling them “judgment for nearly a decade now. So it is surprising that the pro-
errors.” Infosys simply refused to act on the lapses. moter continued to borrow against the company’s stock
Rather, the entire board came together to defend the from ‘unsuspecting lenders’, even after it breached
indefensible. most loan covenants in 2016.
It is for this reason that investors need to focus on Volatility in foreign currency and commodity prices
corporate-governance standards and management’s can pass, but poor management and corporate gover-
attitude towards all stakeholders. So, when a compa- nance lapses are more permanent in nature and,
ny’s management avoids engagement with media, therefore, can do lasting damage. WI
investors and analysts, especially in tough times, I The author is the editor of Value Research Stock Advisor
hear alarm bells. My belief is that Mr Market some-

INTERVIEW MRINAL SINGH
Deputy CIO - Equity, ICICI Prudential AMC
‘A high margin of safety is the

essence of value investing’
Popularised by Warren Buffett and How do you see the present valuations We are overweight on utilities,
his guru Benjamin Graham, value of the Indian markets? select banks, rural-facing business-
investing is a sophisticated method Broadly the market is fairly priced es and exporters. Consumer sta-
of investing. We speak to Mrinal but there exist pockets of relative- ples, NBFCs and high-ticket discre-
Singh of ICICI Prudential AMC to ly attractive valuation. So, the tionary are the areas we are under-
explore the value-investing scenar- approach now is to be stock specif- weight on.
io in the Indian context. Mr Singh ic rather than taking sectoral calls.
manages ICICI Prudential Value The auto sector has been going
Discovery Fund, which has assets Which pockets still have value? Which through a tough phase. Are you not
of over `16,000 crore. have become expensive? investing in it?

INTERVIEW
The Indian automobile market can been very fruitful for value inves- The inherent nature of the market
be divided into several segments – tors on account of the returns that is quite different when we compare
two-wheelers, three-wheelers, com- were generated. From an investor’s India and developed markets
mercial vehicles, passenger cars, perspective, in an up-trending or a around the world. To begin with,
utility vehicles and tractors. Apart momentum market, value perfor- the number of listed stocks in
from these, we have auto ancillar- mance is likely to take a back seat. India is close to 6,000 and growing,
ies, tyres, batteries etc., all of At such instances, it is important while in the US, that number
which present their own sets of for investors to stay put. would be close to 4,400.
unique opportunities. Given the Second, almost 50 per cent of the
diverse factors at play in each of Value investing may require you to buy Indian market is promoter-owned,
these segments, we are currently a company that has been falling? while US is an institutionally
evaluating the sector and making When do you pick such a stock? owned market. Therefore, corpo-
stock-specific decisions. Correction from time to time is a rate-governance standards are
given when investing in equities. much stronger in developed mar-
How do you define value? At such instances, it is important kets.
Value is the difference between the that the entire analysis required to Third, India is a growing econo-
intrinsic worth of a business and take a call on a scrip be done my with a young demography,
the price an investor is paying for beforehand. This will aid in decid- lower per-capita income and con-
that investment. In general, value ing whether to take a fresh posi- sumption demands, which makes it
investing is about maintaining a tion when the stock reaches the very different from the US.
high margin of safety. This does desired price level or avoid the So, even though the basic ten-
not mean investing solely based on name altogether. As an investor, it ants of value investing remain,
an optically low price-to-book or
price-to-earnings alone. Both of
these are parameters considered “It is imperative to understand that prices
but are not the sole deciding factor.
moving either way tend to create an illusion
How do you identify value traps? of a stock being good or bad, which may be
Our past experience and analysis
have proven that manage-
far away from the reality.”
ment-quality assessment, corpo-
rate-governance standards and is imperative to understand that what is different are the levers that
product obsolescence are the three prices moving either way tend to drive the respective markets.
factors that need to be closely create an illusion of a stock being
watched to avoid a value trap. good or bad, which may be far Can growth and value both be present
away from the reality. in the same stock?
How do you pick value stocks? When investing, there will be a
A combination of inexpensive val- India is largely seen as a growth point, though briefly, where value
uation, cash-generation capability, market. What place does value and growth may overlap. Typically,
good management and comfortable investing have here? after intense research, a value
balance sheet is the framework we While growth remains one of the investor will buy a name and stay
work with. major styles of investing in India, put for years till such a time when
there is room for value investors some of the basic premise on which
When do you exit a value stock? here as well. This can be seen the decision was made changes.
When value gets unlocked or when through the long-term track record The difference between a value and
an investment thesis is no longer of ICICI Prudential Value growth investors is the point of
valid, we exit a value stock. Discovery Fund. Over a decade, the beginning. A growth investor is
fund has been a wealth creator and interested in zones of certainty,
Value investing requires one to be has delivered a CAGR of 22 per while a value investor is interested
patient. How difficult is to persuade cent (as of April 2019). in the margin of safety (given that
investors to invest in a value fund? they operate in the zones of uncer-
Patience is an important and an How different is the value-investing tainty). Therefore, when the calls
inherent part of being a value scenario here as compared to that in play out for a value investor, expo-
investor. Historically, patience has developed countries like the US? nential gains are made. WI

INTERVIEW
Tracking Mrinal Singh

Here is a quick summary of the recent stock moves Mrinal
Singh has made in ICICI Prudential Value Discovery Fund
Increasing Decreasing Complete exits
conviction conviction Top exits in terms of per cent of equity over the last one year
Top companies where his Top companies where his in- Max stake during last 1 year (%)
investments have gone up vestments have gone down Blue Star 1.61
in the last one year in the last one year
Mindtree 0.42
Increase Decrease
(% of eq) (% of eq) Kotak Mahindra Bank 0.21
Amount Amount
invested (` cr) sold (` cr)
Amara Raja 0.95 Power Grid 0.40 Top holdings

Batteries Corporation
120 390 Amount invested (` cr) Current stake (% of net assets)
State Bank of India 1,306 9.8
Tata Power 0.77 Wipro
0.39
Company Sun Pharmaceutical 1,281 9.6
171 580
Infosys 1,127 8.5
Gujarat Pipavav 0.44 Sun 0.20 NTPC 895 6.7
Port Pharmaceutical
25 300 ITC 709 5.3
Wipro 682 5.1
Tata Motors
0.43 Cipla
0.11
Indian Oil Corpn. 658 4.9
223 53
Mahindra & Mahindra 555 4.2
Hindalco 0.30 HDFC Bank
0.10 PI Industries 428 3.2
Industries
135 545 Exide Industries 407 3.1
State Bank of 0.24 Mahindra & 0.08

India
600 Mahindra
78 Top equity stakes
% of equity Amount invested (` cr)
Indian Oil 0.13 Larsen & Toubro

0.07 Gateway Distriparks 4.9 71
Corporation
158 120 PI Industries 3.0 428
Amara Raja Batteries 2.7 306
SBI Life 0.08
Insurance Gujarat Pipavav Port 2.5 107
49 GE Shipping Co. 2.3 100
NTPC
0.07 Exide Industries 2.2 407
214 Sadbhav Engineering 1.9 77

J&K Bank 1.8 61
Max Financial Services 1.7 189
Persistent Systems 1.7 82

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www.valueresearchstocks.com
When
to sell
a stock
D
o you know that Nick Train, the founder
of Lindsell Train and the UK’s star fund
manager, has created enormous wealth
If you don’t feel comfortable
simply by ‘not’ selling? He is a rare buy-
and-hold investor who has rather
owning something for
successfully avoided the bad investment 10 years, then
don’t own it for
behaviour of over-trading. Like Warren Buffett, he
believes that investors are generally too ready to sell
out of investments. They are mistakenly confident
that doing something, as opposed to nothing, will
10 minutes.
make a positive difference.
Buying the right stocks and selling them at an – Warren Buffett
appropriate time is important for stock-investing
success, but it is even more important to not sell
stocks prematurely. Value Research Stock Advisor not
just helps you pick winning stocks but we also keep a until the last minute. The market is inherently
track of them so as to tell you promptly when it is unpredictable and you may find yourself hit hard by
time to exit them. a sudden crash. It is best to start pulling out of the
But when should an investor sell his holdings? He market at least one year in advance and keep doing
should do so in four cases. First, he’s achieved the so gradually over the subsequent months as your
financial goal he was investing for, for example, goal nears.
retirement or paying for his kids’ university Lastly, selling to meet your financial needs doesn’t
education. Second, the stock’s fundamentals have mean you consume your investments for impulse
changed – debt has exploded, sales have gone into a spending on the latest cell phone or any fancy gadget.
terminal decline or the CEO has been arrested for
defrauding shareholders. Third, the valuation or the Fundamental shifts
price the stock is commanding has gone beyond a Companies are rather fond of citing statistics such as
rational explanation. Fourth, his original thesis was these: India has only 13 cars per 1,000 people
wrong in a substantial sense. compared to the USA’s 440 and this implies huge
Let’s look at these reasons in a bit more detail. future growth. Enter Uber and Ola, which are rapidly
rendering car ownership redundant and casting
Approaching financial goal serious doubt on the forecast.
Wealth creation is not an end in itself; it is usually a And this does not end with cars. The rise of the
means to an end. This could mean a trip to the Grand internet and mobile banking means that those
Canyon, paying for home refurbishment or paying for missing bank branches in rural India may never get
your parents’ medical expenses in their old age. built. The rise of restaurant delivery apps may mean
The best reason to sell your investments is that that those local Dominoes and Pizza Hut outlets never
you’ve met the financial goal you had been investing materialise. The unleashing of
for in the first place. It is the ultimate definition locked-up accommodation
of investing success and perhaps nothing is more capacity through Airbnb has serious implications
gratifying than reaping the rewards of your for hotel chains. Google’s ever-growing reach into
investment efforts to fulfil what you want. our lives threatens a host of industries – travel
Therefore, if your financial goal is agencies, IT and even automobiles. One of
approaching and your investments have today’s largest sectors, oil and gas is reeling
grown sufficiently to meet it, by all from the impact of the shale revolution.
means go ahead and sell your The point is a lot can change since
stocks. But make sure you don’t you have invested in a stock,
leave your money invested casting doubts on your
One should ascertain the value, given the quality of the business, its
management and the growth one can expect. After factoring all these,
if you feel that the valuation is not justified, move out of the stock.

A lot can change since you have invested in a stock, casting doubts on
your investment rationale. It could be a factor internal to the company
or it could be external factors causing an industry-wide impact.
investment rationale. It could be a factor internal to “Price is what you pay. Value
the company – a deteriorating moat, a new is what you get,” said Warren
management taking the company in a direction you Buffett. It is important to
don’t like or a board room tussle. Or it could be an ascertain the maximum price
external factor causing an industry-wide impact. one is willing to pay for a
These are all plausible reasons to be worried about company. This should be
the prospects of your stock. But be sure to validate evaluated periodically. One
them before you press the sell button. should ascertain the value,
At Value Research Stock Advisor, we keep a track given the quality of the
of our recommendations and revisit our thesis should business, its management and
a fundamental shift take place. Usually, the signs of a the growth one can expect. After
trouble will start showing up in the numbers, which factoring all these, if you feel that the valuation is not
you should investigate further. Among others, here justified, move out of the stock. For example, if a
are some of the things you should watch out for: company with a great business and competitive
z Falling market share strength is expected to deliver growth of 20–25 per
z Deteriorating sales and margins cent over the next five–10 years, then a price-to-
z Dwindling operating cash flows earnings multiple of more than 100 times is not
z Lower dividend justified. Therefore, it’s time to sell.
payments
z Rising debt levels Faulty thesis
z Notable equity Everyone makes mistakes, especially in a complex
dilution process such as stock analysis. Irving Fisher, one of
z Suspicious related- America’s most respected economists, said that stocks
party transactions had reached what seems
like a permanently high
Price turns irrational plateau, shortly before the
One of the fundamental rules of investing is to buy a 1929 crash and the
great business at a reasonable price. Hence, valuation depression that followed.
plays a very important role in making money even in Companies do their best to portray a positive
the long term. Similarly, valuation plays an important picture without necessarily making false statements.
role in deciding when to sell a stock. If you realise that you were wrong about a meaningful
During the course of the investment, the valuation part of your investment thesis, you should admit your
of your investment may go up and down and still error, shake off the dust and sell the stock
staying the course is important to making money in immediately.
the long term. However, there comes a time when the Investors often continue to hold onto their losers in
valuation goes beyond reason and that is the time the hope of recovering their money, or worst still,
when one should start considering selling the stock or invest more money to ‘average out’ their cost of
reducing one’s stake. holding. That’s a big mistake. There’s no point
throwing good money after bad. Besides, the more you
delay your exit, the higher the opportunity cost of
Investors often continue to hold sticking to a loser instead of moving your money to a
onto their losers in the hope of good company.
At Value Research Stock Advisor, we closely keep a
recovering their money, or worst track of these factors to decide when to sell a stock.
We constantly evaluate our recommendations on the
still, invest more money to basis of the fundamental shifts, valuation and
‘average out’ their cost of revisiting the original thesis and testing it. But as an
investor, you need to evaluate your financial goals and
holding. That’s a big mistake. take action as you are nearing them.

STOCK
SCREEN
Ideas to delve deeper

S
ound investment methods outlast cycles and However, please note that they are not our
fads and generate profits over the long run. recommendations.
Value Research presents stock screens based on Each stock screen explains the reason behind picking
time-tested principles. the stock, which over time will help you develop your
What are stock screens? These are a listing of attractive own investing rules. As we will be evolving such models
stocks based on the objective principles of sound and implementing changes to the methodology to be in
investment. We apply stock filters carefully crafted by line with economic and market cycles, the list will be
Value Research analysts on the universe of Indian stocks dynamic and updated periodically.
to identify these attractive stocks. The filters are devised In the following pages of ‘Stock Screen’, we present
to identify stocks of the following kinds: five categories that collectively list a number of
Quality stocks available cheap stocks. With these, you will be well-equipped to select
ttractive blue chips
A stocks to build your own portfolio after doing further
Stocks available at a steep discount to book value research. If you think that stock picking is a lot of
High dividend-yield stocks hard work, you can get started with these screens and
Growth stocks available at reasonable prices with time understand the way the ideas are shaping to
We believe that stocks listed in this section are a good make your own judgement on stock selection.
starting point to start a close scrutiny before adding Great investments are not easy to find, but practice,
them to your portfolio. patience and sound principles are all that you need.
Key terms
Universe companies In order to arrive at our universe of companies, we checked ICR of more than two implies that it can service more than twice its current
if the companies traded on all the days for the last two quarters. We considered interest charges.
the companies with a market capitalisation of more than `500 crore. Debt-equity ratio The debt-equity ratio is calculated as the ratio of total out-
Price to book value (P/B) Price to book value is the ratio of the price of a stock standing borrowings of the company to its total equity capital. It essentially tells us
to the book value per share of the company. It shows how much premium investors which companies use excessive leverage to achieve growth. Conventionally, the
are willing to pay for the underlying net assets of the company. debt-equity ratio of less than two is considered safe.
Price to earnings (P/E) The price-to-earnings ratio, or the P/E ratio, is simply Return on equity (RoE) This is measured by taking profit after tax as a percent-
the ratio of the price of a stock to its earnings per share. It shows in multiples how age of net worth of the company. It indicates how efficiently the company has been
much investors are willing to pay for the earnings. The thumb rule of valuing a stock able to utilise investors’ money.
is that a high-growth stock will have a high P/E ratio, while a value stock will have Stock return Stock return is calculated by taking the percentage change in the
a relatively lower P/E ratio. price of the stock adjusted for bonus or split.
Earnings per share (EPS) Earnings per share, or EPS, is calculated by dividing Dividend yield This is defined as the percentage of the dividend paid per share
the company’s net profit with the total number of outstanding shares. to the current market price of the stock. Since the denominator in this ratio is the
EPS growth Growth of the EPS over a specified time period – trailing 12 months market price, a stock’s dividend yield changes every day.
(TTM), a quarter or five years. Quarterly comparisons are on a year-on-year basis. Dividend-payout ratio This is the total dividend paid to the shareholders as a
For five years, the figures are annualised. percentage of net profit.
Price-earnings to growth (PEG) This ratio demonstrates how high a price we Altman Z-Score Developed by Edward Altman of New York University, the Z-Score
are paying for the growth that we are purchasing. It is the ratio of price to earnings predicts a company’s financial distress or the possibility of its going bankruptcy
to the EPS growth of the stock. In all our analyses, we have taken five-year historic within two years. A Z-Score of more than three is desirable.
EPS growth. Modified C-Score It tells the probability of financial manipulations. In order to
Earnings yield Earnings before interest and taxes (EBIT) divided by enterprise develop it, we have modified James Montier’s C-Score. A C-Score of less than four
value. Enterprise value is market cap added to total debt and less cash and is desirable.
equivalents. Piotroski F-Score Developed by Joseph Piotroski, the F-Score highlights financial
Dividend per share Total dividend declared during the year divided by the total performance as compared to that in the previous
number of outstanding shares. year. It thus points out to the current outperformer Growth Value
Net sales This is simply the income that a company derives by in terms of profitability and financial improvement.
selling the goods and services that it produces. The downside of taking sales as an An F-Score of seven or above is good. Large
indicator of growth is that it may not be matched by a similarly scintillating bot- Stock style It indicates the style of the stock. It
tom-line (net profit) performance. A company may be earning revenue at a high is derived from a combination of the stock’s valu- Mid
rate. But if it is doing so by incurring a very high cost, the bottom line may not grow ation — growth or value — and its market capital-
in proportion to the growth in the top line (sales). isation — large, mid and small. For example, on the Small
Interest-coverage ratio (ICR) This indicator is generally used to gauge right we have shown the stock style of a large-cap
whether a company has the ability to service its debt. The interest-coverage ratio growth stock.
is calculated as the ratio of operating profit to interest outgo. A company with an

STOCK
SCREEN
Quality stocks available cheap

The stocks listed below clear essential checks on solvency, accounting,
recent financial performance and valuations
No. of companies that
cleared the filters
REASONS TO INVEST THE FILTERS 992

Safety Market cap greater than C-Score less than 4 573
Soundness `500 cr PEG less than 1
104
Good performance Z-Score greater than 2.99 P/E to median P/E less
F-Score greater than or equal than 1.5 97
Reasonable valuations
to 7 Earnings yield greater than 5% 40
Banking and finance companies were removed from this analysis as the metrics don’t apply to them.
Safe bets
Company Stock Altman Piotroski Modified Earnings Market Share 52-week
Industry style Z-Score F-Score C-Score yield (%) P/E PEG cap (` cr) price (`) high/low (`)
Action Const Equipment

Construction 5.1 9 2 10.0 16.5 0.26 1,079 92 185-71
Ahluwalia Contracts (India)
Construction 7.8 8 2 9.9 17.6 0.39 2,067 313 404-251
Asian Star Company
Gems & Jewellery
3.4 9 0 9.2 10.5 0.89 1,193 745 1081-610
Beekay Steel Industries
Stainless Steel
4.4 8 1 22.6 5.5 0.07 549 297 440-252
Cigniti Technologies
Computer Software
3.8 8 2 15.7 6.0 0.11 888 317 492-225
Confidence Petroleum India

Storage & Distribn.
8.4 8 0 8.3 19.0 0.14 1,041 38 57-29
DCM Shriram
Diversified
4.3 9 2 14.8 9.0 0.30 8,156 525 530-237
DIL
Drugs & Pharma
3.8 8 0 20.4 7.1 0.10 642 700 1125-623
Escorts
Auto Ancillaries
5.0 9 2 11.7 14.6 0.66 6,985 569 970-541
Everest Industries 3.5 8 1 13.4 10.2 0.21 631 403 598-376

Cement & Asbestos prod.
Excel Industries 6.3 8 1 19.4 7.9 0.10 1,240 990 1922-923

Pesticides
Fairchem Speciality 4.0 9 0 7.9 19.8 0.26 1,867 469 510-320

Organic Chemicals

STOCK
SCREEN

Greenlam Industries
Wood 5.1 9 1 5.4 27.1 0.55 1,928 805 1240-652
Gujarat Narmada Valley
Nitrogenous Fertilizer 3.4 9 2 24.9 4.5 0.16 4,414 283 502-238
HEG
Welding machinery
6.6 8 3 74.6 2.0 0.02 6,168 1,588 4955-1556
Heidelberg Cement India
Cement
3.1 8 2 9.2 19.0 0.39 4,021 178 192-122
HIL
4.3 9 1 14.2 12.4 0.24 1,313 1,765 2606-1573
Himadri Speciality Chem
Coal & Lignite
4.3 9 3 10.6 13.7 0.22 4,201 101 155-91
Insecticides (India)
Pesticides
4.2 8 1 11.4 12.7 0.56 1,288 625 801-361
International Paper APPM
Paper
3.6 9 1 18.6 7.8 0.17 1,560 392 591-302
Kennametal India
Machine Tools
5.8 8 1 5.6 25.6 0.28 2,270 1,108 1275-681
KNR Construction
Construction
4.8 8 2 7.5 13.1 0.35 3,293 232 313-165
Maithan Alloys
Ferro Alloys
6.7 8 1 29.7 5.8 0.09 1,469 506 765-340
Meghmani Organics
Pesticides
3.9 9 2 24.6 6.6 0.12 1,558 61 103-42
Monte Carlo Fashions
Readymade Garments
4.7 8 2 22.9 8.0 0.93 636 306 542-300
National Aluminium Co
Aluminium
3.6 8 2 45.6 5.2 0.27 9,170 49 78-46
NR Agarwal Industries
Paper
3.4 8 1 21.7 4.9 0.03 515 306 616-265
NRB Bearings
Ball Bearings
3.5 8 1 9.2 13.7 0.52 1,608 167 224-150
Ramco Industries
4.0 8 2 6.4 21.1 0.42 1,710 199 266-172
Sandur Manganese
Minerals
6.8 9 1 46.1 4.8 0.25 779 885 1422-750
Satia Industries
Paper
3.5 9 2 14.3 8.2 0.09 719 715 740-343

STOCK
SCREEN

Seamec
Shipping
11.5 9 1 5.8 19.4 0.47 1,048 412 485-187
Sharda Motor Industries
Auto Ancillaries 4.8 8 3 21.4 9.0 0.29 768 1,271 2340-1139
Shemaroo Entertainment
Media & Entertainment 11.9 8 2 12.7 12.2 0.73 1,013 367 543-333
Sreeleathers
Footwear 11.3 9 1 8.2 15.3 0.43 503 198 297-156
Sterlite Technologies
Communication Equipt. 5.3 8 2 12.6 12.1 0.17 6,804 168 400-164
Sunflag Iron & Steel Co
Finished Steel 3.2 8 3 24.7 5.2 0.13 712 40 84-39
Tata Metaliks
Pig Iron 4.1 8 0 12.0 9.1 0.25 1,668 592 829-545
Time Technoplast
Other Forms-Primary Plastic 3.2 9 0 14.6 9.4 0.59 1,730 77 165-74
VenkyS (India)
Food Processing 5.6 9 2 12.2 13.4 0.35 2,325 1,636 3560-1616
Data as on May 14, 2019. New entrants.
Reasonably priced growth stocks

Growth investing is about picking companies that are fast growing their
bottom lines. But make sure that the valuations are not overheated.
REASONS TO INVEST THE FILTERS cleared the filters
All-weather style Market cap greater than

At least 20% in the trailing 12
992
Companies with strong `500 cr months YoY
fundamentals Earnings growth of:

At least 20% in latest quarter
144
YoY
Greater stability vis-a-vis
At least 20% in the past five Stocks with a P/E of less
value or growth years
than 15 70
On fast track
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)
Alicon Castalloy 14.7 18.4 0.65 21.5 31.4 22.2 570 779 750-510
Aluminium Prod.
Ashoka Buildcon 11.2 19.8 0.43 32.3 45.8 21.8 115 3,300 189-93
Construction

STOCK
SCREEN
Atul Auto
Two & Three Wheelers
12.3 22.7 0.95 66.1 29.7 44.3 300 652 450-269
Balmer Lawrie Investments
Misc. Fin.services
11.4 17.1 0.67 42.8 41.0 139.1 387 861 458-361
Bharat Financial Inclusion
Misc. Fin.services
14.2 27.1 0.18 47.2 511.9 144.9 88112,389 1235-824
Bombay Dyeing
Textile Processing
1.9 68.8 0.02 11,346.8 3,570.9 43.5 113 2,329 289-82
Cigniti Technologies
Computer Software
6.0 28.7 0.11 48.7 348.7 127.4 317 887 492-225
DCM Shriram
Diversified
9.0 10.1 0.30 501.2 39.5 62.5 523 8,187 530-237
DIL
Drugs & Pharma
7.1 21.3 0.10 36.6 454.0 88.8 705 642 1125-623
Excel Industries
Pesticides
7.9 11.5 0.10 112.3 299.5 33.8 993 1,250 1922-923
Filatex India 10.1 17.7 0.24 61.0 41.9 48.1 39 857 66-37
Synthetic Yarn
Gallantt Ispat 5.9 11.8 0.04 143.9 75.6 45.5 33 960 51-22
Steel Wires
Ganesha Ecosphere 13.0 13.2 0.79 37.0 29.4 37.2 288 630 403-232
Textile Processing
Gateway Distriparks 3.9 23.2 0.26 837.9 341.4 55.4 132 1,440 228-96
Transport Support Services
Genus Power Infra 14.3 9.6 0.35 48.7 40.3 27.1 27 687 50-23
Electronic Components
Granules India 11.9 18.8 0.59 212.8 72.8 26.4 110 2,812 123-72
Drugs & Pharma
Graphite India 2.3 18.6 0.05 112.8 1,364.7 50.3 332 6,605 1127-325
Welding machinery
Gujarat Alkalies & Chem 5.2 7.0 0.17 44.6 84.7 44.4 520 3,836 693-416
Caustic Soda
Gujarat Ambuja Exports 8.7 8.9 0.37 27.3 82.4 68.2 190 2,127 278-173
Other Agri.prod.
Gujarat Fluorochemicals 13.2 17.0 0.61 96.9 915.4 30.5 92610,315 1125-721
Organic Chemicals
HEG 1.9 12.8 0.02 153.4 611.8 61.4 1,579 6,140 4955-1556
Welding machinery
Himadri Speciality Chem 13.7 30.7 0.22 20.3 51.9 42.1 100 4,190 155-91
Coal & Lignite

STOCK
SCREEN
Hindustan Oil Exploration

Crude Oil & Natural Gas 10.7 46.8 0.41 191.6 293.7 26.8 128 1,681 165-103
Insecticides (India)
Pesticides 12.7 18.5 0.56 75.1 21.4 20.8 619 1,286 801-361
International Paper APPM
Paper 7.9 31.1 0.17 83.0 140.9 51.3 389 1,572 591-302
IOL Chemicals & Pharma
Drugs & Pharma 6.7 28.5 0.05 834.5 704.7 157.6 170 982 226-77
Ion Exchange (India)
Industrial Machinery 9.3 13.5 0.38 44.7 23.4 33.2 374 550 490-335
Jain Irrigation Systems
Plastic tubes & pipes
9.1 30.3 0.19 23.1 30.1 42.9 49 2,462 107-46
Jindal Saw
Steel Tubes & Pipes
4.8 6.9 0.15 36.4 27.1 59.0 75 2,413 110-67
JK Paper
Paper
5.4 11.6 0.11 50.1 62.6 90.9 128 2,290 194-97
Jubilant Life Sciences
Drugs & Pharma
11.8 19.2 0.07 22.7 29.8 96.6 604 9,794 899-586
Kirloskar Brothers
Pumps & Compressors
15.0 50.5 1.85 41.7 67.0 89.2 159 1,251 332-134
Kirloskar Ferrous Ind
Pig Iron
12.5 15.0 0.63 74.6 158.0 57.9 89 1,225 104-77
L&T Finance Holdings
Misc. Fin.services
10.6 15.9 0.35 93.8 65.1 67.5 11823,535 190-111
Lumax Industries
Auto Ancillaries
13.8 20.7 0.14 169.7 73.2 36.0 1,513 1,435 2417-1405
M&M Financial Services
Misc. Fin.services
12.6 23.1 1.06 86.9 40.5 35.6 37623,104 527-343
Meghmani Organics
Pesticides
6.6 11.9 0.12 52.4 62.2 90.5 61 1,558 103-42
MM Forgings
Castings & Forgings
14.0 14.8 0.53 58.2 69.3 26.3 512 1,275 742-470
Mukand
Finished Steel
11.8 38.0 0.58 25.5 151.5 26.4 45 637 74-42
National Peroxide
Inorganic Chem.
8.6 18.8 0.24 78.9 174.6 93.2 2,556 1,488 5539-2312
NMDC
Minerals
6.6 9.6 -1.06 77.8 33.7 29.7 9228,307 124-89
NRB Bearings 13.8 23.0 0.52 25.7 75.8 49.7 167 1,623 224-150
Ball Bearings

STOCK
SCREEN
Orient Paper & Industries

Paper 6.5 28.5 0.07 105.4 106.2 87.5 31 664 53-25
Phillips Carbon Black
Carbon Black 5.9 22.5 0.13 91.9 79.0 42.8 131 2,282 287-130
PNB Housing Finance
Housing Finance 11.0 – – 50.2 57.7 21.8 76913,127 1428-675
Polyplex Corporation
Plastic Films 5.7 10.2 0.10 53.8 95.1 57.3 509 1,634 668-406
Prakash Industries
Diversified 1.9 8.9 0.06 30.3 109.0 66.6 68 1,108 191-66
Ramkrishna Forgings
Auto Ancillaries
11.9 23.0 0.12 22.2 80.1 193.3 475 1,533 798-414
Renaissance Global
Gems & Jewellery
7.0 5.3 0.25 30.3 32.2 40.0 289 554 345-252
R Systems International
Computer Software
9.3 12.0 -14.34 221.4 173.7 51.4 47 555 57-25
Sandur Manganese
Minerals
4.8 10.7 0.25 76.3 62.4 41.1 885 779 1422-750
Satia Industries
Paper
8.1 6.0 0.09 38.7 27.8 37.7 715 715 740-343
Seshasayee Paper
Paper
6.9 10.6 0.13 63.4 45.9 63.0 934 1,181 1348-818
Seya Industries
Organic Chemicals
12.6 19.6 0.24 43.6 31.5 129.6 454 1,117 714-378
Shriram City Union Fin
Equipt.Leasing
9.6 20.9 0.71 1,040.7 39.0 26.6 1,450 9,666 2400-1405
Sonata Software
Computer Software
15.0 12.1 0.48 29.7 37.5 103.3 339 3,570 429-265
SP Apparels
Textile Processing
11.2 12.9 0.23 86.2 52.0 67.7 286 743 363-201
Steel Authority Of India
Finished Steel
7.9 13.8 -12.05 1,327.8 222.1 41.4 4819,950 91-44
Sterlite Technologies
Communication Equipt.
12.1 30.8 0.17 46.4 68.2 67.1 167 6,802 400-164
Summit Securities
Invest.Services
7.4 38.7 0.11 190.3 376.0 54.4 525 572 1003-473
Tata Steel BSL
Finished Steel
1.9 40.3 0.02 99.8 101.4 46.6 30 3,302 47-22
Technocraft Industries (I) 10.0 10.4 0.99 51.7 40.8 84.3 495 1,216 650-472
Steel Tubes & Pipes

STOCK
SCREEN
Tejas Networks
Computer Hardware 11.9 16.5 0.31 22.3 36.6 23.8 191 1,758 325-115
Trident
Cotton & Blended Yarn 8.8 12.2 0.65 80.1 41.2 50.7 64 3,284 76-51
Ultramarine & Pigments
Dyes & Pigments 12.3 14.0 0.39 35.5 33.2 78.4 243 704 322-205
Universal Cables
Wires & cables 10.5 13.5 0.33 62.2 130.9 26.9 199 689 350-131
Vindhya Telelinks
Wires & cables 10.1 13.6 0.17 126.9 89.4 48.6 1,301 1,547 2030-890
West Coast Paper Mills
Paper
4.7 10.9 0.04 57.3 63.4 79.4 224 1,485 415-216
WPIL
Pumps & Compressors
8.1 22.5 0.18 192.5 348.8 83.0 781 775 987-516
Zee Learn
Education
12.3 63.7 0.36 63.2 31.0 31.0 24 799 42-24
Data as on May 14, 2019. EPS growth rates are annualised. Median P/E is for less than five years if five-year data are not available. New entrants.
Discount to book value

Stocks available at a discount to their book value indicate bargain and
inherent value, provided the business fundamentals are sound
REASONS TO INVEST THE FILTERS
993
Really cheap Market cap greater than Companies must have a five-year
Relatively undervalued `500 cr earnings growth of more than 787
Companies with assets Debt-equity ratio of less than 1.5 10%
Price at least 10 per cent below 555
times
Return on net worth of more than the book value
411
10% in the most recent year
30
Bargain hunt
Company Stock Dividend Debt-equity Market cap Share 52-week
Industry style P/B P/E PEG yield (%) ratio RoE (%) (` cr) price (`) high/low (`)
Ajmera Realty & Infra

Infrastructure
7.0 0.9 0.11 2.1 0.9 15.9 565 157 262-132
Bharat Road Network 29.3 0.7 1.15 0.5 1.0 11.5 772 92 181-78
Construction
Chennai Petroleum Corp 0.9 0.9 – 8.6 1.1 24.5 3,187 212 345-197
Crude Oil & Natural Gas

STOCK
SCREEN

Datamatics Global Ser

Computer Software
7.9 0.9 1.06 0.7 0.1 13.2 592 100 155-82
Eros International Media

Media & Entertainment
2.2 0.2 0.32 0.0 0.3 11.0 580 60 157-57
Genus Power Infr

Electronic Components
14.3 0.9 0.35 1.5 0.3 12.0 687 27 50-23
Gujarat Alkalies & Chem

Caustic Soda
5.2 0.9 0.17 1.2 0.1 14.9 3,836 524 693-416
Gujarat Narmada Valley

Nitrogenous Fertilizer.
4.5 0.9 0.16 2.6 0.1 18.9 4,399 283 502-238
Hindalco Industries
Aluminium
32.3 0.9 -8.19 0.6 0.9 12.3 43,542 192 260-182
Hinduja Global Solutions

Misc.Other Services
7.7 0.8 -14.16 1.6 0.4 13.6 1,313 626 935-562
India Glycols
Organic Chemicals
4.5 0.7 0.12 1.7 1.0 12.3 721 233 545-220
Indian Metals & Ferro

Metal Tanks & Fabrications
6.4 0.5 0.21 7.0 0.7 16.4 576 215 458-203
Kalyani Steels
Finished Steel
6.7 1.0 0.32 2.7 0.2 15.5 809 186 307-176
Kiri Industries
Dyes & Pigments
5.2 1.0 0.24 0.0 0.1 11.2 1,605 514 682-373
Munjal Showa
Auto Ancillaries
7.7 1.0 6.99 0.0 0.0 14.3 594 147 261-145
National Aluminium Co
Aluminium
5.2 0.8 0.27 9.5 0.0 13.0 9,188 49 78-46
NHPC
Electricity Generation
12.8 0.9 25.17 6.3 0.7 10.8 22,300 22 28-22
NLC India
9.2 0.7 3.40 6.9 1.0 15.4 9,055 65 91-60
Polyplex Corporation
Plastic Films
5.7 0.6 0.10 7.8 0.3 11.7 1,634 508 668-406
Prakash Industries
Diversified
1.9 0.3 0.06 0.0 0.3 14.5 1,108 68 191-66
Redington (India)
Computer Hardware
7.3 0.9 1.37 2.7 0.4 14.5 3,506 89 139-64
Renaissance Global
Gems & Jewellery
7.0 0.9 0.25 0.0 0.6 11.9 554 289 345-252

STOCK
SCREEN
Sandesh
Books & Newspapers
8.8 0.7 2.54 0.7 0.0 12.8 510 682 1069-639
SJVN
9.1 0.8 -5.54 8.8 0.2 11.0 9,432 24 33-22
Skipper
Electronic Equipts.
9.2 0.9 -0.83 2.9 0.8 20.3 580 57 201-49
Srikalahasthi Pipes
Pig Iron 7.2 0.7 0.29 3.3 0.3 14.8 841 180 324-157
Sunflag Iron & Steel Co
Finished Steel 5.3 0.8 0.13 1.2 0.4 16.8 723 40 84-39
Tata Chemicals
Soda Ash 12.6 1.0 0.43 1.9 0.6 27.9 14,587 568 782-550
Tata Sponge Iron
Sponge Iron 8.6 1.0 0.82 2.9 0.0 15.2 1,073 711 1156-661
Thomas Cook (India)
Tourism 1.5 1.0 0.01 0.2 0.0 120.8 8,787 236 288-193
High dividend-yield stocks

Good dividends are not just a bonus in addition to stock returns, they also
accumulate to become sizeable in the long run
REASONS TO INVEST THE FILTERS
Cushion against volatility Market cap greater than Stocks with a current dividend 989
Higher total return `500 cr yield of more than 3%
850
Generate regular tax-free Dividend payout ratio of less Stocks with sustained per
income than 40% share dividend and amount 31
over the past five years
18
Dear dividend
Company Stock Dividend Dividend Dividend Earnings Market cap Share 52-week
Industry style P/E PEG per share (`) yield (%) pay-out ratio (%) yield (%) (` cr) price (`) high/low (`)
Arvind
Cloth
6.6 -2.63 2.4 3.3 20.1 12.4 1,900 74 439-72
BSE
Misc. Fin.services
13.6 -0.18 36.0 6.0 27.0 -893.9 2,701 599 881-535
Deepak Fertilisers
Inorganic Chem.
10.8 2.10 6.0 4.7 32.5 8.9 1,125 128 358-104

STOCK
SCREEN
Company Stock Dividend Dividend Dividend Earnings Market cap Share 52-week
Industry style P/E PEG per share (`) yield (%) pay-out ratio (%) yield (%) (` cr) price (`) high/low (`)
Graphite India
Welding machinery
2.3 0.05 17.0 5.1 32.2 25.9 6,506 331 1127-325
Gujarat Industries Power Co
12.6 -0.93 2.7 3.9 24.6 24.7 1,041 69 102-67
Gujarat Mineral Dev Corp
Coal & Lignite
10.6 -0.51 3.5 4.8 31.5 26.8 2,321 73 130-69
Hindustan Zinc
Other Non-Ferrous Metal
13.6 4.73 8.0 3.1 36.4 12.3 1,07,978 256 309-243
IRB Infra Developers
Construction
4.5 0.38 5.0 4.5 19.1 15.4 3,942 111 257-105
Moil
Minerals
8.0 -50.91 5.5 3.8 36.0 45.9 3,748 145 202-140
NLC India
9.2 3.40 4.5 6.9 35.2 9.9 9,041 65 91-60
ONGC
Crude Oil & Natural Gas
7.2 1.06 6.6 3.0 38.3 15.0 2,05,939 164 192-128
Procter & Gamble Hygiene
Drugs & Pharma
53.5 0.67 15.0 10.7 26.5 3.0 6,853 4,120 4150-1830
PTC India
Electricity Distribn.
4.7 1.06 4.0 5.9 33.3 3.9 2,008 68 94-64
Rail Vikas Nigam
Construction
8.1 - 0.8 3.6 29.3 11.1 4,608 22 27-19
Reliance Capital
Equipt.Leasing
2.3 0.17 11.0 10.3 21.2 14.8 2,705 108 488-102
Reliance Infrastructure
Electricity Distribn.
2.6 -0.33 9.5 9.1 18.7 28.1 2,735 104 490-97
Srikalahasthi Pipes
Pig Iron
7.2 0.29 6.0 3.3 19.0 27.7 843 179 324-157
Sutlej Textiles & Industries
Synthetic Yarn
10.1 -0.78 1.3 3.6 18.8 8.6 589 36 64-34
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STOCK
SCREEN
Attractive blue chips

Investing in blue chips at reasonable valuations is one of the simplest
methods of wealth creation with limited pain
REASONS TO INVEST THE FILTERS cleared the filters
Liquidity Large and mid caps
298
Large companies in respective businesses Debt-equity ratio of less than two
Strong balance sheets Interest coverage ratio should be more than 247
Liked by institutions two 190
Average ROE should not have fallen more than
84
20 per cent in any year
Annualised earnings growth of more than 20% 38
over the past five years 15
PEG of less than 1.5 8
Five-year average return on equity above 20%
Solid foundation
Company Stock Debt-equity Interest 5Y avg 5Y EPS Market cap Share 52-week
Industry style P/E PEG ratio coverage ratio RoE (%) growth (%) (` cr) price (`) high/low (`)
Aarti Industries
Organic Chemicals
31.7 1.27 1.3 4.3 22.8 64.8 13,624 1,569 1808-1100
Godrej Cons Products

Cosmetics & Toiletries
28.0 1.20 0.6 12.8 24.5 25.2 65,552 642 979-627
Hero Motocorp 14.7 1.48 0.0 171.2 36.6 43.6 50,679 2,523 3712-2475
Two & Three Wheelers
Minda Industries 25.4 0.42 0.4 12.6 20.4 58.7 8,839 338 459-261
Auto Ancillaries
Natco Pharma 11.8 0.20 0.1 58.6 21.9 51.3 9,704 534 848-520
Drugs & Pharma
Rajesh Exports 14.4 0.63 1.2 3.5 20.9 22.8 20,092 677 785-542
Gems & Jewellery
Sundram Fasteners 23.6 0.81 0.5 15.8 20.9 73.9 10,818 513 689-480
Fasteners
Vinati Organics 32.6 1.22 0.0 94.5 26.4 57.9 9,204 1,818 1935-910
Organic Chemicals
Data as on May 14, 2019. EPS growth rates are annualised. New entrants.

WORDS WORTH
NOW
There is a credit squeeze, over-leveraging, excessive

concentration, massive mismatch between assets and
liabilities, coupled with some misadventures by some very
large entities, which is a perfect recipe for a disaster.
Injeti Srinivas Corporate Affairs Secretary, Business Standard, May 13, 2019
I think that China felt they were being beaten so Tata Consumer Products
badly in the recent negotiation that they may as [to be formed after
well wait around for the next election… The only merging Tata Chemicals’
problem is that they know I am going to win. consumer businesses with
Donald Trump US President, The Economic Times, May 13, 2019
Tata Global Beverages]
consolidates our current
presence in food and
beverages in the fast-
We were a late entrant in the brick & mortar business too. We were growing consumer sector.
extremely slow in the first 8-10 years. I think even the online business Through this combination,
is trending that way. It’s in our DNA not to lose money we have created a strong
recklessly. Some see that as a good approach while others growth platform to meet
find it not aggressive enough. But kya karein, we are like the growing aspirations of
this only. We are taking e-commerce one quarter at a
Indian consumers.
time. Reviewing and course correcting, in small ways.
N Chandrasekaran Chairman, Tata
Neville Noronha CEO, Avenue Supermarts, The Economic Times, May 15, 2019 Sons, Mint, May 16, 2019
If you’re a small publisher today, it’s very hard to run

ads on your website because you don’t have a giant
ads platform, so you may want to plug into Google or
Facebook. And if you do that, you’re basically going to
have to tell customers you are selling data to them.
Evan Spiegel CEO, Snap Inc., Financial Express, May 15, 2019
[On collapse of the JV with ThyssenKrupp] A lot of heavy lifting has been done in
Europe over the last four-five years and in the past couple of years it [European
business] has continued to improve. We are in a stage when we want to run the
business in a cash-positive way so that there is no pressure on the India business
to do loss-funding. Tata Steel, today, is in a much stronger place than it was five or
ten years ago. We have restructured the European business and shrunk it from
18 million tonnes to 10 million tonnes. The India business, on the other
hand, has grown to 18 million tonnes.
T V Narendran CEO & MD, Tata Steel, Business Standard, May 15, 2019

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INDIA’S MOST CONSISTENT

Total pages 64, including cover

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36 ICICI Prudential AMC

managements tend to send out Reinvigorating R&D

June 2019 Wealth Insight 5

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Electing to build wealth

June 2019 Wealth Insight 7

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‘The way to make

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Do you know the only thing that gives me A friendship founded on

The ability to deal with people is

Charity is injurious unless it

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Three high-quality stocks

Vivek omnamhshivayah @MKharigowda

Murali Narasimhan @muralinarsimhan

Sachin Shah @SachinS38985066

ITC, NESTLE, PIDILITE, Next 3 - AP, Nil Gandhi @gandhinil186

Nifty 50, Nifty Next 50, Nasdaq 100 Mr Rookie @sahilynwa

Everyone is typing the recent best per-

10 Wealth Insight June 2019

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S&P BSE Auto

Price to book value (P/B) Dividend yield

Key numbers Top gainers/losers Valuations and dividend

12 Wealth Insight June 2019

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Large caps Price to earnings Net profit (` crore)

June 2019 Wealth Insight 13

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Mid caps Price to earnings Net profit (` crore)

14 Wealth Insight June 2019

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Small caps Price to earnings Net profit (` crore)

June 2019 Wealth Insight 15

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Mutual funds FIIs

Mid caps Change Change

Small caps Change Change

16 Wealth Insight June 2019

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Mutual funds FIIs

Mid caps Change Change

Small caps Change Change

Top 10 holdings of mutual funds Top 10 holdings of FIIs

June 2019 Wealth Insight 17

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Fall in promoter stake

18 Wealth Insight June 2019

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June 2019 Wealth Insight 19

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20 Wealth Insight June 2019

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The authoritative guide

June 2019 Wealth Insight 21

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