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SCAN TO INVEST
A. HDFC TOP 100 Fund - SIP Performance^ - Regular Plan - Growth Option Since Inception*
15 year SIP
10 year SIP
5 year SIP
3 year SIP
1 year SIP
Total Amount Invested@ (` in lacs)
32.80
18.00
12.00
6.00
3.60
1.20
Market Value as on January 31, 2024 (` in lacs)$$
786.64
59.61
26.94
10.31
5.05
1.46
Returns& (%)$$
18.90
14.61
15.44
21.78
23.17
41.75
N.A.
14.08
14.76
18.45
16.93
33.95
Benchmark Returns (%)#
Additional Benchmark Returns (%)## 14.67 13.87 14.69 17.55 15.44 25.27 @ Assuming ` 10,000 invested systematically on the first Business Day of every month since October 11, 1996 (Scheme Inception Date). &CAGR returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return) for Regular Plan - Growth Option. The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. SIP - Systematic Investment Plan. HDFC AMC/HDFC MF is not guaranteeing or assuring any returns on investments in the Scheme.
NAV as at January 31, 2024 ` 994.989 (per unit)
B. HDFC Top 100 Fund - Performance^ - Regular Plan - Growth Option Period
Scheme Returns (%)$$
Scheme Benchmark Additional Benchmark Returns (%)# Returns (%)##
Value of investment of (`) 10,000 Scheme (`)$$
Benchmark (`)#
Additional Benchmark (`)##
Last 1 Year
33.91
26.56
22.10
13,391
12,656
12,210
Last 3 Years
23.37
18.36
17.11
18,799
16,595
16,076
Last 5 Years
16.37
16.23
16.00
21,349
21,224
21,008
Since Inception*
19.20
N.A.
13.87
12,13,198
N.A.
3,47,691
Common notes for the above table A & B: Past performance may or may not be sustained in future and is not a guarantee of any future returns. *Inception Date: October 11, 1996. The scheme is managed by Mr. Rahul Baijal since July 29, 2022. # NIFTY 100 (Total Returns Index). ## S&P BSE SENSEX (Total Returns Index). $$ All Distributions declared prior to the splitting of the Scheme into IDCW & Growth Options are assumed to be reinvested in the units of the Scheme at the then prevailing NAV (exdistribution NAV). N.A. Not Available. ^Above returns are as on January 31, 2024.
C. Performance of Other Funds Managed by Mr. Rahul Baijal, Fund Manager of HDFC Top 100 Fund (who manages total 3 schemes of which 2 schemes have completed one year) Scheme HDFC Business Cycle Fund
Returns (%) as on January 31, 2024
Managing Scheme since
Last 1 year (%)
Last 3 years (%)
November 30, 2022
33.66
N.A.
N.A.
33.81
N.A.
N.A.
Benchmark - NIFTY 500 (Total Returns Index)
Last 5 years (%)
Past performance may or may not be sustained in future and is not a guarantee of any future returns. Returns greater than 1 year period are Compounded Annualised (CAGR). Load is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have different expense structure. The expenses of the Direct Plan under the scheme will be lower to the extent of the distribution expenses/commission charged in the Regular Plan. The above returns are of Regular Plan - Growth Option. Returns as on January 31, 2024. N.A. Not Available.
HDFC TOP 100 FUND (An open ended equity scheme predominantly investing in large cap stocks) is suitable for investors who are seeking~: To generate long-term capital appreciation / income
z
z
Investment predominantly in Large-Cap companies
~Investors should consult their financial advisers, if in doubt about whether the product is suitable for them. Riskometer^^ of the Scheme
RISKOMETER
Mo Lo d
Mo Lo d Low
Mo Lo d Low
HDFC Business Cycle Fund
Very High
Very High
Very High
RISKOMETER
Investors understand that their principal will be at very high risk
Modera oderate High tely o te M t Hi w era
gh
Modera oderate High tely o M Hi w t erate
gh
gh
RISKOMETER
HDFC Top 100 Fund
Very High
Modera oderate High tely o M Hi w t erate
Riskometer^^ of the Scheme
NIFTY 500 (Total Returns Index)
rate Moderately High Mode Hi
gh
o w t erate
Name of scheme
Low
NIFTY 100 (Total Returns Index)
Name and Riskometer of Benchmark
Mo Lo d
Name of scheme
Low
Name and Riskometer of Benchmark
RISKOMETER
Investors understand that their principal will be at very high risk
Benchmark and Scheme Riskometer as on January 31, 2024. ^^For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Subscription copy of [
[email protected]]. Redistribution prohibited.
3 Aim to navigate business cycles with ease. Invest in
ICICI Prudential
Business Cycle Fund
To invest, contact your Mutual Fund Distributor
IPRUTOUCH App | www.iciciprumf.com
*Inception date is 18 Jan 2021
̴UŨǍğơƭųƙơ͘ơŀųƵŝė͘ĐųŨơƵŝƭ͘ƭŀğņƙ͘ǦŨñŨĐņñŝ͘ñėǍņơğƙơ͘ņķ͘ņŨ͘ėųƵĎƭ͘ñĎųƵƭ͘ǎŀğƭŀğƙ͘ƭŀğ͘ product is suitable for them.
C
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• Long term wealth creation • An equity scheme that invests in Indian markets with focus on riding business cycles through dynamic allocation between various sectors and stocks at different stages of business cycles.
S
ICICI Prudential Business Cycle Fund (An open ended equity scheme following business cycles based investing theme) is suitable for investors who are seeking*:
Investors understand that their principal will be at Very High risk
»ŀğ͘¦ņơř̿ų̿Ŧğƭğƙ̹ơ̺͘ơƖğĐņǦğė͘ñĎųǍğ͘ǎņŝŝ͘Ďğ͘ğǍñŝƵñƭğė͘ñŨė͘ƵƖėñƭğė͘ųŨ͘ñ͘ŦųŨƭŀŝǔ͘Ďñơņơ̩ Please refer www.icicipruamc.com/news-and-updates/all-news for more details on scheme riskometers.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Subscription copy of [
[email protected]]. Redistribution prohibited.
March 2024
VOLUME XVII, NUMBER 9
47 Cover Story EDITORIAL POLICY The goal of Wealth Insight, as with all publications from Value Research, is not just limited to generating profitable ideas for its readers; but to also help them in generating a few of their own. We aim to bring independent, unbiased and meticulously-researched stories that will help you in taking better-informed investment decisions, encouraging you to indulge in a bit of research on your own as well. All our stories are backed by quantitative data. To this, we add rigorous qualitative research obtained by speaking to a wide variety of stakeholders. We firmly stick to our belief of fundamental research and value-oriented approach as the best way to earn wealth in the stock market. Equally important to us is our unwaveringly focus on long term planning.
Imitation investing A guide to stealing ideas from experts
Simplicity is the hallmark of our style. Our writing style is simple and so is the presentation of ideas, but that should not be construed to mean that we over-simplify. Read, learn and earn – and let’s grow and evolve as we undertake this voyage together. EEDITOR-IN-CHIEF Dhirendra Kumar COPYEDITING Aditya Roy, Khyati Simran Nandrajog, Mithilesh Bhaumik and Ujjal Das RESEARCH & ANALYSIS Aditya Gupta, Ashish Kumar Pal, Hemkesh Khattar, Karthik Anand Vijay, Nipun Arora, Ravikant Prasad, Samridh Rela, Satyajit Sen, Shubham Dilawari, Sneha Suri, Udhayaprakash J and Vishal Goyal DESIGN Aman Singhal, Anand Kumar, Aprajita Anushree, Harish Kumar, Kamal Kant Koner, Mukul Ojha and Nitin Yadav DATA SOURCE FOR STOCKS AceEquity MARKETING Aastha Tiwari, Aditya Roy, Ashish Jain, Jash Ashar and Kasturi Kaushik
44 Words Worth Wisdom
60 Interview
“Hindustan Lever is after us”
“Nobody knows anything about anything beyond a point”
Harsh Mariwala Chairman of Marico
Alok Bahl Chief Investment Officer, Helios Mutual Fund
PRODUCTION MANAGER & CIRCULATION Hira Lal +91-9958058407 ADVERTISING Venkat K Naidu +91-9664048666 Biswa Ranjan Palo +91-9664075875 CUSTOMER SUPPORT Email:
[email protected] Phone: +91-9999322422 EMAIL
[email protected]
4 Wealth Insight March 2024
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CONTENTS 28 Monthly Agenda
Quarterly result update
by SAURABH MUKHERJEA
How various sectors have performed in Q3 FY24 in terms of revenue, profit and margins and which companies stand out
The rapid rise of female entrepreneurs in India
30 Market Compass
7 Edit by DHIRENDRA KUMAR
‘Monkey see, monkey do’ won’t do Crafting your own unique path to success in investing
63 Main Street
z
Institutional moves z Change in promoter stake z Pledging tracker 35 ABCD ETF
Exploring the boom in women entrepreneurship 66 Straight Talk by ANAND TANDON
Revisiting diversification: The must-have tool for investors Why diversifying your portfolio is more of a necessity than a choice
Passive equity funds for savers
8 Twitter
Meet the pharma pundit Unseen Bio (Sajal Kapoor) @unseenvalue | 140k
36 Analyst’s Diary z
Out of season Glass titan’s rise z Decoding AU Small Finance Bank’s success z Satellite view z
10 Market Reporter
Buzz of the month 14 Stock Story
From Lakmé to Zudio Trent’s success was not an easy ride
46 vis-a-vis
68 Everyday Economics by PUJA MEHRA
Economic stability over populism Understanding the interim budget and what more needs to be done
Pharmaceutical pioneers 70 Stock Screen
16 Big Moves
Top-rated stocks
The most significant price movements
All stocks with five-star Stock Ratings 74 Wordsworth Now
22 Index Watch
Quotable words from prominent figures
S&P BSE Oil & Gas 24 IPO Tracker
D-Street debutants 26 Market Barometer
Trends and trails Here are some charts that will help you make sense of the current market in terms of valuations and return potential
58 Stock Advisor by DHIRENDRA KUMAR
Value Research Monkey/Goat Advisor Even when stocks go down sharply, there is a difference between being invested in good ones vs just following the herd
9DOXH5HVHDUFK,QGLD3YW/WG Wealth Insight is owned by Value Research India Pvt. Ltd., 5, Commercial Complex, Chitra Vihar, Delhi 110 092. Editor-In-Chief: Dhirendra Kumar. Printed and published by Dhirendra Kumar on behalf of Value Research India Pvt. Ltd. Published at 5, Commercial Complex, Chitra Vihar, Delhi 110 092. Printed at Option Printofast, 46, Patparganj Industrial Area, Delhi-110092 Total pages 76, including cover
',6&/$,0(5 The contents of Wealth Insight published by Value Research India Private Limited (the ‘Magazine’) are not intended to serve as professional advice or guidance and the Magazine takes no responsibility or liability, express or implied, whatsoever for any investment decisions made or taken by the readers of this Magazine based on its contents thereof. You are strongly advised to verify the contents before taking any investment or other decision based on the contents of this Magazine. The Magazine is meant for general reading purposes only and is not meant to serve as a professional guide for investors. The readers of this Magazine should exercise due caution and/or seek independent professional advice before entering into any commercial or business relationship or making any investment decision or entering into any financial obligation based on any information, statement or opinion which is contained, provided or expressed in this Magazine. The Magazine contains information, statements, opinions, statistics and materials that have been obtained from sources believed to be reliable and the publishers of the Magazine have made best efforts to avoid any errors and omissions, however the publishers of this Magazine make no guarantees and warranties whatsoever, express or implied, regarding the timeliness, completeness, accuracy, adequacy, fullness, functionality and/or reliability of the information, statistics, statements, opinions and materials contained and/or expressed in this Magazine or of the results obtained, direct or consequential, from the use of such information, statistics, statements, opinions and materials. The publishers of this Magazine do not certify and/or endorse any opinions contained, provided, published or expressed in this Magazine.Reproduction of this publication in any form or by any means whatsoever without prior written permission of the publishers of this Magazine is strictly prohibited. All disputes shall be subject to the jurisdiction of Delhi courts only. ALL RIGHTS RESERVED
March 2024 Wealth Insight 5
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by Dhirendra Kumar
EDIT
‘Monkey see, monkey do’ won’t do X Crafting your own unique path to success in investing
I
f a kid has just started playing cricket, would watching videos of Virat Kohli and copying the shots be the right strategy? Kids do that, but a moment of thought will tell you that, no, that’s unlikely to be the path to success. I’m not saying that no kid watching can have the kind of talent that Kohli has – I’m sure many would. The difference is that the beautiful cover drive that the kid sees and wants to copy is just the tip of the iceberg. It’s the end result of a process and a support system that has lasted a lifetime in which talent was just one input. Moreover, it’s particularly suited to the exact kind of advantage that Kohli has. Copying the result is unlikely to produce the same result. So am I saying that one cannot learn from an expert? What about the oft-repeated saying that to win, one must play like a winner? That’s one of those corny ‘inspirational’ things that people say, and we implicitly believe it to be true. In the investment world, too, this idea of mimicking successful people is quite common. Investors are constantly seeking insights into the strategies of more prosperous counterparts with the intention of replicating them. Since mutual funds have to reveal their portfolios on a schedule, it’s quite easy to do. Here’s the most interesting argument against this idea. It was presented by the well-known investor and fund manager Howard Marks, who, incidentally, is just the kind of famous investor whom amateurs would like to emulate. In a talk that Marks gave many years ago at Google (bit.ly/howmarks), he illustrated this very point by drawing an analogy from tennis. He said that top tennis players win by playing a lot of shots that are winners. Djokovic, Alcaraz or Medvedev often play shots that few of their opponents can handle and play with great regularity. However, amateur players can’t play such shots except by rare chance. Marks says that for amateurs, the key to winning is not to hit losers, instead of hitting winners. A good amateur player believes that if
he or she can just get the ball over the net and keep that going for eight or 10 shots, then sooner or later, the opponent will make a mistake. Amateurs achieve their victories by just managing to do the ordinary thing competently and consistently. An amateur who tries to play Djokovic shots will lose every time. Do you see how this fits into investing? It’s not as if amateurs cannot invest well. However, they are unlikely to invest well by mimicking professionals. If they choose their own path based on their own advantages and keeping in mind their own limitations, then they can do even better than professionals. However, the strategy cannot be a copy. Blindly following the moves of a renowned investor without a solid grasp of the underlying rationale is like an amateur tennis player attempting a Nadal backhand – it’s ill-suited to their abilities and more likely to lead to a flubbed return than a point won. Instead, successful amateur investors must focus on understanding their own strengths and weaknesses. Perhaps you have a knack for identifying solid, long-term companies or excel at maintaining a balanced portfolio amidst market volatility. Whatever your inherent advantage, the key lies in tailoring your investment approach accordingly, focusing on the fundamentals that you genuinely comprehend and can execute reliably. Consistency and a clear understanding of your own game, rather than imitating the flashy plays of the investment world’s superstars, will ultimately determine your long-term investment success. The tendency of beginner investors to mimic experts is a losing formula. Great investors hit winners. They achieve success by making profitable investments, using unique skills or experience or a process to identify opportunities that elude others. Additionally, since investing is not an open book, many conceal their failures and only highlight the rare success achieved, perhaps by mere luck. To use an up-to-date phrase, you see only the highlights reel and not the bloopers. Write your own story instead. Read this issue’s cover story to understand more about it. March 2024 Wealth Insight 7
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TWITTER
Meet the pharma pundit Unseen Bio (Sajal Kapoor) @unseenvalue
140k
| Followers
Why Follow
A
n operational risk and regulatory consultant, Sajal Kapoor, more
famously known as ‘Unseen Value’, is an avid pharma and
This “forward PE” thing fooled many in 2015 Pharma cycle. Go and read the broker reports from that era. What were they smoking then?? How on earth do they predict the future? How do they know that US FDA will not smooch a Pharma company badly?? Consumption is an exceptional opportunity in India. How you define consumption is up to you! For me, healthcare and education are mandatory consumptions. I may cut down on restaurants, tourism, and even gold jewellery for my daughter’s wedding, but not those 2. Knowledge entails understanding all of the return ratios. Wisdom is understanding which ones to employ and which ones should be given greater weight in a certain scenario. Management remains sacrosanct. Unseen lenses.
healthcare industry follower. On his Twitter handle, he shares insights about various companies or the overall pharma industry, showcasing the expertise gained with over two decades of experience. Kapoor consistently chases unnoticed valuation gaps and regularly highlights the role of probability in investments.
Fundamentally, I’m not really interested in sectors where there isn’t enough of a sustainable moat, such as basic APIs, commodity chemicals, and other hyper-cyclical plays. I want to own specialty assets that competitors find difficult to emulate due to sustainable barriers. US FDA warning letters: stock prices fall only if cash flows are impacted. Firms A, B, C, and D: stocks corrected sharply after warning letters, and many have not crossed previous highs adjusted for inflation. Oops!! Firm E: stock is a 25-bagger since the warning letter. Wow!! Fund raising requires external validation. Biocon burned shareholder capital for 16 years in oral insulin obsession as there was no need for external validation. The core business kept the tab open for wastage. Any lessons from failures? UV: Fasting has long-lasting benefits.
Follow us on social media @VROStocks
vrostocks
VROStocks
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-UTUAL&UNDINVESTMENTSARESUBJECTTOMARKETRISKS READALLSCHEMERELATEDDOCUMENTSCAREFULLY Subscription copy of [
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MARKET REPORTER
RBI bans Paytm The share price of One97 Communications (Paytm) tanked 36 per cent in two days as the RBI banned Paytm Payment Banks from offering several banking services, such as accepting deposits, fund transfers, UPI, etc., effective February 29, 2024. RBI cited the company’s repeated compliance violations as the cause behind the ban. Post February 29, existing users will not be allowed to top-up their accounts. However, they can withdraw their existing balance.
Interim Budget 2024-25 highlights z Capital expenditure budget capped at `11.1 lakh crore, up 11 per cent YoY. z `75,000 crore provisions to support milestone-linked reforms by the state governments.
JSW Steel partners with JFE Steel Corp
z `80,671 crore allocated under Pradhan Mantri Awas Yojana, up 1.4 per cent YoY. z A 100 MT coal gasification and liquefaction facility will be established by 2030. z `1 lakh crore corpus established to provide 50-years interest-free loans for R&D in sunrise domains.
`65,000 crore will be invested in Odisha by the JSW Group for mega projects, including steel, cement, and power plants.
Tata Steel amalgamates its five businesses Tata Steel has amalgamated five out of its nine businesses with itself. These include Tata Steel Mining, Tata Steel Long Products, S&T Mining, Tinplate Company of India and Tata Metaliks. It plans to merge three of the remaining four businesses by Q1 FY25. The merger of TRF stands cancelled as it has improved its performance. Note that Tata Steel announced its amalgamation plan in September 2022.
JSW Steel, a leading Indian steel producer, has entered into a joint venture (JV) with Japan-based JFE Steel Corporation. The JV (JSW JFE Electrical Steel), will be the first Indian company to produce grain-oriented electrical steel (used in electrical transformers). `5,500 crore will be invested to set up a manufacturing plant in Karnataka. Operations are expected to commence in FY27.
Eris Lifesciences acquires Swiss Parenterals Eris Lifesciences, an Indian pharmaceutical company, has acquired a 51 per cent stake in Swiss Parentals for a consideration of `638 crore. Swiss Parentals manufactures sterile dosages (products that are injected directly into the bloodstream) in India and exports to more than 80 countries. Eris will initially pay `200 crore, and the balance will be paid in the next 12 months.
10 Wealth Insight March 2024
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RBI stays repo rates
ECONOMIC METRICS
Repo rates stay unchanged at 6.5 per cent for the sixth consecutive quarter. The last rate hike of 25 bps happened in February 2023. The real GDP growth rate for FY25 is projected at 7 per cent compared to the FY24’s estimated 7.3 per cent. CPI inflation for FY25 is expected to be 4.5 per cent compared to the FY24’s estimated 5.4 per cent.
.:;JVSSLJ[PVU 2,00,000
In ` cr
1,50,000 1,00,000 50,000 0 Jan '22
Quess Corp announces demerger
Zee-Sony saga culminates The two-year-long Zee-Sony merger saga has come to an end. Culver Max (formerly known as Sony Pictures) has terminated its $10 billion merger with Zee Entertainment. In addition, Sony is seeking a $90 million termination fee from Zee for breaching merger agreements. Post the merger announcement in September 2021, Zee underwent a tumultuous period, including a SEBI ban on its CEO Punit Goenka from holding any key managerial position.
Quess Corp, an HR and business services provider, plans to demerge into three different firms: Digitide Solutions, Bluspring Enterprises and Quess Corp. Digitide will house the business process management and HR outsourcing services. Bluspring will provide facility management and security services, and Quess Corp will offer workforce management services. Shareholders of Quess Corp will get one share of each of the new entities for one share held.
`30.3 lakh crore is the total market value of Tata Group companies, making it India’s first conglomerate to breach the `30 lakh crore mark (as of Feb 19, 2024).
Jan '24
0UMSH[PVU!*VUZ\TLY7YPJL0UKL_ 8
% change YoY
7 6 5 4 Jan '22
Jan '24
0UK\Z[YPHSHJ[P]P[`!0UKL_VM 0UK\Z[YPHS7YVK\J[PVU 20
% change YoY
10 0 -10 Dec '21
Dec '23
`]Z Inverted scale
72 75 78 81 84 Feb '22
Feb '24
*Y\KLVPS 150
Brent $/barrel
120 90 60 Feb '22
Feb '24
March 2024 Wealth Insight 11
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MARKET REPORTER
GFCL to invest `6,000 crore in EV batteries
Vedanta to double its oil & gas production capacity In India Energy Week 2024, held in Goa, Anil Agarwal, Chairman of Vedanta, said that the company will invest $4 billion (around `33,000 crore) over the next three years to double its oil & gas production capacity to 3 lakh barrels per day. This is 114 per cent more than its current capacity of 1.4 lakh barrels per day.
Gujarat Fluorochemicals (GFCL) will invest `6,000 crore over the next four to five years in electric vehicle (EV) battery solutions through its subsidiary GFCL EV. These investments aim to secure the supply of approximately 200 GWh annually of electric vehicle and Energy Storage System (ESS) battery solutions. The company plans to spend `3,200 crore on capex till FY26.
Moody’s upgrades four Adani firms Moody’s, a renowned global credit rating agency, has upgraded its credit ratings of four Adani group companies, including Adani Green, from negative to stable. The agency had previously downgraded the group companies a year ago, in the wake of the Hindenburg fiasco. Moody’s has stated that equity infusion from various institutions and ability to repay debt are the key reasons for this upgrade.
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12 Wealth Insight March 2024
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STOCK STORY TRENT
From Lakmé to Zudio Trent’s success was not an easy ride The cosmetic divestment
T
rent, a prominent Tata group company, is a leading retailer in India. It owns 715 fashion stores and 67 grocery stores. As of February 8, 2024, its six-month return is 124 per cent. Recently, it crossed the `1 lakh crore market cap milestone, making it the talk of the town. However, the company’s journey was not always smooth.
Originally established as Lakmé in 1952, the company manufactured and sold cosmetic products. However, in 1998, the company divested this cosmetics business and shifted focus to branded apparel by acquiring Littlewoods International. Lakmé rebranded itself as Trent in the same year. Trent started selling branded
clothing, footwear and accessories under the ‘Westside’ brand. After witnessing reasonable success in this venture, it diversified its operations and entered the food retail segment in 2005 by launching the first ‘Star India Bazaar’ store. Aiming to become a one-stop shop retailer, Trent took the path of acquisition and partnership. With the acquisition
Profit and loss statement break-up of Trent Figures in ` crore Operating profit (including other income) 1,358
Share of associates and minority interest 115
Exceptional items 3 Finance costs 378 Tax 255
Profit before interest, tax and exceptional items 1,473
Profit after tax 837
Raw material cost 6,454
Revenue
11,260
Total income
Operating expenses
Employee expenses 882
10,199
11,558
Depreciation and amortisation 595 Occupancy cost (incl. rent) 965
Other income
298
Data for trailing twelve months ending December 2023 Trent
Sensex
Sensex rebased to stock price Sep 12, 2006
Jan 03, 2000
`242
`13
Oct 2004 The company opened its first hypermarket store under ‘Star India Bazaar’.
Other expenses 1,304
Aug 31, 2005 Acquired 79 per cent interest in Landmark (the largest book and music retailer).
Sep 18, 2007 Partners with Benetton Group for the expansion of the Sisley brand in India.
Aug 12, 2008 Association with Tesco Plc (UK’s leading retailer)
Feb 5, 2009 Entered an MOU with Spain’s Inditex Group to develop and promote Zara stores in India.
14 Wealth Insight March 2024
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Jul 22, 2011 Entered an MOU with the same Inditex Group to develop and promote Massimo Dutti stores in India.
of Landmark for book and music retailing, the introduction of Sisley and Zara brands to India, and a joint venture with Tesco, Trent was actively present on all fronts.
Revenue and profit after tax
The turnaround with Zudio While these moves helped with revenue growth, the company was barely profitable and couldn’t find its identity. Although Westside and Star Bazaar were successful, Trent wanted something more. In 2016, it launched a value fashion brand called ‘Zudio’. Its goal, as the company puts it, was ‘fashion at irresistible prices for men, women and children.’ This entry into the low-priced segment seemed to have done magic for the company as its numbers exploded. Zudio’s initial success shifted the company’s focus towards prioritising this brand. This can be seen in the pace of store openings. Over FY18-23, the number of Zudio stores grew by 119 per cent annually compared to 11 per cent for Westside. This success is reflected in the numbers. Profit margins and capital efficiency improved, and revenue and profit after tax grew by 29 and 32 per cent, respectively, annually over FY17-23. Zudio is the formula that Trent was searching for a decade and a half to slingshot itself into leadership. By Vishal Goyal
Operating profit and margin
Revenue (` cr, left side) Profit after tax (` cr, right side)
Operating profit (` cr, left side) Operating profit margin (%, right side)
9,000
600
750
12
6,000
400
500
8
3,000
200
250
4
0
0
0
0
-3,000
-200 FY14
-250
FY23
-4 FY14
FY23 Feb 08, 2024
Store count Westside
`3,843
Zudio
400 300
Jan 08, 2024
`3,044
200 100 0 FY18
FY23
Capital efficiency ROE (%)
ROCE (%)
45 30 15 0
Apr 06, 2022
`1,329
-15 FY14
FY23 Jan 27, 2023
`1,177
Feb 24, 2020
`795
Feb 26, 2019
`323
Sep 14, 2016
Mar 23, 2020
`239
Mar 21, 2014
Apr 24, 2015
Tesco invests `850 crore in Trent Hypermart for a 50:50 joint venture.
Launched Sports Zone (Portugal’s largest sports chain) in India.
`404
Sep 2016 Launched the first Zudio store.
Sep 28, 2019 Acquired 51 per cent stake in Booker India.
179
May 22, 2023 Signs JV with MAS Amity Pte for intimate apparel and related products.
March 2024 Wealth Insight 15
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BIG MOVES
Large caps 3M returns (%)
Price to earnings
3Y avg RoE (%)
Unrated
117.2
4.3*
14.6
18.9
101.9
206.5
32.5
105.5
88.6
31.6
26.7
10.8
87.7
185.4
23.8
9.5
82.6
5.7
16.8
153.7
79.6
4.8
10.1
21.8
78.8
28.1
11.4
7.1
Unrated
73.1
16.6
81.3
137.6
67.9
5.4*
9.8
58.9
64.1
-
-2.1
24.8
63.7
4.9
21.7
70.7
61.7
1.4*
3.5
11.2
Unrated
58.9
9.9
12.6
52.0
56.5
3.1*
4.8
153.5
44.1
2.1*
2.3
14.2
Stock Rating
IRFC Posted its highest-ever revenue in Q3 FY24.
Adani Green
Raised $1.4 billion to construct its renewable energy park.
Oracle Financial Its profit after tax grew 69 per cent YoY in Q3 FY24.
Adani Total Gas
Signed an MoU with Shigan Quantum for decarbonisation collaboration.
Indian Oil Q3 FY24 profit after tax rose 12 times YoY.
Hindustan Petroleum Corporation Q3 FY24 profit after tax was up 60 per cent YoY.
NHPC
Signed an MoU with GPCL for `4,000 crore in 750 MW hydro storage project.
LIC Q3 FY24 profit after tax is up 50 per cent YoY.
Indian Overseas Bank
Signed an MoU with IREDA. Q3 FY24 profit after tax is up 30 per cent YoY.
BHEL
`19,422 crore order from NLC India to build a thermal power plant.
Bharat Petroleum Corporation
Partners with Tata Motors to set up 7,000 electric vehicle charging stations.
Punjab National Bank
Profit after tax more than tripled on a YoY basis in Q3 FY24.
General Insurance Corporation Q3 FY24 profit after tax is up 17 per cent YoY.
UCO Bank
Profit after tax rose 25 per cent sequentially in Q3 FY24.
Central Bank of India Gross advances rose 14 per cent YoY.
3Y earnings growth (%)
*Price-to-book ratio. Our large-cap universe has 134 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 of February 15, 2024.
16 Wealth Insight March 2024
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BIG MOVES
Mid caps Stock Rating
3M returns (%)
Housing & Urban Development Corp Profit after tax grew 104 per cent YoY in Q3 FY24.
Inox Wind
Price to earnings
3Y avg RoE (%)
150.1
2.5*
12.1
11.2
128.4
-
-38.2
13.7
112.9
208.9
0.3
39.2
108.8
9.8
22.8
49.3
108.7
-
-34.6
23.9
103.8
66.1
14.8
17.8
Unrated
91.8
-
-164.9
-251.2
84.9
72.9
3.7
32.7
76.7
64.7
194.2
150.8
Unrated
66.4
43.7
5.2
-14.5
66.3
49.4
10.3
-15.3
63.8
26.3
-
83.8
Unrated
63.6
37.2
19.3
20.8
60.5
18.0
4.5
82.7
54.3
91.4
29.1
28.2
Received a letter of intent from NLC India for a 50 MW wind project.
GE T&D India Bags order worth $74 million from UK Grid Solutions.
MRPL Profit after tax grew 301 per cent YoY in Q3 FY24.
IFCI Q3 FY24 revenue is up 31 per cent YoY.
NBCC
Received a `1,500 crore order from National Cooperative Development Corp.
Sterling and Wilson Renewable Raised `1,500 crore from institutional investors.
IRB Infra Received an order worth `1,683 crore from NHAI.
Schneider Electric Q3 FY24 profit after tax rose 109 per cent YoY.
The New India Assurance Net premium written is up 15 per cent YoY in Q3 FY24.
SJVN
Received a letter of intent from GUVNL for a 200 MW solar project.
Jai Balaji Inds Raised `559 crore in debt from Tata Capital.
Rail Vikas Nigam
MoU with REC for multi-modal infra projects up to `35,000 crore.
Electrosteel Castings Profit after tax more than tripled YoY in Q3 FY24.
MMTC The stock is up due to the current rally in PSU stocks.
3Y earnings growth (%)
*Price-to-book ratio. Our mid-cap universe has 304 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 of February 15, 2024.
18 Wealth Insight March 2024
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BIG MOVES
Small caps Stock Rating
Unitech
Unrated
New management can begin construction activities.
Tine Agro
Unrated
Revenue and profit after tax are up 12 and 550 times YoY, respectively, in Q3.
Advait Infratech
Unrated
Signed MoUs with the governments of Gujarat and Uttarakhand.
Waaree Technologies
Unrated
MoU with Israel-based 3DBattery for advanced energy solutions.
Waaree Renewable
Won an order worth `547 crore to build a solar power plant.
Hazoor Multi Projects
Won order of `1,130 crore to upgrade National Highway 66.
Urja Global Profit after tax is up 54 per cent YoY in Q3.
Panorama Studios
Announced new movies in Hindi and regional languages.
Cupid
Acquired land to increase production capacity by 1.5 times.
VL E-Governance
Unrated
Shares have been going up due to general market conditions.
Oriental Rail Infra
Won an order worth `485 crore from the Indian Railways.
Websol Energy System
The stock rallied due to general market conditions.
Pritika Auto Industries
NCLT approved the demerger of Pritika Industries from the company.
MSTC
Unrated
Stock is up due to general market conditions.
Artemis Electricals
Unrated
Stock is up due to general market conditions.
3M returns (%)
Price to earnings
3Y avg RoE (%)
3Y earnings growth (%)
270.2
-
-207.1
-3.2
238.9
128.5
-
257.7
218.5
174.3
17.9
146.8
208.5
-
-3.6
-280.9
182.3
78.8
40.4
197.2
166.2
10.6
32.8
667.2
158.0
625.9
0.8
16.7
152.9
17.8
44.1
-4.3
136.6
111.0
19.3
-9.4
136.3
134.3
2.7
-
131.3
79.7
12.6
-3.9
120.5
-
8.7
-279.3
114.3
61.2
8.8
85.5
111.8
28.6
29.4
77.0
73.8
80.7
-2.1
-19.5
Our small-cap universe (minimum market capitalisation `650 crore) has 1,082 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 of February 15, 2024.
20 Wealth Insight March 2024
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INDEX WATCH
S&P BSE Oil & Gas Over the last three months, S&P BSE Oil & Gas returned 49 per cent, making it the best-performing index in the market. It has outperformed the BSE Sensex over five years. While its P/E ratio looks cheap, the recent rally may have pushed its P/B and dividend yield to expensive levels compared to its five-year median. .H\QXPEHUV
,QGH[PRYHPHQW
8.9
1.8
Price to earnings
Price to book
2.59
31.8
Dividend yield (%)
z BSE Oil & Gas
30,000
z Median
z BSE Sensex
24,000 18,000 12,000 6,000
Market cap (` lakh cr)
0
,QGH[ZHLJKWV
Sensex rebased to index
Feb 2019
Feb 2024
3ULFHWRERRNYDOXH 3% Others 7.6
GAIL 3.9
4 3
Bharat Petroleum Corp. 4.4
2
1.4
1
Indian Oil 8.7
In %
0 Reliance Industries 65.9
ONGC 9.5
Feb 2019
Feb 2024
3ULFHWRHDUQLQJVUDWLR 3( 40 32 24
9DOXDWLRQVGLYLGHQGVDQGUHWXUQV Company
P/B
P/E
Dividend yield (%)
1Y return (%)
16 8
Hindustan Petroleum Corp.
1.8
4.8
0.00
144.5
Indian Oil
1.5
5.7
1.58
138.9
Bharat Petroleum Corp.
1.9
4.9
0.61
97.0
GAIL
1.6
15.0
2.71
93.3
ONGC
1.1
8.3
4.06
87.9
6.0
14.2
111.7
0.21
54.8
4.8
Petronet LNG
2.4
11.9
3.61
25.0
3.6
Reliance Industries
2.6
28.5
0.31
21.1
2.4
IGL
3.3
16.0
2.92
2.0
32.5
185.4
0.02
-6.6
Linde India
Adani Total Gas Data as of February 15, 2024
22 Wealth Insight March 2024
10.6
0 Feb 2019
Feb 2024
'LYLGHQG\LHOG In %
3.61
1.2 0
Feb 2019
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IPO TRACKER
D-Street debutants Here is how the S&P BSE IPO Index has performed over the last one year and how the biggest IPOs have fared Highest Listing-Day Gain
Tata Tech
140% Highest Listing-Day Loss
Yatra Online
-8.5%
Highest Post-Listing Gain
IREDA
253.5%
%6(6HQVH[YV%6(,32 With a slew of IPOs, the IPO Index has performed well in the last few months 190 170 150 130 110 90
-87.8%
Rebased to 100
70 February 2023
Highest Post-Listing Loss
Ideaforge Tech
z BSE Sensex z BSE IPO
February 2024
Highest Subscribed IPO
Lowest Subscribed IPO
BLS E-Services
Biggest IPO
Yatra Online
162.5 times 1.6 times
Total Issue Size
Mankind Pharma
`4,326 cr `50,488 cr
7RS,32VE\LVVXHVL]H Company
Listing date
Subscription ratio (times)
Issue size (` cr)
Issue price (`)
List price (`)
Current price (`)
Listing gain (%)
Mankind Pharma
09-May-23
15.3
4,326
1,080
JSW Infra
03-Oct-23
37.4
2,800
Tata Tech
30-Nov-23
69.4
R R Kabel
20-Sep-23
Honasa Consumer
Change post Sensex listing (%) change (%)
1,300
2,210
20.4
70.0
16.7
51.3
119
143
222
20.2
55.1
10.0
63.0
2,251
500
1,200
1,108
140.0
-7.7
7.6
72.0
18.7
1,965
1,035
1,179
1,469
13.9
24.6
7.9
87.3
07-Nov-23
7.6
1,702
324
324
447
0.0
37.9
10.9
-
Concord Biotech
18-Aug-23
24.9
1,551
741
900
1,406
21.5
56.2
10.9
61.3
IREDA
29-Nov-23
38.8
1,501
32
50
177
56.3
253.5
7.7
5.8*
Inox India
21-Dec-23
61.3
1,459
660
933
1,163
41.4
24.6
1.7
69.1
Cello World
06-Nov-23
38.9
1,430
648
831
821
28.2
-1.1
10.9
65.5
SAMHI Hotels
22-Sep-23
5.3
1,370
126
131
192
3.6
47.1
9.2
-
Sai Silks
27-Sep-23
4.4
1,201
222
230
242
3.6
5.1
9.0
38.0
DOMS Industries
20-Dec-23
93.5
1,201
790
1,400
1,566
77.2
11.8
2.2
99.2
India Shelter Finance
20-Dec-23
36.7
1,200
493
613
641
24.3
4.6
2.2
2.6*
Medi Assist Healthcare
23-Jan-24
16.2
1,172
418
465
508
11.2
9.2
2.4
47.2
SBFC Finance
16-Aug-23
70.2
1,025
57
82
86
43.8
5.2
9.9
3.4*
*Price-to-book ratio. Data as of February 15, 2024.
24 Wealth Insight March 2024
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Current P/E
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MARKET BAROMETER
Trends and trails Here are some charts that will help you make sense of the current market in terms of valuations and return potential z Max Current z Median z Min
Sensex’s movement 75
In ’000
72,427 72,427
60
45
30
21,120 15 Feb ’14
Feb ’24
Sensex’s price-to-earnings ratio
The price-to-earnings ratio of the Sensex is a simple market-valuation ratio. A general guideline to help understand the valuation is:
40
35.1
35 30 25
23.3
24.6
Highly undervalued (mouthwatering valuations) P/E
12
Fairly valued
16
Undervalued
20 15
The Sensex is the most convenient indicator to tell the state of the Indian market. The 10-year graph presented alongside shows the secular run in the markets. However, this rally was punctuated by several bearish phases. The most prominent ones include the following: Chinese growth concerns in 2015, demonetisation blues in 2016, the sell-off in 2018 due to US-China trade war and the March 2020 COVID-19 shock. After staging a remarkable recovery from the lows of March 2020, the markets yielded to the Russian invasion of Ukraine and rising interest rates. However, with recessionary fears easing, Sensex reached a new all-time high.
16.8 Feb ’14
Feb ’24
Dangerously overvalued 20
24
Overvalued
This graph is based on standalone data of Sensex companies. If one takes the consolidated data, the P/E will likely be lower.
Sensex’s price-to-book value 4.0
3.83 3.65
3.6 3.2
3.04
If: P/B > Median P/B = Overvalued P/B < Median P/B = Undervalued
2.8 2.4 2.0
The price-to-book value ratio tells us how many times an investor is ready to pay for a rupee of net assets. Since book value is stable and less volatile than earnings, some consider it better than the P/E as a measure of valuation.
2.36 Feb ’14
Feb ’24
26 Wealth Insight March 2024
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Sensex’s dividend yield 1.6%
1.52 1.4
1.2
1.22
1.13
1.0
Dividend yield is nothing but the return an investor gets in the form of dividend on his investment. It is measured as dividend per share divided by price per share. Generally speaking, when stocks are cheap, dividend yields are high. If: Dividend yield > Median dividend yield = Undervalued Dividend yield < Median dividend yield = Overvalued
0.8
0.72 0.6
Feb ’14
Feb ’24
Market cap to GDP 150%
131 120
131 83
90
60
56
30
Here we have considered the market capitalisation of all the listed companies on the BSE. This measure is Buffett’s personal favourite. He said, “It is probably the single best measure of where valuations stand at any given moment.” If: Market cap > GDP = Overvalued Market cap < GDP = Undervalued Considering market cap of all the listed companies on the BSE, revised estimate of FY22 nominal GDP, provision estimate of FY23 nominal GDP and first advance estimate of FY24 nominal GDP.
0 FY06 FY08 FY10 FY12 FY14 FY16 FY18 FY20 FY22 FY24
10Y G-sec yield vs Sensex’s earnings yield 4.6%
3.97
3.8
2.91
3.0
3.03
2.2
The spread between G-sec yield and Sensex’s earnings yield is another valuation measure. G-sec yield is the yield of the 10-year government bond. Sensex’s earnings yield is the inverse of the Sensex’s P/E ratio. The greater the deviation from the median in either direction, the greater the degree of overvaluation or the undervaluation of the Sensex. If: Spread > Median = Overvalued Spread < Median = Undervalued
1.4
0.94 0.6
Feb ’14
Feb ’24
All data as of February 16, 2024
March 2024 Wealth Insight 27
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MONTHLY AGENDA
Quarterly result update How various sectors have performed in Q3 FY24 in terms of revenue, profit and margins and which companies stand out
2EVENUEGROWTH
Sector
/PERATINGPROÜTGROWTH
0!4GROWTH
Change in median OPERATINGPROÜTMARGINPT
QoQ
YoY
QoQ
YoY
QoQ
YoY
QoQ
YoY
Automobile
1.4
18.2
4.8
57.5
13.7
59.7
0.3
2.5
Bank
4.4
29.5
-
-
3.1
23.9
-
Capital Goods
1.0
16.5
3.2
25.7
-8.5
17.5
0.2
0.8
-7.1
-19.7
-30.4
-51.3
-33.4
-52.4
-2.3
-4.5
Communication
3.0
6.2
1.8
43.8
23.4^
35.3^
-0.2
4.2
Construction
8.4
17.6
8.2
29.4
-8.6
56.5
0.0
1.2
Consumer Discretionary
39.2
-16.5
15.4
-8.3
15.9
-12.0
-0.6
0.3
Consumer Staples
-0.6
1.5
-1.4
-1.7
3.9
5.7
-0.1
-0.4
Diversified
-0.8
-4.3
23.3
-18.8
34.7
-27.7
2.2
-2.0
Energy
6.6
0.3
-26.4
22.4
-27.1
34.0
-4.2
1.7
Financial
5.6
25.3
-
-
0.6
19.2
-
Healthcare
0.2
10.3
-2.3
19.7
0.0
-2.1
-0.4
Insurance
6.1
6.0
-
-
17.9
36.5
-
Materials
5.0
5.3
31.4
36.3
28.6
24.3
3.2
3.6
Metals & Mining
-3.8
2.1
-2.3
51.5
57.1
101.2
0.2
3.7
Services
12.6
13.5
48.1
51.9
82.6
51.9
2.2
2.3
2.1
3.3
5.5
2.4
5.1
1.9
0.6
-0.2
-3.9
4.2
3.4
10.7
26.8
58.4
0.5
0.4
Chemicals
Technology Textiles
-
1.3 -
/PERATINGPROFITISREPRESENTEDBYEARNINGSBEFOREINTERESTANDTAXEXCLUDINGOTHERINCOME >INDICATESINCREASEORDECREASEINLOSS0ROFITAFTERTAXISADJUSTEDFORDISCONTINUEDOPERATIONSAND exceptional items; Q3 FY24 data available for 1,554 companies as on February 15, 2024. Minimum market capitalisation of `500 crore 4OFINDOUTWHICHCOMPANIESAREINCLUDEDINEACHOFTHESECTORS VISITHTTPSWWWVALUERESEARCHONLINECOMSTOCKS SCREENER
7RSFRPSDQLHVE\4UHYHQXH
7RSFRPSDQLHVE\4SURILWDIWHUWD[
In ` cr
In ` cr
2,27,970
2,26,892
Reliance Industries 17,265 1,65,569
HDFC Bank 1,29,985
17,258
1,18,484 SBI
16,034 Tata Consultancy Services 11,729 Reliance Industries
Indian Oil Corporation
ONGC
Bharat Petroleum Corporation
Hindustan Petroleum Corporation
ICICI Bank 11,053
28 Wealth Insight March 2024
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7RSFRPSDQLHVE\4UHYHQXHJURZWK
%RWWRPFRPSDQLHVE\4UHYHQXHJURZWK
In %, YoY
In %, YoY
69,792 MMTC
Jindal Poly Investment and Finance
Naperol Investments
PC Jeweller
Deep Energy Resources
47,865
-91.5 14,505 4,341 Blue Cloud Softech Solutions
SG Mart
TCC Concept
-95.3
1,474
Diamond Power Infrastructure
Swan Energy -99.9
-99.1
-99.1
7RSFRPSDQLHVE\4RSHUDWLQJSURILWJURZWK
%RWWRPFRPSDQLHVE\4RSHUDWLQJSURILWJURZWK
In %, YoY
In %, YoY
89,000
59,100
BGR Energy Systems
Solara Active Pharma
Astec Lifesciences
Sun Pharma Advanced Research
Kanoria Chemicals
-914
-911
-728
50,500 32,333 18,100
Blue Cloud Softech Solutions
Tine Agro
Sarla Integrated Perform. Indus. Fibers
Cropster Agro
-1,203
-3,518
Excluding banking, financial services and insurance companies
Excluding banking, financial services and insurance companies
7RSFRPSDQLHVE\43$7JURZWK
%RWWRPFRPSDQLHVE\43$7JURZWK
In %, YoY
In %, YoY
54,900
Solara Active Pharma Sciences
46,500
TCNS Clothing Company
GMR Power and Urban Infra
Astec Lifesciences
TARC
-3,160
-2,996
-2,656
40,600 31,120
30,733
-10,424
Tine Agro
Cropster Agro
Blue Cloud Softech Solutions
Adani Power
Integrated Industries
-51,522
March 2024 Wealth Insight 29
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MARKET COMPASS
Institutional moves The top five companies across market caps in which mutual funds have significantly changed their holdings (in terms of per cent of equity) between September and December 2023
,QFUHDVHLQSRVLWLRQ
'HFUHDVHLQSRVLWLRQ
Large caps Company
Sector
Dec ’23
Sep ’23
Change (% pt)
Large caps Company
Sector
Mankind Pharma
Healthcare
7.6
3.9
3.7
Suzlon Energy
Capital Goods
Bank of India
Bank
4.3
1.2
3.1
Persistent Systems
IT
Indian Bank
Bank
10.5
8.0
2.5
Cholamandalam Inv. and Fin. Finance
Lupin
Healthcare
18.9
16.7
2.2
Bank of Baroda
Bank
Tech Mahindra
IT
14.2
12.4
1.8
UltraTech Cement
Dec ’23
Sep ’23
Change (% pt)
Mid caps Company
Sector
Dec ’23
Sep ’23
Change (% pt)
1.3
4.7
-3.4
22.4
24.1
-1.7
15.0
16.7
-1.7
8.6
9.8
-1.2
Const. Materials
12.5
13.6
-1.1
Sector
Dec ’23
Sep ’23
Change (% pt)
0.2
7.6
-7.4
Mid caps Company
CAMS
Finance
11.3
3.8
7.5
Indiabulls Hsg. Finance
Finance
Fortis Healthcare
Healthcare
25.0
18.5
6.5
Tata Motors (DVR)
Auto & Anc.
20.3
25.7
-5.4
Petronet LNG
Inds. Gases & Fuels
9.9
4.8
5.1
MCX
Finance
30.7
35.1
-4.4
JK Tyre & Industries
Auto & Anc.
4.5
0.0
4.5
Natco Pharma
Healthcare
5.2
7.7
-2.5
Kaynes Technology
Electricals
15.5
11.7
3.8
Atul
Chemicals
17.1
19.3
-2.2
Dec ’23
Sep ’23
Change (% pt)
Dec ’23
Sep ’23
Change (% pt)
18.2
22.9
-4.7
2.9
7.5
-4.6
Small caps Company
Sector
Small caps Company
Sector
Nazara Technologies
IT
14.1
7.2
6.9
MTAR Technologies
Capital Goods
TeamLease Services
Business Services
33.1
27.9
5.2
Orient Paper & Inds.
Paper
Fusion Micro Finance
Finance
15.8
10.7
5.1
Delta Corp
Hospitality
12.2
15.7
-3.5
Arman Financial Services Finance
4.7
0.0
4.7
Tracxn Technologies
IT
12.0
15.6
-3.6
Sequent Scientific
5.0
1.0
4.0
Alembic
Healthcare
0.0
3.4
-3.4
Healthcare
30 Wealth Insight March 2024
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MARKET COMPASS
Change in promoter stake Companies that have seen a rise or decline in promoter stake in Q3 FY24
H
The tables below list the companies in which the promoter stake has changed notably over the last quarter. We took companies where the promoter stake in the previous quarter was at least 25 per cent. In the case of an increase in promoter stake, we set a threshold of 2 percentage points. In the case of a decrease in promoter stake, we set a threshold of 8 percentage points.
igher promoter holding shows that promoters are bullish about their company. In contrast, a fall in promoter stake is usually a negative development. However, corporate actions, such as rights issue, mergers and promoter reclassification, can also impact promoter holdings. Hence, one needs to dig deeper while tracking promoter stake.
,QFUHDVHLQSURPRWHUVWDNH Companies where the promoter stake in the previous quarter was at least 25 per cent and has risen by at least 2 percentage points Promoters’ stake (%) Company
Sector
Tide Water Oil Company
Auto & Anc.
Krishana Phoschem Capacit'e Infraprojects
M-cap (` cr)
Dec '23
Sep '23
Increase in promoter holdings (% pt)
3M return (%)
2,793
62.3
57.3
5.0
16.2
Chemicals
1,300
69.9
66.2
3.7
1.5
Realty
2,246
38.3
35.7
2.6
21.1
)DOOLQSURPRWHUVWDNH Companies where the promoter stake in the previous quarter was at least 25 per cent and has fallen by at least 8 percentage points Promoters’ stake (%) Company
Sector
M-cap (` cr)
Dec '23
Sep '23
Polyplex Corporation
Decrease in promoter holdings (% pt)
3M return (%)
Plastic Products
2,914
26.7
51.0
-24.3
-9.1
SG Mart
Textile
6,156
53.8
75.0
-21.2
59.0
Sterling and Wilson Ren.
Infrastructure
13,511
53.0
67.6
-14.6
19.8
Inox Wind
Capital Goods
18,757
52.9
64.6
-11.7
159.1
Sky Gold
Jewellery
1,457
62.1
73.6
-11.5
213.2
EFC
Trading
2,142
46.0
56.8
-10.8
67.7
Sapphire Foods
FMCG
8,536
31.3
41.7
-10.4
-2.2
Fusion Micro Finance
Finance
5,584
57.7
67.9
-10.2
-3.2
KFin Technologies
Finance
10,832
39.1
49.1
-10.0
2.7
Paramount Comm.
Electricals
2,858
53.5
62.7
-9.2
39.7
TCNS Clothing
Textile
2,540
52.1
61.1
-9.0
3.6
Texmaco Rail & Engg.
Auto & Anc.
7,404
50.2
58.7
-8.5
33.0
Thomas Cook (India)
Hospitality
7,942
63.8
72.3
-8.5
13.5
Bank of India
Bank
65,035
73.4
81.4
-8.0
2.9
Ircon International
Infrastructure
21,806
65.2
73.2
-8.0
18.3
Shalimar Paints
Chemicals
1,667
31.9
39.9
-8.0
9.9
Market capitalisation of more than `1,000 crore as of February 15, 2024. Returns as of December 2023.
32 Wealth Insight March 2024
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MARKET COMPASS
Pledging tracker Companies that have seen a rise or decline in promoter pledging in Q3 FY24
P
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 and the dilution of promoter stake in the company. Generally speaking, a high pledged stake also indicates a bad management. Investors should stay away from companies that have high levels of pledging.
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
,QFUHDVHLQSOHGJLQJ Companies in which promoter pledging has gone up by 10 percentage points and the minimum promoter stake is 25 per cent Company
Sector
M-cap (` cr)
Pledged stake (%) Dec '23
Sep '23
Increase (% pt)
Promoter stake (%)
3M stock return (%)
Z-Score
F-Score
Debt-toequity
Tide Water Oil Company
Auto & Anc.
2,793
54.2
0.0
54.2
62.3
16.2
4.5
6
0.0
Kesoram Industries
Const. Materials
5,219
51.6
21.3
30.3
43.4
101.0
2.3
4
5.3
India Cements
Const. Materials
7,314
45.5
25.6
19.9
28.4
11.1
3.1
5
0.5
Orient Green Power
Power
2,412
93.2
76.5
16.7
29.4
68.0
2.7
7
1.0
Wockhardt
Healthcare
6,392
74.5
64.4
10.1
54.9
80.2
1.5
3
0.6
'HFUHDVHLQSOHGJLQJ Companies in which promoter pledging has come down by 11 percentage points and the minimum promoter stake is 25 per cent Company
Sector
M-cap (` cr)
Pledged stake (%) Dec '23
Sep '23
Decrease (% pt)
Promoter stake (%)
3M stock return (%)
Z-Score
F-Score
Debt-toequity
1,13,539
0.0
100.0
-100.0
63.2
22.6
12.3
6
0.0
49,328
0.0
77.5
-77.5
58.7
20.3
4.3
4
0.4
Ambuja Cements
Const. Materials
Jindal Stainless
Iron & Steel
Sanghi Industries
Const. Materials
2,902
22.2
98.9
-76.7
72.6
11.7
2.1
2
1.4
Kuantum Papers
Paper
1,398
0.0
30.0
-30.0
70.3
-2.7
3.3
8
0.4
Tilaknagar Industries
Alcohol
4,527
0.0
23.9
-23.9
40.3
18.8
7.5
6
0.3
Kilburn Engineering
Capital Goods
1,275
0.0
21.3
-21.3
54.6
55.8
6.2
7
0.5
Themis Medicare
Healthcare
2,174
2.4
23.5
-21.1
67.2
17.6
8.9
3
0.3
Jaiprakash Associates
Infrastructure
6,242
0.0
20.5
-20.5
30.0
65.4
1.6
7
-8.8
Prakash Industries
Iron & Steel
3,274
16.7
32.8
-16.1
44.2
17.3
3.4
6
0.1
Deepak Fert. and Petrochem Chemicals
6,437
0.0
14.5
-14.5
45.5
5.1
2.9
6
0.8
Mafatlal Industries
Textile
1,031
0.0
11.9
-11.9
70.2
-1.9
2.8
5
0.1
ACC
Const. Materials
49,541
0.0
11.7
-11.7
56.7
9.7
11.5
6
0.0
Servotech Power Systems
Capital Goods
2,147
0.0
11.3
-11.3
60.6
-2.1
17.4
4
0.5
Minimum market capitalisation of `1,000 crore as of February 15, 2024. Returns as of December 2023. Z-Score: Predicts a company’s financial distress or the possibility of its going bankrupt within two years. A Z-score of more than three is desirable. F-Score: Highlights financial performance as compared to that in the previous year. An F-Score of seven or above is good. A negative value for debt-to-equity implies a negative net worth.
34 Wealth Insight March 2024
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Passive equity funds for savers Indians cling fiercely to physical assets, bank deposits, and smallsavings investments. These are deep-rooted behaviours that are tough to shake off.
Recent household financial savings data from the RBI paints a startling picture: as of March 2023, a staggering 55% of
financial assets held by Indian households were parked in bank deposits
and other investments, including the Public Provident Fund.
Pension funds (excluding PPF) 3.2%
Bank deposits
Mutual funds
45.2%
8.4% Other investments (including PPF)
9.7% Currency and non-banking deposits
Financial assets mix of Indian households
11.9% Life insurance funds 21.5%
Data as of March 2023 Source: RBI
Other investments are a slew of schemes that the government offers. Similar to bank deposits, investors receive an assured interest on the capital invested in these schemes.
While some of the traditional investments can be useful in accumulating capital, they are not sufficient for growing wealth.
For wealth creation, one can embrace equity exposure. To that end, mutual funds may be an attractive choice. And for those new to investing, passive funds may be a good starting point.
Passive funds simply track an underlying index and seek to generate returns as per that. They comprise index funds and exchangetraded funds/fund of funds.
For instance, the Nifty 50 Index consists of India’s top 50 listed companies in terms of market capitalisation. By investing in passive funds tracking such an index, you may seek to get underlying index returns.
Thus, saving through passive funds is as easy as…
The views expressed here constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. The data/information/opinions are meant for general reading purposes only and are not meant to serve as a professional guide/investment advice for the readers. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. An investor education and awareness initiative by Mirae Asset Mutual Fund. All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Center section available on the website of Mirae Asset Mutual Fund.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
March 2024 Wealth Insight 35
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ANALYST’S DIARY
Out of season
Y
ou have heard the sirens. “Everything is too expensive.” “Do not invest now!” But amid this surging bull market, a few hidden gems are trading at 52-week lows despite posting a 10 per cent annual growth in earnings over the past five years. Yet, these stocks seem to be ignored by investors. In our analysis, 41 companies (as of February 9, 2024) with a market capitalisation of at least `1,000 crore were trading within 5 per cent of their 52-week low price. The number came down to 13 after applying the following filters: z A five-year median ROE of at least 20 per cent. z An annual profit after tax growth of at least 10 per cent over the last five years. Among them, we look at the top five companies based on their five-year profit after tax growth to understand the possible reasons for the market’s lack of interest.
Best Agrolife Formerly known as Sahyog Multibase, the company adopted the “Best” brand name after amalgamating with Best Agrochem in FY20. Best Agrolife manufactures a wide range of crop protection products in both generic and patented molecule segments. The company witnessed a remarkable FY23, recording a YoY revenue and profit after tax growth of 44 and 83 per cent, respectively. The growth was driven by new product launches, increased sale touchpoints, and favourable raw material costs, leading to a four percentage point jump in the operating profit margin. However, this trend did not continue in FY24. The company’s profitability declined due to pricing pressures and an unfavourable product mix. The management is
focusing on driving growth in the patented molecule segment to increase its revenue share and new launches while also exploring export opportunities.
Rajratan Global Wires It is a leading tyre bead wire manufacturer with operating facilities in India and Thailand. The company draws 64 and 36 per cent of its revenue from India and Thailand, respectively, as of the nine months ending December 2023. The uptick in automobile sales post-FY20 and subsequent growth in the tyre industry helped the company record consistent growth in the domestic market. Additionally, the pandemic-induced supplychain disruptions in China allowed the company to outgrow its Chinese counterparts, which historically dominated the Thai market, and gain a peak market share of nearly 30 per cent in FY22. However, the relaxation of lockdown measures in China triggered intense price competition, squeezing Rajratan’s operating profit margin. Additionally, declining raw material prices compelled a downward adjustment in product prices. The company’s operating profit margin has significantly declined, which raises concerns about its profitability.
GMM Pfaudler It is a global leader in the corrosion-resistant glass-lined equipment used in the production facilities of pharmaceutical and chemical industries. The company earned nearly 73 per cent of its revenue from
Robust financials, yet out of favour Company
Best Agrolife
Stock Rating
Rajratan Global Wire
GMM Pfaudler
SBI Cards and Payment Unrated
Tatva Chintan Pharma Chem Unrated
Alkyl Amines Chemicals
Market cap (` cr)
1,486
3,124
6,247
68,294
2,981
11,340
5-year profit after tax growth (% pa)
141.9
42.4
31.3
30.3
28.5
28.2
5-year median ROE (%)
42.1
25.7
20.4
25.8
30.0
25.3
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AI generated image
Unloved stocks in a bull market
performing assets, and higher impairment costs led to this decline. Moreover, it witnessed a YoY decline of 19 per cent in the new cards issued. The silver lining remains a double-digit growth in overall spending and receivables on credit cards. However, how it will navigate through an increase in competition from other banks, NBFCs, and fintech companies in the retail and MSME credit market remains to be seen.
Recent performance: TTM December 2023 YoY change (%) Revenue
Operating profit
Operating profit margin (% pt)
Best Agrolife
10.6
-26.6
-6.9
Rajratan Global Wire
-5.8
-31.2
-4.6
GMM Pfaudler
22.6
37.3
1.1
SBI Cards and Payment*
28.0
4.4
-3.2
5.6
-17.8
-3.2
Company
Tatva Chintan Pharma Chem
Tatva Chintan Pharma Chem
*Profit after tax and net profit margin. TTM refers to trailing twelve months.
The company’s expertise lies in producing specialty and intermediate chemical products with diverse applications across industries. It boasts an extensive client portfolio featuring prominent names such as Divi’s Laboratories, Asian Paints, and SRF, among others. The growing prominence of the Indian pharma and chemical industry in the global market and the long list of major clients have helped the company in previous years. Like many chemical companies, Tatva Chintan navigated a challenging landscape in the past year. Despite a nearly 30 per cent increase in sales volume, declining raw material costs compelled the company to adjust its prices downward, resulting in a YoY decrease in operating profit as of nine months ending December 2023. On the bright side, the company’s cash flow from operations turned positive in the first half of FY24 because of improving operational efficiencies. The management remains optimistic about the future outlook, citing acquiring new clients, commercialising new products, and capacity expansion in FY25.
international business as of TTM December 2023. Consistent growth in its core glass-lined equipment business, acquisitions and diversification into complementary segments are the key factors behind the company’s growth. It boasts a diverse set of products and services for laboratories and production plants of its clients. GMM Pfaudler relies heavily on the pharma and chemical industries for its growth. Unfortunately, the capex from these industries has slowed down in the current financial year, leading to a decline in revenue and operating profit margin in domestic businesses. Moreover, despite growth in consolidated numbers, the company is yet to find its winning stride.
SBI Cards and Payments It is India’s second-largest credit card issuer, holding a market share of nearly 19 per cent in December 2023. The company’s total accounts have grown annually by 16 per cent in the last five years, with 1.85 crore total active cards as of December 2023. Technological advancements and the growing penetration of credit cards made this growth possible. While the revenue recorded a YoY jump of 25 per cent in nine months ended December 2023, profit after tax only grew by 5 per cent. Increased interest expense, non-
Conclusion Evidently, these companies are facing some challenges. The real question is whether these challenges are temporary or indicative of deeper structural issues. This distinction will determine if these companies represent a good investment opportunity. By Hemkesh Khattar
Stock Rating and price data as of February 9, 2024. Financials as of FY23.
Sumitomo Chemical India
Vinati Organics
Vedant Fashions
Unrated
Unrated
19,125
16,818
23,429
5,056
3,069
5,69,588
40,499
28.2
26.1
23.7
19.0
16.9
14.2
10.5
23.3
22.6
24.2
26.7
22.0
28.6
46.5
TCI Express
Polyplex Corporation
Hindustan Unilever
Page Industries
March 2024 Wealth Insight 37
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ANALYST’S DIARY
Glass titan’s rise The curious case of an Indian small-cap company with eight acquisitions in the last five years GMM Pfaudler’s acquisition history Target
Niche
Sudarshan Chemical’s Industrial Mixing Division
Pfaudler International (erstwhile parent)
DeDietrich Process Systems India
HDO Technologies
Hydro Air Research Italia
JDS Manufacturing
Mixel
MixPro
Apr ’19
Sep ’20
Oct ’20
May ’21
July ’22
Aug ’22
Dec ’22
Sep ’23
Glass-lined equipment
Alloy process equipment
Membrane technologies
Glass-lined equipment
Mixing technology
Mixing technology
Mixing technology
Corossion-resistant technologies
I
n the world of business, certain names stand as titans, be they tech giants like Microsoft and Nvidia or consumer behemoths like Amazon and LVMH. Yet, amongst these, there is a gem from India, a small-cap company that has quietly earned the tag of a global leader. Enter GMM Pfaudler, the worldwide leader in glass-lined equipment. Traditionally, stainless steel was the preferred choice for reactor vessels in the chemical and pharmaceutical industries. However, it could corrode and react with certain chemicals. This is where glasslined equipment changed the game. At the forefront is GMM Pfaudler, which has a global market share of about 40 per cent. Over the last five years, its share
A meteoric rise Tracking the fourfold growth in GMM Pfaudler’s share price over five years ` 2,500
z GMM Pfaudler
z BSE SmallCap Index
2,000 1,500 1,000 500 0 February 2019 February 2024 Data as of February 1, 2024. BSE SmallCap Index rebased to the stock price.
price has increased more than four times. This article explores the company’s acquisitive capital allocation strategy and how it gained market dominance.
A string of acquisitions Acquisitions are a big part of GMM Pfaudler’s growth strategy. The company has acquired eight companies in the last five years. Its acquisition spending amounts to `315 crore or about 46 per cent of the cumulative cash flow from operations since FY18. Note that this doesn’t include the issue of shares worth `170 crore to the promoters for transferring ownership of a foreign subsidiary to the company. Of the eight acquisitions, five were global. The most notable one was the company’s acquisition of a majority stake in its US-based parent company, Pfaudler, in FY21. Given the over 30-year-long association between both companies, this acquisition has strengthened GMM Pfaudler’s foothold as a leader. The company transformed from a domestic player to a global leader by gaining access to 19 production facilities across 10 countries that penetrated the key markets of the US, Europe, and China. As a result, the contribution of exports rose from 11 per cent in FY19 to 73 per cent in the trailing twelve months (TTM) in December 2023. The acquisitions helped expand the company’s capacity in the core business of glass-lined equipment, ultimately making it the global leader. However, there are other segments where the company witnessed growth.
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Key business metrics
Operating profit margin
Consistent growth in standalone biz along with recent acquisitions have led to this growth
Standalone margin has shrunk while consolidated margin has improved
Metrics
FY20
FY21
FY22
FY23
TTM Dec '23
Revenue (` cr)
591
1,001
2,541
3,178
3,572
Op. profit (` cr)
90
88
151
312
351
15.2
8.8
5.9
9.8
9.8
27
157
236
185
-10*
ROE (%)
23.8
17.3
16.2
32.2
22.6
Debt-to-equity ratio
0.03
1.21
0.96
1.00
0.60
Op. profit margin (%) CFO (` cr)
*As of TTM September 2023
Growth in diversification While the glass-lined equipment business proliferated, the addressable market remained relatively small. Hence, the company forayed into complementary product categories, primarily heavy engineering products and mixing systems. The strategic acquisitions in India, Europe, and Canada gave the company access to advanced technologies and ready-to-use production facilities. These moves expanded its client base in the pharma and chemical industries while opening up new opportunities from oil refineries, petrochemical and fertiliser companies. It now serves as a one-stop shop for a wide range of requirements. From laboratories to full-scale production plants, the company is now involved in all aspects of its clients’ projects to optimise and improve the complete lifecycle of any processing equipment. The financials paint a promising picture of the company as well. It recorded high double-digit growth in its non-glass-lined equipment business in FY23.
The road ahead GMM Pfaudler finds itself in quite a unique position. While its core business is a source of consistent growth and sustainability, the newer diversified product portfolio brings an opportunity for future expansion. However, it is not all roses for the company. The
20 %
z Standalone
z Consolidated
16 12 8 4 FY19
TTM Dec 2023
company’s aggressive acquisition strategy has affected its balance sheet. Its debt-to-equity ratio increased from 0.03 in FY20 to 0.6 times as of September 2023. Ballooning goodwill is also a potential cause of concern, representing nearly 16 per cent of the company’s net worth as of September 2023. Moreover, higher working capital requirements also led to a negative CFO (cash flow from operations) in the same period. Generating synergies in operations also remains a challenge as the management requires time to integrate its various businesses. At present, there is a gap between the operating profit margin of the standalone numbers and consolidated numbers. In FY22, management initiated ‘Project Apollo’ with the sole purpose of gaining operational efficiencies. It has certainly resulted in an improvement in order execution and operating profit margin. Whether this continues in the future is yet to be determined. Moreover, the stagnant revenue growth and deteriorating profitability in the standalone business as of the twelve months ending December 2023 period exposed the company’s dependence on the capex cycle of pharma and chemical companies for growth. As of February 1, 2023, the stock trades at around 0.6 times its five-year median P/E. This relatively attractive valuation and a quality score of eight have helped the company earn a four-star Stock Rating. By Hemkesh Khattar
Invest like pros
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ANALYST’S DIARY
Decoding AU Small Finance Bank’s success How the bank carved its niche in the banking sector
T
he unique market position and financial performance of AU Small Finance Bank have captured investors’ attention lately. With a market capitalisation of `42,500 crore as of February 1, 2024, the bank stands as the sole large-cap small finance bank in India, having nearly tripled its stock price since its listing in 2017. Further, the bank has achieved an industry-leading growth rate among small finance banks (SFBs), with an annual growth rate of 34 and 54 per cent in loan advances and deposits, respectively, in the last five years. Here, we explore the factors contributing to AU’s tag of becoming one of the best-performing SFBs in India.
AU SFB steers clear of microfinancing Its loan book is healthier than its peers 3.5% z GNPA ratio (FY23) z Share of microfinance in loan book (FY23) 2.8 72%
2.1
63%
60%
1.4 19%
0.7 0 AU SFB
Equitas SFB
Ujjivan SFB
Utkarsh SFB
Suryoday
Sticking to its guns In FY17, 10 NBFCs (non-bank financial companies) were granted licenses to transition into SFBs. Of these, only two institutions, including AU Small Finance Bank, did not engage in microfinance lending. Before 2017, AU Small Finance Bank operated as an NBFC. The bank has chosen to stay away from microfinance lending and continues to focus on its core competency, i.e., vehicle loans, which has been
Growth in advances and deposits
A diversified loan book
AU’s focus on digital innovation and underserved customers has led to rapid growth `75,000 cr
z Deposits z Advances
60,000 45,000 30,000 15,000 0 FY18
its forte for the last 21 years. This move proved beneficial for AU. Given that microfinance lending involves providing small, unsecured loans to underserved customers, the associated NPAs (non-performing assets) are higher. The decision to stick to vehicle financing has resulted in lower NPAs (non-performing assets) for AU compared to its peers. In addition, it boasts a loan book that is 92 per cent secured.
FY23
The bank’s strategic focus on vehicle loans, which account for 32 per cent of its portfolio and secured business loans (MSME), contributing 31 per cent to the portfolio, has resulted in superior asset quality and a robust balance sheet. To reduce its reliance on vehicle loans, the bank also expanded its share of secured business, commercial and home loans. Further, its decision to launch credit cards in 2021 has been a success, making it the only small finance bank to do so. The bank has issued over five lakh credit cards within two years, emerging as one of the top 10 issuers in the country in terms of incremental monthly issuance. As of FY23, credit card loans contribute 2.5 per cent of the bank’s loan book.
40 Wealth Insight March 2024
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Stable profits
Loan book mix: FY23 vs FY19 Vehicle and MSME loans are the staple
Vehicle 32%
Vehicle 42%
MSME 31%
MSME 32%
Home loans 7%
Small and medium corporate 17%
Others 8%
Others 9%
Commercial banking 22%
FY23
FY19
A distinctive approach The bank implemented a differentiated strategy to attract retail customers from urban markets by offering higher interest rates on savings accounts compared to major commercial banks. It then used these deposits to extend loans in rural or semi-urban regions. In FY23, the bank received 78 per cent of its deposits from urban markets and allocated 63 per cent of its loans to rural or semi-urban areas. Furthermore, AU’s digital innovation played a crucial role in scaling its business. The launch of digital products and channels accelerated the pace of new customer acquisitions, with 43 per cent of customer acquisitions in FY23 being attributed to digital products. The bank has adopted a ‘phygital’ approach, combining its physical presence with digital channels, enabling it to expand its reach in metro cities without incurring significant capital expenditure. Its growth and success are a testament to its strategic planning and effective execution.
Although AU’s profitability (return on asset) appears lower than other SFBs, it is merely an illusion. Its peers have significant exposure to high-yielding microfinance loans, causing their ROAs to shoot up during favourable economic conditions. However, the same loans pose higher risks during economic downturns, resulting in increased NPAs and reduced profitability. Thus, during economic upturns, AU’s profitability may seem comparatively lower within the industry. But, during economic downturns, AU’s profitability appears stable and higher than its peers, thanks to the conservative loan book that protects it from the impact on NPAs and profitability.
What lies ahead AU’s growth story is a testament to its unique approach of sticking with conservative loans and focusing on its core competencies. However, its success may very well bring more challenges given the scale of operations (advances and deposits of `69,365 crore and `58,422 crore, respectively, in FY23). Despite competing with SFBs, AU may face tough competition from well-established commercial banks in the future. It remains to be seen how the bank will deal with that challenge. Furthermore, AU’s current price-to-book (P/B) ratio of 3.5 times is significantly higher than the peers’ median of 2.2 times. While one could argue that the bank justifies its premium valuation due to its more stable operations, its valuation is still higher than that of top-tier commercial banks. By Shubham Dilawari
Return on assets: Peer comparison AU’s margins appear quite stable 4%
z FY19 z FY20 z FY21 z FY22 z FY23
3 2 1 0 -1 -2 AU SFB
Equitas SFB
Ujjivan SFB
Utkarsh SFB
Suryoday SFB
March 2024 Wealth Insight 41
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ANALYST’S DIARY
Satellite view The fastest-growing industries of the past five years in terms of profit after tax. Our list compiled 757 companies with a minimum market cap of `500 crore, spreading across the top 20 industry groups. z 5-year profit after tax (% pa) z 5-year revenue growth (% pa)
12.3
Data as of trailing 12 months ending Dec 2023
20.3 Food & staples retailing 19.5
20.7
19.8 Real estate development 4.4
Capital goods 9.3
Technology services
9.5
51.3
12.4
12.5
Diversified -1.5
127.8
Textiles, apparel & accessories
Power producers & utilities 12.6
14.7
20.7
18.6
21.6
10.6
49.6
`
Retailing
Food, beverage & tobacco
11.0
Banking & NBFCs Transportation & logistics
Commercial & industrial services 12.3
21.9
14.2 Insurance 12.4
Investment and financial services 19.5
19.2 Automobiles & ancillaries 8.0
37.6
13.9
32.5 Hotels, restaurants & leisure
Health care equipment & services
11.0 13.5 9.6
13.2
20.3 Oil & gas and services 8.8
18.6
5.1
Basic materials
Pharmaceuticals & research 9.7
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WORDS WORTH WISDOM /(9:/4(90>(3( Chairman of Marico
“Hindustan Lever is after us” Marico’s triumph over HUL through the eyes of its founder and his friend
M
arico, an FMCG giant, dominates the coconut oil segment with its ‘Parachute’ brand. But did you know that in the 1990s, the company was at war with Hindustan Unilever (HUL) for market dominance? Marico’s founder, Harsh Mariwala, and his friend Professor Ram Charan have captured the company’s journey, including this rivalry, in their book, ‘Harsh Realities.’ In one of the chapters, the duo delve deep into the challenges posed by HUL and how they overcame them. We share the entire event in a nutshell.
Illustration: ANAND
HUL’s entry After demerging from Bombay Oil Company, Marico had established itself as a leader in the coconut oil segment by 1993. Meanwhile, HUL, the Indian subsidiary of Unilever, went on an acquisition spree under its then Chairman, Keki Dadiseth, to solidify its position as an FMCG giant. It acquired brands like Kwality, Dollops and International Best Foods. Professor Ram Charan writes, “Along with mergers of some of the group businesses, he knew he could strengthen Lever’s position by acquiring promising companies.” HUL’s eyes were now on the hair oil segment. It acquired TOMCO (Tata Oil Marketing Company) to access Nihar Coconut Oil, which held a 7 per cent market share. HUL wanted to strengthen its position in this segment.
The first move from HUL To be the first preference on the shelves of retailers, HUL offered discounts of 35 per cent compared to Marico’s 10 per cent. Furthermore, HUL spent twice as much on advertising despite operating on a smaller scale. Ram Charan notes, “This amounted to a
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Well-oiled growth!
9,763
z Revenue z Profit after tax In ` cr
5,733 1,007
106 2 FY91
283 12 FY95
2,661
648 36 FY00
70
FY05
7,315
232
FY10
full-blown assault on Marico.” It even made Marico’s Vice President of Marketing exclaim, “Hindustan Lever is after us, all guns blazing.”
HUL’s offer to acquire Marico and the response The war between HUL and Marico was not cooling down. The leaders at Marico believed that HUL might make an acquisition offer. Ram Charan says, “Large companies can offer incredible financial payouts. Because for them, what they give you does not materially affect their earnings per share. Hindustan Unilever was a thirty times larger predator, with humongous hunger and deep pockets. Very deep pockets.” HUL did come knocking as per their expectations. Dadiseth made a direct offer to Mariwala, saying, “The consideration will ensure that you and the next generations will be well cared for… You know that we’re in the coconut oil market. We’re very serious about this. We have a far superior and deep penetrating distribution network…I’m giving you an opportunity to sell out.”. However, Mariwala refused to sell, and the conversation ended with a threat from the HUL Chairman that if he didn’t sell, “Marico will be history” and “you will live to regret it.”
Competition intensifies Mariwala and his team were initially taken aback by the competitive offer, but their confidence in their abilities helped them to become more aggressive. Ram Charan writes, “A huge advantage for Harsh was his in-depth knowledge of branded coconut oil: consumer insights, sourcing expertise, a well-established distribution and marketing set-up, and the significant cost optimisation achieved across the value chain.” Besides, Mariwala also realised that
573
1,302
1,021
FY15
FY20
FY23
Marico was more nimble than HUL, which had layers of management in its hierarchy. The brand war intensified as both companies upped their advertisement expenses. Marico completely changed its package to make it shinier and added a tamper-free cap. The brand was linked to tradition and religion to create a sentimental value, resulting in Marico’s market share reaching 52 per cent. While Nihar also gained market share, it was from smaller players. Ram Charan says, “Harsh astutely turned around the Nihar and Hindustan Lever threat to augment competitive advantage for Parachute and Marico.” Although Nihar’s market share touched 15 per cent, it couldn’t catch up to Marico. HUL couldn’t keep up with this strong fightback from Marico and eventually stopped investing in Nihar, leading to a decline in its market share.
Marico stands tall After more than six years of brand war, HUL had given up. It wanted to sell this division, and first in the queue was Marico. In February 2006, Marico acquired Nihar Oil for `216 crore, taking its market share to 60 per cent. This marked the end of the war. Marico emerged as the undisputed segment leader and allowed Harsh Mariwala to take a breather. He says, “It was a quantum leap for Marico. Internally, it brought a strong feel-good factor that we were good enough to succeed against a powerful company.” Although Marico did come out on top, it went through a challenging period and had to reinvent itself on all fronts to stay on top despite being a market leader. On the other hand, HUL realised that splurging cash at a segment would not result in leadership. The entire saga highlighted the importance of the strategic approach to brand building. March 2024 Wealth Insight 45
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VIS-A-VIS
Pharmaceutical pioneers Putting two market leaders face-to-face Cipla
Dr Reddy’s Laboratories
As India’s second-largest pharmaceutical company by market cap, Cipla has six brands among the top 25 in the Indian pharmaceutical market. The company specialises in respiratory drugs, where it has cornered a 23 per cent market share (as of FY23). Moreover, it ranks second in India’s chronic therapeutics market. In the 12 months ending December 2023, 43 per cent and 28 per cent of its revenue came from India and North America, respectively.
Unlike Cipla, this third-largest Indian pharmaceutical company by market cap generated most of its revenue from North America (45 per cent) in the 12 months ending December 2023. India and emerging markets each accounted for 18 per cent of its revenue during the same period. Moreover, 60 per cent of its retail-facing products and 58 per cent of institutional products in North America occupy the top three ranks.
)LQDQFLDOV (All numbers in ` cr) Revenue
Operating profit
Net profit
Net worth
Total debt
Cash from operations
Market cap
25,350 27,213
5,040 6,210
3,708 5,228
25,095 25,497
674 965
3,792 7,212
1,14,653 1,02,785
3ULFHFKDUW
3(UDWLR
300
60
225
45
150
30
75
15
0
0
Rebased to 100
Feb 2019
Feb 2024
30.9 19.7
4.4
3.8
Price to book
Price to earnings
29.2 14.3
18.6
19.9
22.6
22.8
23.2
Feb 2019
0.6
0.7
ROE (%)
Debt to equity
)LYH\HDUDQQXDOLVHGJURZWK SD 20.5
ROCE (%)
36.5
32.0
16.0
Operating profit margin (%)
0.03 0.04
Dividend yield (%)
8.5 Net profit margin (%)
Feb 2024
11.6
Revenue
Operating profit
14.7
EPS
Price data as of February 08, 2024. P&L data and ratios as of 12 months ending December 2023. Balance sheet items as of September 2023.
Over the last two decades, India has dominated the global pharma market, becoming the largest manufacturer of generic medicines and vaccines globally. The Indian pharmaceutical industry currently stands at $65 billion and is expected to reach $130 billion by 2030, growing annually by about 10 per cent, according to an Indian Brand Equity Foundation report. While low-cost product portfolios have been the key growth drivers in the past, the research-oriented biotech segment is expected to drive growth in future.
46 Wealth Insight March 2024
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COVER STORY
Imitation investing A guide to stealing ideas from experts By Udhayaprakash, Hemkesh Khattar, Mithilesh Bhaumik and Nipun Arora
I
n a 1675 letter, Isaac Newton, who peeked into the mathematical laws governing the motion of celestial bodies, wrote, “If I have seen further, it is by standing on the shoulders of giants”. The urge to seek the guidance of experts, those who have done it before, is embedded in the very essence of what makes us human. Most choices we make are influenced by those we consider our idols. So, it shouldn’t be surprising that this inherent human tendency to follow the footsteps of the greats is present in investing. Most investors closely track the buys and sells of fund managers. We, too,
regularly publish interviews with market experts. But, does it work? The market is notorious for not adhering to the laws of nature. Even Albert Einstein, who figured out how space and time work, could not predict the markets and lost most of his Nobel Prize money in the 1929 Wall Street Crash. In this issue, we explore the age-old question: Can mimicking the investments of fund managers give you an edge? We explore instances where this investment strategy has worked and failed. But first, let’s dive into why investors choose to follow fund managers. March 2024 Wealth Insight 47
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COVER STORY
The allure of expertise The psychology behind why investors seek expert advice
G
oogle any toothpaste brand. You will be bombarded with advertisements and imagery claiming that nine out of 10 dentists have recommended their toothpaste. Whether these claims are valid or not is a different tale. However, marketers know people are more likely to buy their products if a dentist endorses them. Why is that? In one simple word, the answer is trust. We trust that a dentist who has spent years learning about oral health would know better than most which toothpaste is best for our teeth. In fact, modern civilisation is built on our trust in those who have dedicated their lives to mastering their respective fields. We trust our doctors to cure us, we trust our teachers to help us grow and we trust policymakers to drive the economy forward. Similarly, investors tend to trust fund managers who have spent years studying the market to know which stocks are the best. So, if nine out of 10 fund managers are buying a stock, chances are they know something most don’t, and maybe you should also buy that stock. But, as we have previously stated, the markets are a world of their own. Their laws are different and often absurd. So, apart from society’s natural trust in its experts, there exist subtler motivations for investors to follow the lead of fund managers.
They are financial athletes We have all run a race at some point in our life. Some of us might even have been stars of our school track team. But, we are no Usain Bolt. Investing is often a race. To reap the highest returns, one must spot promising companies before the market euphoria kicks in. But, fund managers are the Usain Bolts of the market. Analysing the market and spotting winners is what they live for, and chances are they will spot the next multibagger before you. Take the example of Deepak Nitrite. Mutual funds started increasing their stake back in 2015 when the company was just a sodium nitrite manufacturer. But, the experts at the helm knew it had the potential to be much more. Today, it produces a wide range of chemical intermediates. It has also grown an eye-popping 25 times since fund houses spotted it.
Illustration: ANAND
They know more More information leads to better investment decisions, and fund managers will always have more information than the average investor. Fund houses have access to doors a retail investor doesn’t. In addition, they have dedicated teams working around the clock to gather information. To emulate how a fund manager picks stocks is nearly impossible for a retail investor.
They can influence the market We are not discussing market manipulation or any underhanded tactics. However, it’s undeniable that when investment firms begin to show interest in a particular stock, it captures the broader market’s attention. Moreover, the significant levels of investment or divestment that these firms are capable of executing can impact a stock’s price.
Even experts follow experts Monish Pabrai, the famed Indian American investor and founder of Pabrai Investment Funds, has openly advocated copying successful investing ideas. He even conducted an exercise where he created a portfolio
48 Wealth Insight March 2024
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When copying works An equal-weighted portfolio of the 10 stocks would have more than doubled your investment 5Y return (% pa) H.G. Infra
32.6
Fine Organic
32.5
Poonawalla Fincorp
31.6
IFGL Refractories
27.2
ICICI Securities
22.0
Portfolio return
19.5
Sensex
14.8
Aavas Financiers
13.1
Sandhar Tech
9.5
Orient Electric
9.5 Khadim India
-8.2
Indostar Capital
-12.9 Data as of January 1, 2024
based on the top picks of a few value-oriented fund managers. The results? The portfolio gave 15.5 per cent annual returns in 18 years compared to the S&P 500’s 4.8 per cent during the same period. A similar exercise, copying Warren Buffett’s Berkshire portfolio from 1976-2006, yielded same results. The portfolio beat the benchmark in 27 out of 31 years!
The numbers favour them Even if one disregards the psychological aspects, historical data says following fund managers is rewarding. We created an equal-weighted portfolio constituting the top 10 stocks that witnessed the highest increase in mutual fund stake as of December 2018. The portfolio generated an annual return of 19 per cent in the next five years. To put that into perspective, Sensex gave an annual return of 15 per cent in the same period. That’s an alpha of four percentage points! So, is the question we began with answered? Is copying fund managers a sure-shot road to success? Not quite. It is only one side of the coin. But before we explore the other side, let’s delve into the stories of five multibagger stocks, showcasing how investment firms managed to identify their potential early on.
DEEPAK NITRITE
Turning on the nitro
I
0.3 per cent in December 2015 to 10.1 in December 2016. n 2015, Deepak Nitrite was a rising Indian chemical In 2019, Deepak Nitrite commenced production. Over manufacturer. Its expertise in manufacturing sodium the years, it went on to become the largest phenol and nitrite and nitrate helped it gain several prominent clients in the textile dyeing, agrochem and petrochem acetone producer in India. At the same time, supply chain disruptions in China opened up lucrative new industries. Its robust nitrate business alone warranted opportunities for its existing product portfolio in textile investment consideration. However, fund houses sensed dyeing, detergents, agrochemicals a larger opportunity on the horizon. The chemical manufacturer was about and colour additives. Between Dec 2015 Dec 2016 to invest `1,700 crore to produce FY15-20, its revenue and profit after Mutual fund 0.3 10.1 phenol and acetone. tax grew 26 and 63 per cent annually, position (%) There was immense domestic respectively. Its return on capital Dec 31, 2016 Feb 9, 2024 demand for acetone and phenol. But employed and operating margin India was mostly importing these doubled in the same period. Market chemicals, with no major domestic If you stole from the playbook of cap (` cr) 1,068 30,201 producer. This supply gap provided fund houses and invested in Deepak Stock Rating Nitrite in January 2017, your an opportunity begging to be conquered. So, hearing Deepak investment would have P/E ratio 17.8 37.9 Nitrite was up for the task, fund compounded 92 per cent annually Initial Stock Rating as of FY16 houses increased their stake from for the next five years. March 2024 Wealth Insight 49
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COVER STORY UNO MINDA
Honking for high returns
U
the autopart maker double its revenue and profit after no Minda is a leading Indian auto component tax between FY14 and FY16. It also started focusing on maker with a diverse product portfolio, including innovation, spending around 3 to 4 per cent of its car switches, horns, automotive lighting, etc. revenue on R&D. But, its primary breadwinners are switches and lighting parts, accounting for 27 and 23 per cent of the total Fund managers knew smart acquisitions, surging revenue (TTM December 2023), respectively. earnings and robustness were the perfect success recipe. They gradually increased their holdings in Uno Fund houses first took notice of Uno Minda for its Minda, from 1 per cent in June 2016 smart acquisitions between FY13 Jun 2016 Jun 2017 to 7.3 per cent in June 2017. and FY16. Notably, it acquired Mutual fund Their convictions did not go Clarton Horns, a renowned 1.0 7.3 position (%) unrewarded. Between FY16 and European horn manufacturer, in Jun 30, 2017 Feb 9, 2024 2013. This granted it access to FY21, Uno Minda’s revenue grew lucrative OEM markets in Europe 20 per cent annually. Simultaneously, and the US and made it the secondits profit after tax compounded Market cap (` cr) 5,538 36,741 largest horn manufacturer in the 15 per cent annually. world. During the same period, its Investors who spotted the uptick Stock Rating two ailing subsidiaries, MJ Casting in mutual fund stakes and invested in P/E ratio 29.8 47.5 and Minda Kyoraku, started July 2017, gained 53 per cent annually Initial Stock Rating as of FY17 recovering. The turnaround helped in the next five years!
KAJARIA CERAMICS
A glossy success story
K
0.2 per cent to 6.4 per cent. ajaria Ceramics is India’s largest ceramic Their conviction was rewarded. Between FY10 and and vitrified tiles manufacturer in terms FY14, Kajaria Ceramics almost doubled its capacity, of volume, with an annual capacity of focusing primarily on vitrified tiles. It even 86.5 million square meters. converted some of its ceramic tile capacity for The company caught the eye of top fund managers vitrified tile manufacturing. It also acquired new when it began manufacturing vitrified tiles. For the plants, entered into partnerships, improved product uninitiated, vitrified tiles are lightweight, lowavailability and expanded its dealer network. porosity tiles popular for their ease of installation. Its bet on vitrified tiles turned In addition to its focus on vitrified Dec 2009 Dec 2010 out to be a game-changer. From tiles, improving financials also Mutual fund FY10 to FY15, its revenue soared drew the attention of fund houses. 0.2 6.4 position (%) 24 per cent annually. Concurrently, Over 2010, its debt-to-equity ratio Dec 31, 2010 Feb 9, 2024 profit after tax compounded contracted from 2 to 1.4 times. The 37 per cent annually. recovering financials and growth Those who invested in Kajaria prospects in vitrified tiles Market cap (` cr) Ceramics in January 2011, based on convinced fund houses to amp up 546 19,934 the rising fund house stakes, were their stakes. Between December Stock Rating NA rewarded handsomely. It grew 2009 and December 2010, fund P/E ratio 9.9 46.3 12 times in the next five years! houses increased their stake from 50 Wealth Insight March 2024
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SONATA SOFTWARE
Flying high on cloud nine
F
in services, banking, financial services and healthcare ounded in 1986, Sonata Software initially focused sectors. But the most significant boost came when it on hardware and software licensing. It quickly entered a 30-year-long partnership with Microsoft as established a prestigious client base, including a its official cloud services provider. partnership with IBM. Later on, it started developing These strategic decisions yielded impressive original software for the travel and retail industry. results. Between FY19 and FY23, revenue from cloud It was, however, Sonata’s foray into cloud services grew 21 per cent annually. Notably, in FY19, computing that intrigued fund houses. They increased the cloud services segment their stakes in the company from generated 80 per cent of its profit 2 per cent in June 2017 to Jun 2017 Jun 2018 after tax despite accounting for just 4.9 per cent in June 2018, Mutual fund 2.0 4.9 one-fourth of the topline. Its core anticipating incremental growth position (%) hardware licensing business also from cloud computing. Jun 30, 2018 Feb 9, 2024 flourished in this period, growing its Sonata reciprocated this belief revenue 30 per cent annually. and made several smart global Market acquisitions in the cloud computing Investors who followed the cues cap (` cr) 3,288 22,343 domain. It also partnered with from fund houses and invested in Stock Rating major cloud services providers, Sonata Software in July 2018, including Google, AWS, Salesforce, compounded their wealth by P/E ratio 13.9 50.2 etc. Its cloud computing clientele 34 per cent annually for the next Initial Stock Rating as of FY18 included several prominent names five years.
FINE ORGANIC INDUSTRIES
More than fine growth
F
Between June 2018 and September 2018, mutual fund ine Organics is India’s largest oleochemicalholdings in Fine Organics rose from 6.4 per cent to based additives manufacturer. It boasts a diverse 14.5 per cent. portfolio comprising 470 specialty additives, However, fund managers had to live through a with applications in several industries such as temporary phase of muted performance. From FY19 to plastics, packaging, rubber & coatings, etc. FY21, edible oil prices surged due to the pandemic, In 2018, fund houses were particularly impressed by impacting the chemical manufacturer’s financials. the company’s innovations. For example, Fine But it didn’t take long to bounce back once the Organic is among the few global players to pandemic receded. Between FY21 and FY23, it tripled manufacture green additives. The manufacturing its topline. Also, its net margin process of these eco-friendly Jun 2018 Sep 2018 doubled and profit after tax grew additives is highly complex, Mutual fund five times in the same period. requiring vegetable oils instead of 6.4 14.5 position (%) Investors tracking the stake of petrochemicals. In addition, green Sep 30, 2018 Feb 9, 2024 mutual funds in Fine Organics additive products have spotted the optimism of fund characteristically long and managers. Those who copied the expensive approval processes. Fund Market cap (` cr) fund houses and invested in October houses believed these entry barriers 3,242 13,491 2018, compounded their investment provided Fine Organics with a Stock Rating Unrated by 35 per cent annually for the next strong moat and started investing in P/E ratio 22.9 30.2 five years. the chemical manufacturer. March 2024 Wealth Insight 51
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COVER STORY
The limits of expertise Why blindly copying financial experts is unwise
I
n 1915, while writing down the final pieces of his general theory of relativity, Albert Einstein was in a pickle. His equations were screaming that the universe is not static. It is either expanding or contracting. But a static universe was the belief of the age. So, he decided to add a constant, called the cosmological constant, to bend his equation to adhere to the scientific consensus. Ten years later, Edwin Hubble, a renowned astronomer, discovered that our universe is expanding. Reacting to this discovery, Einstien called the cosmological constant his “greatest mistake”. Our experts, even once-in-a-generation geniuses like Albert Einstein, are capable of blunders (though Einstein was later somewhat vindicated. But that’s a different story!). Experts, regardless of the field, base their decision-making on the information available. Their expertise equips them to interpret the data accurately and make sound decisions. Our financial experts, for example, look into a plethora of data points, such as historical performance, valuations, business outlook, etc., to arrive at a decision. But here’s the conundrum. The world is everchanging. New discoveries can add new variables to an equation, and new technological advancement can suddenly make a company’s business model obsolete. Now, consider how volatile the markets are and how often the data points change. Suddenly, a fund manager’s decision doesn’t seem so infallible anymore. Let’s redo our previous exercise to explore how changing data points can flip a good decision on its head. To recap, we created a portfolio based on the top 10 stocks that witnessed the highest hikes in mutual fund stakes as of December 2018. The portfolio beat the benchmark by a wide margin over the next five years. Now, if we tweak the date to December 2015 from December 2018, the results change completely. Our new portfolio gave a measly annual return of 0.4 per cent in the next five years. In contrast, the Sensex in the same period grew 13 per cent annually. So, in a nutshell, the limits of expertise themselves are an argument against blindly copying what fund managers are doing. However, apart from this, there are a few other additional concerns to aping the financial experts.
Illustration: ANAND
When copying doesn’t work Your portfolio would have bombed! 5Y return (% pa) KEI Industries
32.1
Sensex
12.8
Mold-Tek Packaging
12.3
PNC Infratech Portfolio returns
10.5 0.2
-7.6
Aditya Birla Fashion
-8.2
Power Mech Projects
-18.5 -20.1 -23.8 -27.4 -29.5
Titagarh Railsystems Sanghvi Movers Indian Terrain Fashions Navkar Corp UFO Moviez
Data as of January 1, 2021
52 Wealth Insight March 2024
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Time lags Fund houses do not disclose their portfolio daily. Rather, their holdings are updated for the public eye every month. So, you can never be sure when the fund manager is buying or selling a stock. There are bound to be delays between the fund manager’s call to action and yours. And this slight time lag can, at times, transform into sizeable losses. For example, several fund houses raised their stake in Noida Toll Bridge between December 2008 and June 2009. If you had bought the stock on January 27, 2009, you would have gained around 8.3 per cent annually for the next five years. However, if you invested on July 01, 2009, you would have lost 4 per cent every year!
You can’t afford a grand mistake Investing, for retail investors, is a personal journey. Everyone’s destination is different. Some of us are investing to buy a car, some for a house and some for retirement. A financial setback for us means years of frugality turning inconsequential. We cannot take the same risks as a fund manager. Hence, we cannot have the same risk appetite as a fund manager while picking stocks.
Experts also have biases Parag Parikh, the founder of PPFAS Mutual Fund, wrote in his book titled ‘Value Investing and Behavioural Finance’ that “They (institutional investors) are as prone to behavioural biases as any other layman and secondly, due to their organisational compulsions which lay more stress on short-term performance rather than long-term one”.
Institutional investors are prone to the same behavioural biases that plague retail investors. They might not succumb to it as often but are equally susceptible to it.
There is no denying that fund managers are experts of the market. But they are still humans and are prone to the same behavioural biases as an average investor. They, too, can often get blinded by their biases, ignoring glaring red flags. A case in point would be Zee Entertainment. In the past few years, the company has struggled with corporate governance issues and financial instability. Yet, between December 2022 and December 2023, mutual funds increased their stake in the company from 12.2 per cent to 32.5 per cent. We all know what happened next. It shed nearly one-fourth of its market cap in January 2024! So, now that we have seen the yin and yang of our original question, let’s recap where we stand. Borrowing popular investment ideas can indeed be rewarding. However, simply copying the buys and sells of a fund manager is not wise. So, is there a way forward? Yes. But it might not be the answer you are looking for. But before we finally put an end to the question, let’s look at some stock picks that fund managers got wrong. It may shed some light on common behavioural biases fund managers are privy to.
One of the bad apples Mutual funds have increased their stake in Zee Entertainment in each of the last nine quarters 40 %
Share price: Zee Entertainment `400
Mutual fund position
32
320
24
240
16
160
8
80
0
0 Mar ’21
Jun ’21
Sep ’21
Dec ’21
Mar ’22
Jun ’22
Sep ’22
Dec ’22
Mar ’23
Jun ’23
Sep ’23
Dec ’23
Share price data as of February 9, 2024. Mutual fund position as of quarter end.
March 2024 Wealth Insight 53
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COVER STORY PUNJ LLOYD
A debt-fuelled demolition
I
Between FY06 and FY10, its net debt grew nearly n the early 2000s, Punj Lloyd was a promising sevenfold to `4,455 crore! engineering, procurement, and construction The debt-fueled expansion weakened the balance company with a global presence. In FY06, it went on sheet. Project delays and cost overruns added to its a massive expansion drive, exploring various projects woes. As a result, it incurred a loss of `108 crore in in the Middle East and North Africa (MENA) region. In FY10. In addition, the MENA region, accounting for 2007, it bagged its highest-ever order of `12,000 crore nearly 67 per cent of the order book, experienced from an oil company in Libya. political instability in 2010. Consequently, it incurred The massive order wins and rapid growth sparked significant losses in FY11 as well. interest from fund houses. They were convinced that Punj Llyod surely gave they had spotted the next Larsen & Jun 2006 Jun 2007 institutional investors sleepless Toubro. Between June 2006 and Mutual fund nights. It became one of the biggest June 2007, they increased their stake 3.9 16.2 position (%) wealth destroyers of the last decade. from 3.9 per cent to 16.2 per cent. Jun 30, 2007 Dec 31, 2018 If you had invested in Punj Lloyd in At the time, the infrastructure July 2007, based on mutual fund segment was amid a once-in-aholdings, you would have lost lifetime bull run. Several infra stocks Market cap (` cr) were touching their all-time highs. 81 per cent of your investments in the 6,712 141 However, this bullish fervour turned next five years. It is now part of Stock Rating NA Unrated many blind, and Punj Lloyd’s D-street folklore of companies that P/E ratio 29.2 – burgeoning debt went unnoticed. shined too bright and burnt out fast.
NOIDA TOLL BRIDGE
Toll on investor
I
in revenue. Also, its net profit margin zoomed from n 1997, the state-run Infrastructure Leasing & 7 per cent to 42 per cent. Financial Services founded the Noida Toll Bridge However, fund houses did not consider that Delhi Company. Its primary purpose was to develop, Metro would emerge as a significant competitive construct and maintain the Delhi-Noida direct flyway threat. On November 13, 2009, trouble struck as Delhi (DND flyway). At the time, Noida was reinventing Metro commenced operations between Central Delhi itself as a global working hub, and the need for and Noida. Consequently, the company’s topline connectivity was immense. From June 2008 to June started contracting. The final blow was dealt in 2009, mutual fund holdings in Noida Toll Bridge grew October 2016, when the Allahabad from 0.5 per cent to 11.8 per cent. Jun 2008 Jun 2009 High Court waived off DND toll Fund managers were optimistic that Mutual fund charges. As a result, its profit after daily traffic between Noida and 0.5 11.8 position (%) tax plummeted by 98 per cent YoY in Delhi would soar, pumping up the Jun 30, 2009 Feb 9, 2024 the fiscal year 2017, marking a earnings of this PSU. devastating turn of events. For a while, fund managers were Had you copied fund houses and convinced that they had hit a Market invested in Noida Toll Bridge in jackpot. Between FY06-09, average cap (` cr) 762 197 July 2009, your investment would daily traffic surged 18 per cent Stock Rating NA Unrated have shrunk by 3 per cent annually annually. Consequently, Noida Toll P/E ratio 22.9 – for the next five years. Bridge witnessed a significant surge 54 Wealth Insight March 2024
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JYOTI STRUCTURES
Global dreams turn financial nightmares
I
n the early 2000s, the government embarked on an In the pursuit of international success, it took on ambitious mission to link rural and semi-urban concerning amounts of debt to build electrical towers areas to the electrical grid, sparking a surge in in the US. Its debt-to-equity ratio jumped from demand for electrical towers. Jyoti Structures seized 0.8 times in FY11 to a mind-boggling 7.2 times in FY15. the opportunity, positioning itself as one of the primary Although its international business was bringing in beneficiaries of this infrastructure boom. Institutional revenue, it was incurring losses. The shift in focus investors were also chasing the infra wave and Jyoti towards overseas operations left the domestic Structure was a prime candidate. business hanging, with its volumes falling by Between June 2005 and December 2006, mutual funds 42 per cent between FY11 and FY14. significantly bolstered their stake in Investors who heeded the Jun 2005 Dec 2006 Jyoti Structures, increasing it from recommendations of fund houses and Mutual fund 7.1 per cent to 14.3 per cent. During invested in Jyoti Structures in 7.1 14.3 position (%) the period spanning FY05 to FY10, the January 2007 faced significant losses, Dec 29, 2006 Feb 9, 2024 company showcased remarkable witnessing a 21 per cent annual performance, with annual revenue erosion in their investments over the growth averaging 38 per cent and subsequent five years. Market profit after tax soaring by an Jyoti Structures’ tale serves as a cap (` cr) 1,012 2,172 impressive 40 per cent annually. cautionary reminder of the perils of Stock Rating NA unchecked expansion and However, its dream of going P/E ratio 39.2 158.2 overreliance on debt. global became its Achilles’ heel.
KHADIM INDIA
Stepping into losses
K
profitability soon started to decline as it accumulated hadim India is an Indian footwear retailer debt to fund expansion. Interest costs surged and it with a strong presence in East and South India. witnessed a massive spike in its raw material costs in It sells its products through retail, distribution, 2019. As a result, it incurred a loss in FY20. and e-commerce channels. They contribute around 70, 27 and 3 per cent, respectively, to the revenue The onset of the COVID-19 pandemic exacerbated (as of Q3 FY24). Khadim India’s woes. GST hike from 5 per cent to Fund houses were initially enticed by its vast 12 per cent further compounded challenges, distribution network, encompassing 829 exclusive stores triggering a slowdown in the retailer’s sub-`1,000 across 23 states. In addition, it had a segment. Additionally, Khadim Sep 2017 Dec 2017 diverse product portfolio, catering to India’s belated entry into the Mutual fund both premium and mass markets. e-commerce sphere allowed 0.0 13.0 position (%) Following its stock market debut in competitors to gain market share. Dec 31, 2017 Feb 9, 2024 November 2017, it quickly became a Between FY19 and FY23, both favorite among fund houses, with revenue and profit after tax mutual fund holdings reaching witnessed a 5 per cent annual decline. Market 13 per cent by December 2017. If you had invested in the cap (` cr) 1,214 706 company in January 2018, you Its performance in the initial years Stock Rating Unrated would have lost 19 per cent annually post listing was decent. It displayed P/E ratio 31.9 56.3 in the next five years. healthy topline growth. However, the March 2024 Wealth Insight 55
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COVER STORY ABAN OFFSHORE
Sinking fortunes
I
n 2009, Aban Offshore stood as one of the premier offshore oil drilling service providers globally, securing a position within the top 10. For those unfamiliar with the industry, these service providers possess and lease drilling rigs utilised for the exploration and extraction of underwater oil and natural gas resources. Aban Offshore boasted ownership of four deep-water and 15 shallow-water drilling rigs, which were leased out Dec 2008 to various domestic and international firms spanning nine countries. 6.3 It achieved remarkable growth in Dec 31, 2009 the mid-2000s on the back of growing demand and technological advancements in drilling for oil and energy. Its clientele included 5,581 prominent names like Reliance and NA ONGC, which impressed fund houses. 31.2 They increased their stake in the
company to 15.6 per cent in December 2009 from 6.3 per cent in December 2008. Fund houses initially were convinced they had made the right call. In FY08, Aban Offshore doubled its revenue and operating profit YoY. However, the 2008 Global Financial Crisis led to a massive dip in crude oil prices. In addition, several of Aban’s clients were forced to revise their project timelines and cut down on expenses. Furthermore, its balance Dec 2009 sheet was debt-heavy. In FY08, its Mutual fund debt-to-equity ratio was 16 times! 15.6 position (%) Subsequent years saw rising Feb 9, 2024 interest and depreciation costs denting its profitability. In FY16, it became a loss-making company. Market cap (` cr) If you had invested in January 473 2010, your investment would have Stock Rating Unrated declined by 61 per cent annually in P/E ratio – the next five years.
A possible solution How to copy from experts the right way
B
enjamin Graham is often considered the father of value investing. His focus on fundamental analysis and margin of safety inspired a generation of value investors. However, many would argue that his purely quantitative-driven approach might be ill-suited for value investors. Warren Buffett, perhaps Graham’s most illustrious pupil, also recognised this limitation. But does this mean investors should dismiss Benjamin Graham’s teachings? Absolutely not. True disciples do not discard the wisdom of experts due to their mistakes. Rather, they learn and refine their teachings. Warren Buffett exemplifiess this by taking Graham’s foundational lessons ons and expanding upon them. And there lies the answer to our original ginal question. Learning from the experts can n indeed lead you to riches in the market..
But the trick is what you learn. Blindly copying experts would mean you are copying their mistakes. What you need to learn is the essence of their expertise: their investment philosophy. History’s most revered value investors, including Warren Buffett and Benjamin Graham themselves, have not been strangers to failure. But, the monumental wealth they have amassed is a testament to the fact that their investment philosophy works. Simply put, copy the philosophy, not the portfolio. Investigate how a fund manager assesses companies, rather than just looking at which look companies they choose to invest in. Discover what wh cues they follow to spot their nex next big investment. We aim to help you in this journey through our various interviews var with market experts. exp
56 Wealth Insight March 2024
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STOCK ADVISOR
Value Research Monkey/Goat Advisor Even when stocks go down sharply, there is a difference between being invested in good ones vs just following the herd
by Dhirendra Kumar
S
tocks that you own are going to go down sharply at some point. All of them are large cap, mid cap and small cap. Any sector, any industry, any business. It’s not just normal but inevitable – as inevitable as someone falling ill or having an accident. It could be a market crash, some sectoral thing or even a generalised economic downturn. The question is, what happens afterwards? Some 16 years ago, when the stock markets were racing to a new high practically every day, I wrote an article about the stock markets with a story about monkeys and goats. Here’s how it went. One day, a man appeared in a village and offered to buy all the monkeys the villagers could supply for `1,000 each. The villagers caught all the monkeys around and sold them. Soon, another man appeared and offered `2,000 for each monkey. However, there weren’t any more monkeys around, so the villagers couldn’t sell the man anything. But, they figured that, for some reason, the demand for monkeys was going up, so they looked for the first man and bought back all the monkeys for `3,000 each (which was the least the man was willing to take). Unfortunately, this stratagem was a failure, and the buyer never reappeared. Nearby, there was another village where the same story was repeated, except here, it was about goats. Here, too, the final buyer never appeared, and the villagers had to keep the goats themselves. However,
there was a big difference. The monkeys were a nuisance. They were noisy, troublesome and dangerous, and they stole food all the time, so the villagers eventually abandoned them in the forest. The goats, however, weren’t so bad. Even though they cost a lot of money, they were easy to keep. They just grazed on grass and gave milk. When they grew older, the villagers slaughtered them for meat. All in all, buying goats was not the bad deal that it looked like in the beginning. In the long run, it worked out to be a good purchase. The moral of this story for equity investors is quite clear. When the stock market is in a bull run, all kinds of stocks are available at ever-higher prices. However, there are high-priced goats in the markets and there are highpriced monkeys. Back when I originally wrote about this, there was a huge crowd of all kinds of monkeys in the markets. There were infrastructure monkeys, real estate monkeys, giant monkeys, small monkeys, there were even entire business groups made up of monkeys. Many of these monkeys were disguised as goats. It’s the same now, except that the sectors have changed, and there’s the notable addition of digital monkeys this time. Anyway, digital monkeys notwithstanding, my point is that equity investors need always to ensure the essential quality of the companies they invest in, regardless of how the markets are priced. Goats – stocks of companies with solid fundamentals – may not seem as glamorous or promise astronomical short-term returns. Still, they offer stability and the potential for steady growth over the long term. However, for the individual equity investor or the beginner, the next question is how to identify the
Many investors obsess over picking the top stock but often just chase past winners. They focus on finding ‘goats’ and not on avoiding the ‘monkeys.’
58 Wealth Insight March 2024
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Illustration: ANAND
goats from the monkeys. Well, that’s what we do here at Value Research. Our Value Research Stock Advisor could actually be renamed Value Research Monkey/ Goat Advisor. Over the half-decade that this service has been operating, I have lost count of the number of almost-good stocks that we have rejected. In our way of thinking, this is very important. Far too many investors, when choosing stocks to invest in, are obsessed with finding the absolute top performer and sticking to it. Unfortunately, unless you are a genius and lucky, this doesn’t happen. What happens is that such investors flit from idea to idea, generally chasing past performance and buying into yesterday’s winners in an effort to spot the greatest winner. Once in a while, it works out. In other words, they are always looking for goats and paying no attention to avoiding monkeys. At Value Research, we diligently sift through the market to separate the ‘monkeys’ from the ‘goats’. Our analytical approach, applied across both this magazine and Value Research Stock Advisor premium service, is fundamentally based on a process of elimination. For any selection, we start by discarding stocks that carry any negative attributes. Regardless of their positive aspects, certain red flags are absolute deal-breakers for us. Our list of deal-breakers is inviolable and forms the core of our decision-making process. Later in the process or after investing, this provides great comfort. Even if an investment thesis is wrong, there is no great disaster. One can always sell a stock if it has some problems or some better alternative comes along. The problem will be small and easily contained if it’s not a monkey. So, what exactly does Value Research Stock Advisor get you? You get: z Access to all our stock picks z A set of starter stocks was selected from our recommendations. Use this set to start building your
portfolio right away! z The complete investment thesis for all recommended
stocks so that you understand why you are investing z New recommendations as soon as they are released z Continuous updates and analysis on all recommended
stocks straight from our dedicated analyst team z Tools and data to research and analyse any other stock Our system works because it emphasises fundamental analysis and the pursuit of long-term value. Our strategy extends beyond mere enthusiasm for purchasing stocks; it’s about comprehending the rationale behind each selection or dismissal. Rooted in comprehensive research and a reliable methodology, our guidance is not merely a response to prevailing market conditions but is informed by the enduring strength of business models and genuine wealth-building opportunities. As you can see from the above feature list, you, too, can learn to tell the monkeys from the goats. We believe that an informed investor is a successful investor. Therefore, we not only provide recommendations but also offer detailed analysis and updates on these picks. This ensures that our members are not just blindly following advice but are equipped to understand the reasoning behind each investment decision.
Value Research Stock Advisor is a premium service where you get promising stocks along with their full analyses. We also actively track the underlying companies for you and keep you posted on the major developments in them, including when to sell a stock. Additionally, members get exclusive access to a range of tools and data which they can use to study any other stock. You can subscribe to the service at www.valueresearchstocks.com or scan the QR code. March 2024 Wealth Insight 59
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INTERVIEW
“Nobody knows anything about anything beyond a point” Investing insights from a veteran investor
ALOK BAHL Chief Investment Officer – Helios Mutual Fund
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F
resh off the heels of securing a mutual fund license, we interviewed Alok Bahl, Chief Investment Officer at Helios Mutual Fund. With over 30 years of investing experience in his locker, we couldn’t let the opportunity pass by. Bahl gives his take on the current market outlook, what sectors he finds exciting and the long-term trends he is optimistic about. He further delineates how retail investors should approach portfolio construction. So, sit back and enjoy the interview!
With all the commotion surrounding the central bank decisions in India and abroad and the upcoming general elections, how do you assess the market’s outlook in the near term? We feel the probability of a negative surprise from the upcoming general elections is very low. The results of the state elections held in November 2023 further reinforce our view. We expect the markets to trade in a narrow range, with stock/sector rotation being the main theme till the election results come in. A better-than-expected mandate for the ruling coalition may give a leg-up to the markets. However, we are more realistic in our expectations of rate cuts both in the US and India as we feel softer inflation remains the key indicator of rate cuts in both these markets. We also believe that the bigger issue related to the global markets is the large quantum of debt accumulated by central governments.
With the market reaching new highs over the past year, can you find opportunities? Are there specific sectors or industries that you find attractively priced? Optically, markets look richly valued but there are many sectors/stocks, especially in the large-cap space, which have not participated in the rally despite delivering strong growth. So, we feel there are still many investment opportunities in the markets. Banking, defence, infrastructure, power/energy, property, certain areas in consumption and certain names levered into the capex cycle reflect exciting investment themes for the longer term.
What are some of the long-term trends that you and your team are betting on? What are the underlying risks? India has been doing well in both earnings and growth, and we are optimistic that it will continue to do so. The forecasted economic outlook of a 7 per cent
plus multi-year GDP growth rate makes India an attractive market. The capex upcycle currently underway is in its infancy and should have a long runway ahead. This upcycle is in no small part being led by a stable, execution-oriented government that is seeing higher tax collections post-GST and the ongoing digitisation of the economy. The quality of India’s fiscal spending has improved a lot over the years under the current government. Domestic investors have emerged as a powerful force, and this is not expected to change anytime soon.
Banking, defence, infrastructure, power/ energy, property, certain areas in consumption and certain names levered into the capex cycle reflect exciting investment themes for the longer term. Foreign investor positioning is also light, and as the India investment case gets better recognised, we expect more foreign capital to gravitate towards the Indian market. The risks to our base case scenario above are two-fold: 1. Political instability (very low probability as outlined above) 2. Growth and earnings slowdown (low probability and in short cycles, if at all)
How do you differentiate between short-term challenges and permanent weaknesses in a business? Short-term issues like lack of access to capital because of a squeeze in liquidity or bearish market environment, disruptions in supply chains (strong learning for most countries/companies during the March 2024 Wealth Insight 61
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INTERVIEW Covid pandemic), attrition, change in regulations/tax environment, sudden increase/decrease in raw material prices etc. are challenges which most companies grapple with on a day-to-day basis. Companies that successfully overcome these challenges emerge as strong value creators and wealth generators for investors. Permanent weaknesses that can cause companies to shut down can happen if companies do not adapt to the changing environment caused by technological changes or due to an irrevocable change/shift in consumer behaviour.
What are retail investors’ three most important considerations when constructing a portfolio? Additionally, do you believe retail investors possess any advantages over institutional investors? Investing is a full-time profession and if retail investors do not have the knowledge, resources or time to track direct investments in stocks, they should use mutual funds as their preferred mode for investments. The difference these days is no longer information but knowledge. Wide access to social media, along with cheap data prices, have created an almost level playing field in so far as access to information is concerned. How to interpret this information and put it in a consistent
Advice to retail investors: Invest in companies you understand Invest with a three- to five-year horizon and review your portfolio periodically Q Diversification is important Q Q
framework is more important, and not all retail investors have this skill set. Also, retail investors lack the capacity to create a well-diversified riskadjusted portfolio that can weather market volatility. In such a situation, the best option for the retail investor is to go through the SIP route and invest in a good, diversified mutual fund scheme. With the excellent work done by the regulators, SEBI and AMFI, in investor education and with digitalisation providing the tools for easy access and tracking of investments, there is a wide variety of investment options available for the retail investor now. For those who have the ability to navigate the markets independently, my advice would be to: Q Invest in companies/businesses that are simple to understand and analyse, Q Invest with a three- to five-year investment horizon but review these investments periodically, and Q Diversify because nobody knows anything about anything beyond a point, and there are a large number of companies that do well every year.
Photos: MANOEJ PAATEEL
Reflecting on your investing journey, what would you say was your most significant investing mistake? What lessons did you learn from it? Investment mistakes have been too many to enumerate in my 30-plus years of investment journey. The key is to learn from these mistakes and try not to repeat the same mistakes again. The markets are dynamic and constantly evolving, and that is what makes this space so interesting.
Can you recall the first company you invested in? How long did you hold the investment, and what were the returns? My first investment was in Infosys Technologies and HDFC Bank shares, which I had bought on the same day sometime in 1998. I continue to hold these shares, and you can very well guess the returns.
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MAIN STREET
The rapid rise of female entrepreneurs in India Exploring the boom in women entrepreneurship Development and Economic History [square brackets are ours].
The rise of a celebrity from Jail Road Market
By Saurabh Mukherjea
D
ata from the RBI shows that women in India’s urban areas have more money in their accounts than men. Across all levels of the education system, Indian women are outnumbering and outperforming Indian men. Both during our travels and through our number crunching, we can see that urban women are getting wealthier, thanks to a trifecta of greater access to consumer markets and beyond (via the internet), easier access to financing (courtesy financialisation and the India Stack) and a growing target market of aspirational and affluent women. The result is that entrepreneurship is spreading far faster amongst Indian women than their male counterparts. “A few years of high school catapulted a young woman from a life of drudgery and disrespect into a world of comfort and courtesy, or so it seemed to her. The young man, however, did not often see high school as having so positive an impact. The rather dead-end clerical and sales positions opened to young women were not the road to success for the young man. Machinists, electricians and other tradesmen could enter their craft with far less than a high school diploma and little apparent loss. Thus, the apparent private return for young women [of getting educated] was actually higher than for young men, even though the latter remained employed for a considerably longer fraction of their lives.” —Nobel Laureate Claudia Goldin, The U-Shaped Female Labor Force Function in Economic
Nestled in the crowded Jail Road Market in New Delhi is a tiny shop selling bedazzling kurtas and pants for women. However, the story of its owner is anything but ordinary. She is Jasmeen Kaur, the creator of the now famous phrase, “So beautiful, so elegant, just looking like a wow!” Social media ensured that ‘looking like a wow’ became viral and made Ms Kaur a celebrity, possibly helping her garner business. Ms Kaur signifies the rise of a new India, where polished English and high-profile degrees are no longer a prerequisite for success. Today, India has many successful female entrepreneurs like Ms Kaur. Around 500 kilometres from Mumbai, in the industrial town of Dewas in Madhya Pradesh, a mother earns by selling papads on Meesho, an online marketplace. This helps her pay for daily expenses and her son’s tuition.
As we journey and delve into data, it’s evident: urban women in India are amassing wealth, fuelled by online market access, easier financing and an expanding affluent female demographic. Consequently, entrepreneurship is spreading far faster amongst Indian women than their male counterparts.
Such stories are now the norm in India. So much so that the latest RBI data on bank balances shows women in urban areas have more money in their accounts than men. According to the Periodic Labour Force Survey (PLFS) data, women’s share in self-employment has March 2024 Wealth Insight 63
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MAIN STREET The percentage of women in self-employment has shot up significantly
Within the ‘self-employed’ category, women’s share in being an employer has risen sharply
Percentage distribution of workers in usual status (ps+ss) by status in employment
Percentage distribution of workers in usual status (ps+ss) by status in employment
In %
In %
z Male z Female z Total 65.3
51.9 53.6
52.3 52.2
z Male z Female 44.3
44.1
57.3
37.5 31.7
27.0 27.0 22.8 24.3
21.0 23.4
15.9
18.8
27.8
20.2
23.2 20.9 23.2 21.8
9.3
8.2
Self Salaried/ employment regular wage
Casual labour
2017-18
Self employment
Salaried/ regular wage
Casual labour
2022-23
Own account worker and employer 2017-18
Helper in household enterprise
Own account worker and employer
Helper in household enterprise
2022-23
Source: Marcellus Investment Managers, PLFS (annual report FY18 and FY23); period under consideration is July 2017-June 2018 & July 2022-June 2023, respectively; data taken for rural + urban
Source: Marcellus Investment Managers, PLFS (annual report FY18 and FY23); period under consideration is July 2017-June 2018 & July 2022-June 2023, respectively; data taken for rural + urban
been steadily rising, especially in rural areas, whereas that for men has been falling. While the self-employed category is vast and includes unpaid labour, if we go deeper and see the stratification within the self-employed, the rise of women entrepreneurs (rather than ‘woman unpaid’ labour) is evident. For women, the share of self-employment by their own account and self-employment as an employer increased from 2017-18 (when PLFS started) to 2022-23. Further, the share of women performing unpaid labour decreased. The same cannot be said for men. There are three distinct driving forces driving entrepreneurship among Indian women. Let’s discuss each of them.
account for each Indian via the Jan Dhan scheme. In 2022, India had three billion bank accounts, up nearly three times from 1.1 billion in 2015. The introduction of low-cost and fast cellular internet in 2016, courtesy of Jio, coupled with widespread smartphone penetration, meant that every Indian now had a social identity (Aadhaar), an economic identity (Jan Dhan bank account) and a digital identity. This trinity of Jan Dhan, Aadhaar and mobile phones was soon dubbed ‘JAM’. Today, women have effectively leveraged JAM to generate income. How? Q Indians can access the Unified Payments Interface (UPI), facilitating instant bank-to-bank transfers. UPI helps SMEs pay suppliers and get paid instantaneously. Q Aadhaar gives Indians valid proof of residence, easing the process of SMEs getting regulatory permits and licenses. Q Smartphones and cheap broadband access help Indian SMEs reach customers via social media, increasing their total addressable market multifold.
Greater access to the ‘market’ for women In 2009, Mr Nandan Nilekani, then CEO at Infosys, left his corner office in Bengaluru to work with the Indian Government on UIDAI (Unique Identification Authority of India) to envision and provide 1.21 billion Indians with a social security-like number (or Aadhaar). Not only did Aadhaar succeed in this endeavour (there are nearly 1.31 billion unique Aadhaar IDs today), but Mr Nilekani’s successful demonstration of the concept of social infrastructure opened doors for mass financialisation, i.e., the opening of a bank
Greater access to ‘financing’ for women The financialisation of the Indian economy transformed how Indians dealt with their money. According to National Payments Corporation of India’s (NPCI) data for December 2023, last year
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saw total transactions worth over $2 trillion happening via UPI (about 61 per cent of the estimated GDP in FY24)! According to World Bank data, the proportion of women above 15 years of age holding any financial account divided by the proportion of men above 15 years of age holding a financial account already crossed the ratio of one in 2021, meaning more women are in the financial system today (as a % of total women) than men (as a % of total men). As more women are included in the financial system, they find it easier to access credit. Hence, business expansion has become easier than before. Furthermore, a study by MassChallenge and BCG for multiple countries showed that startups founded by women got less funding but generated more revenues than those founded by men. It implies that women are better capital allocators than men.
Women are better capital allocators on an average despite receiving less funding Funds invested
Revenue generated $662,000
$2.12 million
$935,000
$730,000
Sources: Masschallenge; BCG analysis. Of the 350 companies included in the analysis, 258 were founded by men, and 92 were founded or cofounded by women.
Based on the debt default (gross non-performing assets or GNPA) data, women are better borrowers. From a lender’s perspective, female entrepreneurs are the perfect conduit through which a lender can lock into the flywheel of higher credit, resulting in more significant investments, revenues and profits, and thus, greater payback of credit and lower delinquencies.
Growing addressable market of women, by women, for women Women – as a category of buyers – are also burgeoning thanks to digitisation and greater access to markets. The greatest enabler is their increasing education levels. As mentioned in our previous note on the subject, “Over the last four years, across all levels of the Indian educational system, the GPI (Gender Parity
Women are better borrowers than men 3.0 %
z Male z Female
2.6 2.2 1.8 1.4 1.0 FY19
FY20
FY21
FY22
FY23
Source: Marcellus Investment Managers, CRIF Highmark, CRISIL MI&A
Index) has been greater than 1 indicating that more girls than boys are getting enrolled in schools at all levels of education!... In fact, if we go one step further and look at the GPI for higher education (i.e., for the age group 18-23 years), not only is the GPI greater than 1 across all social categories, but the improvement has also been most rapid for Scheduled Castes and Scheduled Tribes indicating that women in the most disadvantaged sections of Indian society are powering ahead the fastest.” Women today have more financial freedom because of this benefit of ‘access’ and knowledge of what to do with it. It has enabled them to decide what they wish to do. India’s women entrepreneurs are best suited to cater to female customers’ needs because they understand their pain points better than anyone else. Case in point is the emergence of multi-billion dollar companies like Nykaa (promoter: Falguni Nayar), Mama Earth (promoter: Ghazal Alagh), and Sugar (promoter: Vineeta Singh), who have taken the beauty and personal care market by storm. From a standing start in 2012, Nykaa’s revenue share of the total beauty and personal care online market was about 27 per cent in 2022. Historically, the most discriminated communities resort to newer, more rewarding opportunities. A community that faced discrimination in the West – thanks to antisemitism – is the Jews. The rise of the Jews in America, where they dominate American capitalism, is a testament to the fact that in a free market economy, once a community has access to financing and the ‘market’, it will rise. Saurabh Mukherjea is part of the Investments team at Marcellus Investment Managers (www.marcellus.in). He is the author of ‘Diamonds in the Dust: Consistent Compounding for Extraordinary Wealth Creation’.
March 2024 Wealth Insight 65
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STRAIGHT TALK
Revisiting diversification: The must-have tool for investors Why diversifying your portfolio is more of a necessity than a choice
By Anand Tandon
I
n January 2024, Chua Soon Hock, CIO of the $330 million fund Asia Genesis Asset Management PTE Ltd, wrote a letter to his investors: “I am writing to you with a heavy heart and utmost regret. Asia Genesis Macro Fund has had a significant and unprecedented drawdown of -18.8 per cent in the first weeks of January. As such, I am making the painful decision to close the fund and return your investment”. He goes on to state, “I have reached the stage whereby my confidence as a trader is lost… I have lost my knowledge, trading and psychological edge.” Hock’s fund bet against the rising Japanese markets and bought into the falling Chinese markets. Both bets went against him. Hock isn’t the only investor who has seen losses in China. T. Rowe Price Group has seen its China holdings fall 80 per cent from the peak. Banxia Investment Management cut its position two weeks into January, stating that ‘it must lose an arm for survival’. The firm, founded by Li Bei, had turned bullish from the third quarter, anticipating monetary and fiscal policies to support the market – policies
An undiversified portfolio, like a single roulette bet, may make you rich a few times, but more often than not, it will clean out your bank account.
that fell short of market expectations. The rout in the Chinese market was set off by government action attempting to curtail the profits of leading tech companies and socialise gains. It has resulted in a collapse of property and equity markets. Over $5 trillion of value was lost. But why should Indian investors care about the Chinese policies? Aren’t the Indian markets booming?
What is diversification? Imagine venturing into a casino, your pockets brimming with cash, determined to walk away richer. Would you bet everything on a single spin of the roulette wheel? Probably not. Just like in a casino, financial markets come with inherent risks. Stock prices can plummet, bonds might default and even seemingly ‘safe’ assets like cash can lose purchasing power due to inflation. Diversification aims to mitigate these risks, not by eliminating them but by spreading your investments across various asset classes, minimising the impact of any single asset’s downfall.
Correlation: The art of picking compatible assets But simply diversifying across different asset classes isn’t enough. We need to consider how these asset returns correlate with each other. Correlation measures the degree to which two assets move together. Assets with positively correlated returns tend to rise and fall in tandem, while negatively correlated assets move in opposite directions. Ideally, we want to build a portfolio where assets have low or negative correlations, as this minimises the risk of widespread losses. It’s important to remember that diversification doesn’t eliminate risk. Unexpected events, like global pandemics or economic meltdowns, can impact all asset classes simultaneously. This is where the concept of ‘realised risk’ comes in. Realised risk is the actual risk you experience in your portfolio, which may differ from your initial calculations based on
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historical data. For example, during the 2008 financial crisis, even traditionally safe assets like government bonds experienced losses, highlighting the limitations of relying solely on past correlations. Building a diversified portfolio may not prevent falls, but it significantly reduces the impact and helps you bounce back faster. The important thing to keep in mind is that diversification, while reducing risk, often reduces returns. Instead of putting all investments into the best-performing asset class, it requires the investor to invest in asset classes that may well be underperforming or even losing money at the current time (after all, they have low correlation or even negative correlation). Position sizing is another factor to consider. To be effective, a diversified portfolio cannot be heavily weighted into one asset class alone. If it is, it may not offer enough risk mitigation, which will impact its ability to come back into the game if it suffers a serious fall. You don’t want to be Chua Soon Hock! It is important to remember that an undiversified portfolio is equivalent to a single bet on a roulette table – it may make you rich, but only a few times! In most other cases, it will clean out the bank account.
Government policies are inscrutable Let us circle back to the Chinese story we started with. On most parameters, the markets in China are oversold. Assuming companies’ current earnings were to be sustained, the payback for an investor would be only a few years. However, this ignores the effect of government policy. The Chinese government policy changes triggered the fall, and now that the government wants to stem it, markets are unconvinced. In this case, investors have to take a view on the thinking of the government decision-makers and their willingness to act. Both are unpredictable. And for those who took an optimistic view, it turned out sour – in the time frame relevant to them. The Indian market’s recent performance stands in contrast – for now. Government policy is benign, indeed positive for markets. The performance of stateowned companies has improved, driven by cleaner bank balance sheets and strong order books in railways and defence sectors. However, there is a flip side to this. Many of these companies are trading at valuations that imply an unrealistic perpetual growth rate close to the current elevated rate. Stock prices are supported by low float and low institutional interest. This should be a reason to exercise caution.
Illustration: ANAND
Policy risks come in many shades – just a few weeks back, the Indian stock market had turned nervous, anticipating a sell-off triggered by SEBI regulations demanding greater information on overseas investors coming into the Indian markets through P-notes. This fear was rapidly dispelled. However, not all interventions may end in the same way.
Uncorrelated assets Investors in India tend to have a pronounced ‘home market’ bias. They are rarely diversified across countries, and even within India, diversification is usually restricted to equity and real estate. Importantly, investing in multiple mutual funds – many with similar underlying portfolios – is often construed as diversification. At times like this, one must look hard to see what factors could adversely affect markets. For example, energy prices are reasonably steady despite a cut in oil production, increased piracy in the Middle-Eastern trade routes and sustained oil demand. OPEC members have announced plans to scale back investment in production facilities; global strategic reserves are low and planned refinery shutdowns in key markets loom. Is it possible that this year could be one where oil prices could shoot up? Would that adversely affect the Indian market? No one can know for sure, but it may be prudent to model such changes and take a hard look at portfolios. When everyone is euphoric, it’s time to be circumspect. March 2024 Wealth Insight 67
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EVERYDAY ECONOMICS
Economic stability over populism Understanding the interim budget and what more needs to be done
By Puja Mehra
F
inance Minister Nirmala Sitharaman left all existing direct and indirect tax rates untouched in the interim budget. Technically, interim budgets merely highlight the expenditure needed to keep the government functioning until a full budget can be presented. Before its term ends, the Lok Sabha votes to approve the expenditure. But most governments flout this convention. In the 2014 interim budget, the then Finance Minister P Chidambaram announced the One Rank One Pension (OROP) for the armed forces, making a token outlay of `1,000 crore. Today, the burden of pensions on the defence budget has left insufficient money for investments.
How Sitharaman’s predecessors fared In 2019, Sitharaman’s predecessor, Piyush Goyal, announced annual cash payments of `6,000 per farmer family under a new flagship PM-Kisan scheme. He also made annual incomes of up to `5 lakh tax-free, raising the income tax threshold to roughly three times the per capita income. In one stroke, he let go of 1.3 crore taxpayers; 63 per cent of the individuals who filed returns that year paid no income tax. Hardly any country in the world is so generous about the minimum threshold for tax-applicable incomes. Goyal’s 2019 interim budget attempted to change the country’s political mood after the BJP lost the 2018 state assembly polls. It also needed to respond to the cash payment schemes for farmers that the states of Telangana and Odisha had rolled out. There was political pressure on Goyal to match up or risk losing farmer votes. However, this year’s interim budget was rather low-key. There was no political compulsion this time, as Prime Minister Narendra Modi had already
announced free food grains for more than 80 crore Indians for the next five years in his 2023 poll campaigns across five states. The BJP also promised generous hikes in minimum support prices at which the government buys wheat. Voters handed victories to the BJP in the three states of the Hindi belt vital for national politics. Meanwhile, the Opposition alliance, the INDIA, has suffered debilitating shocks.
How this interim budget was different The Finance Minister focused on reading details of schemes introduced in the last 10 years. Also, she stuck with her growth strategy of increasing budget outlay on capital expenditure, which, for FY25, she increased by 11.1 per cent to `11,11,111 crore. It is commendable that she didn’t compromise on the capex outlay even after committing to reduce the fiscal deficit (roughly what the government must borrow to pay for expenditures its revenue won’t) to 5.8 per cent of GDP (gross domestic product), below the FY24 target of 5.9 per cent. She also stayed committed to the fiscal deficit target of 4.5 per cent of GDP by FY26, a commitment she first made in the budget speech for FY23 after the pandemic forced her to take it up to above 9 per cent of GDP. Did the interim budget do the job that was required of it? Politically, yes. The economy needs more. But the GVA (gross value added) of agriculture will grow 1.8 per cent in FY24, slower than 4 per cent in the previous year, according to the government’s estimates. Nearly 46 per cent of India’s working population toils on farms. This means almost half the working population is experiencing less than 2 per cent GVA growth. This likely forced the prime minister to
The figure that must be targeted for targeting economic growth is not just the central government’s capex spending. It is the total cumulative capex spending by the Centre, states and public sector companies.
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Illustration: ANAND
promise free food to 40 per cent of the population for the next five years. Doesn’t this call for a review of the growth strategy, the budget’s capex and welfare spending? If an assessment shows that changes are required, they should have been implemented immediately. This requires two types of evaluations: One, are capex outlays ensuring growth for the bulk of the population? The welfare spending is mainly on MGNREGA wages that are too low to provide economic well-being and free wheat and rice that guarantee calories, not nutrition. Two: Is this welfare spending an optimum response to low rural economic growth? The low growth levels in rural India are delaying a sustainable pick-up in consumption spending, without which high GDP growth cannot be sustained. Businesses will not set up new factories if most of the population doesn’t have enough money for consumption. Research published by ICRIER economists led by Dr Ashok Gulati has found that real farm wage growth decreased by 3.3 per cent per annum from FY15 to FY19. Non-farm wages in rural India decreased by 3 per cent per annum over the same period. From FY20 to FY24, these rates became negative. The government, however, maintains that increasing the budget’s capital expenditure will help create infrastructure, stimulate private sector investments and create new incomes. The government’s GDP estimates show that private investments have remained tepid for the last 10 years. Why? Sure, prioritising capex over other expenditures is
good budget-making. FY25 will be the fourth successive year in which more than half the budget’s total spending growth will go for higher capex. As a result, the Centre’s capex will be twice (3.4 per cent of GDP) what it was in FY14 (1.7 per cent of GDP). Why, then, is this capex increase not stimulating private investments? The figure that must be targeted for targeting economic growth is not just the central government’s capex spending. It is the total cumulative capex spending by the Centre, states and public sector companies. Government data compiled by Motilal Oswal in its note dated February 5, 2024, shows that capex (as measured by Internal and Extra Budgetary Resources) by central public sector enterprises (CPSEs) was 2.8 per cent of GDP in FY14. It had dropped to 1.4 per cent of GDP by FY23. It will be 1 per cent of GDP in FY24 (revised estimate). The interim budget shows that it is estimated to fall to 0.9 per cent of GDP in FY25 (budget estimate) – the lowest level in the last 20 years that the data is available for. At its peak, CPSEs’ capex was 3.3 per cent of GDP in FY09. As a result, despite the budget’s capex, the total public sector capex (including by states) is at the same level it was in 2014; it was 5.8 per cent of GDP in FY14 and 5.7 per cent of GDP in FY23, as per the latest available data. Perhaps the full budget in July will fill in the gaps. Puja Mehra is a Delhi-based journalist and the author of ‘The Lost Decade (2008-18): How the India Growth Story Devolved into Growth Without a Story’
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STOCK SCREEN
Top-rated stocks All stocks with five-star Stock Ratings
T
ired of spending hours sifting through the vast listed universe? You need a reliable stock screener. It can help you get a list of promising stocks that deserve your attention with just a click of a button. Once you have a manageable list, you only need to research them further to find the ones worth investing in. Value Research offers several carefully curated stock filters that can pick the most attractive companies from the listed Indian universe. In this issue, we cover the ‘Top-rated stocks’ screen in detail. Also, we have given a concise list from the other screens. To view all the companies, visit: https://www.valueresearchonline. com/stocks-screener/
Five-star rated stocks Successful stock picking is a rather tricky affair. There are a lot of factors to consider, and it’s easy to make mistakes. A common mistake investors make, particularly beginners, is failing to distinguish between high-
quality businesses and sound investments. These concepts are not synonymous. A company with solid operational efficiency and a strong balance sheet does not automatically qualify as a wise investment choice. Quality does not inherently imply growth potential. Similarly, a company’s rapid growth does not guarantee wealth creation. If the growth is not profitable, there’s no real value being added. Is there a way to sidestep these pitfalls? Value Research Stock Ratings offers a solution. This tool combines multiple metrics spanning quality, growth and valuation factors. Use our ‘Top-rated stocks’ screen as a starting point for your research. Pick companies that you understand and research them in detail.
A word of caution These are not stock recommendations. Please do the due diligence before investing. If you are interested in a list of stocks to invest in, subscribe to Value Research Stock Advisor.
Key terms 4HYRL[JHW Stands for market capitalisation. Obtained by multiplying the stock price by the total number of shares. Shows a company’s market value or size. 7YPJL[VLHYUPUNZ7, The ratio of the stock price and earnings per share (EPS). It shows in multiples how much investors are willing to pay for a share in a company’s earnings. Note that a highgrowth stock often will have a high P/E ratio, while a value stock will have a relatively lower P/E ratio. 9L[\YUVULX\P[`96, Measured by taking profit after tax as a percentage of the net worth of the company. Indicates how efficiently the
company has been able to utilise investors’ money. 8\HSP[`:JVYL It assesses the quality of a company quantitatively, capturing two crucial aspects, i.e., business efficiency and balance sheet quality. It considers various metrics, such as return on equity, return on capital employed, debt-to-equity ratio, etc. The score is based on the relative ranking of all parameters after assigning certain weights to each. Both current values and historical values drive the ratings. The score is out of 10. The higher the score, the higher the quality. .YV^[O:JVYL It evaluates a business’s historical growth and scale, using metrics such
as revenue growth, operating cash flow growth, Piotroski F-score, etc. The score is based on absolute ranges and is driven by current performance and historical consistency of growth. Per share data is considered for each parameter to calculate growth. The score is out of 10, and the higher the score, the higher the historical growth. =HS\H[PVU:JVYL It gauges if a stock is reasonably priced. This quantitative rating considers the stock’s current and historical valuation parameters based on metrics such as P/E ratio, free cash flow yield, dividend yield, etc. The score is out of 10. The higher the score, the more attractively priced it is.
:[VJR9H[PUN Value Research Stock Rating combines the three scores (quality, growth and valuation) based on assigned weights to arrive at a holistic stock rating. We have created a fivestar rating system. The higher the stock rating, the better. :[VJR:[`SL Derived from a combination of the stock’s valuation – growth or value – and its market capitalisation – large, mid and small. For Growth Value example, here Large is the stock Mid style of a large-cap Small growth stock.
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5-star rated stocks Reasons to invest High-quality companies Moderate to high growth Reasonable valuations
Industry
HDFC Bank Banking
ITC Tobacco Products
Bajaj Finance Hire Purchase
Maruti Suzuki Cars & Multi Utility Vehicles
Kotak Mahindra Bank Banking
Coal India Coal & Lignite
Nestle India Dairy products
IndusInd Bank Banking
Eicher Motors Two & Three Wheelers
NMDC Minerals
PI Industries Pesticides
Muthoot Finance Misc. Fin.services
Petronet LNG Natural Gas Utilities
AU Small Finance Bank Banking
Federal Bank Banking
Gujarat Gas Natural Gas Utilities
Bandhan Bank Banking
Companies with a 5-star Stock Rating
Stock style
Company
No. of companies that cleared the filters
The filters
Quality Score
Growth Score
Valuation Score
5Y avg. ROE (%)
9
8
7
16.8
18.2 10,76,400
10
6
5
25.5
24.9
10
10
5
19.4
9
7
5
10
9
10
Stock Rating
P/E
Market cap (` cr)
149
Share price (`)
52-week high/low (`)
1,417
1,758-1,364
5,10,708
409
500-370
30.2
4,15,631
6,713
8,192-5,486
11.7
29.7
3,61,052
6
13.5
19.7
3,44,204
1,731
2,064-1,644
7
7
53.7
9.7
2,84,287
461
488-208
10
7
6
87.4
80.8
2,42,389
2,513
2,769-1,788
7
8
6
12.2
13.3
1,15,389
1,484
1,695-990
10
7
4
19.1
27.8
1,06,799
3,903
4,200-2,836
10
6
5
24.0
11.2
72,181
246
252-104
10
8
5
18.0
34.9
55,596
3,668
4,011-2,869
9
5
7
24.5
13.1
54,436
1,355
1,537-911
10
6
7
24.6
12.1
42,413
283
296-192
8
9
6
17.5
25.2
40,006
599
813-548
7
8
7
11.6
10.3
39,681
163
166-121
10
7
5
29.2
34.4
37,944
551
620-397
9
8
8
13.6
11.0
32,831
204
272-182
11,483 11,613-8,130
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STOCK SCREEN Stock style
Company Industry
Coromandel International Other Fertilisers
Indraprastha Gas Natural Gas Utilities
Narayana Hrudayalaya Health Services
Bayer CropScience Pesticides
Sun TV Network Media & Entertainment
Castrol India Lubricants & Grease
Gujarat State Petronet Natural Gas Utilities
Emami Household & Personal Products
PNB Housing Finance Housing Finance
Amara Raja Energy Storage Batteries
Manappuram Finance Misc. Fin.services
Chambal Fert. and Chem. Nitrogenous Fertiliser
Mahanagar Gas Natural Gas Utilities
Godfrey Phillips India Tobacco Products
Tanla Platforms Software
Fine Organic Industries Organic Chemicals
Great Eastern Shipping Oil & Gas Transportation
Gujarat Mineral Dev. Corp. Coal & Lignite
Akzo Nobel India Paints & Varnishes
Zensar Technologies Software
Aavas Financiers Housing Finance
Quality Score
Stock Rating
Growth Score
Valuation Score
5Y avg. ROE (%)
P/E
Market cap (` cr)
Share price (`)
52-week high/low (`)
10
5
6
26.8
18.8
32,512
1,103
1,272-842
10
7
7
21.9
15.8
30,797
440
516-376
9
8
4
15.0
35.8
27,606
1,351
1,445-721
9
8
5
22.0
34.2
27,488
6,116
6,166-3,920
10
6
7
23.6
12.9
24,427
620
735-394
10
6
5
54.5
24.3
21,029
213
214-107
10
8
7
38.9
13.4
20,946
371
407-255
10
6
5
25.6
28.8
20,732
475
589-341
9
5
6
11.1
14.4
19,404
747
914-383
10
7
6
15.1
19.3
15,655
855
916-546
10
9
8
22.4
7.6
15,515
183
193-101
8
7
7
28.5
12.0
15,214
366
403-248
10
7
7
22.4
11.6
15,015
1,521
1,554-865
10
8
6
17.0
17.1
13,945
2,681
2,720-1,620
9
7
5
19.8
24.9
13,390
996
1,318-493
9
7
5
31.7
29.8
13,301
4,339
5,165-4,040
7
8
8
10.3
5.4
13,206
925
1,044-532
9
6
6
8.1
15.1
12,990
408
506-123
10
7
5
20.6
30.9
12,774
2,809
3,058-2,123
10
7
5
14.8
19.8
12,071
533
644-259
9
8
6
13.1
24.0
11,414
1,442
2,011-1,336
Stock Rating and price data as of February 19, 2024. For the full list, scan the QR code.
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Want more? Here you go Other screens available on the Value Research website P/E
5.7
P/E
Mold-Tek Technologies
21.1
11.8
Swaraj Engines
21.1
LG Balkrishnan & Bros
14.3
eClerx Services
22.1
Can Fin Homes
15.1
Aavas Financiers
24.0
Fiem Industries
20.6
La Opala RG
30.1
High growth large caps
Bajaj Finance
30.2
HDFC Bank
18.2
These are large caps with a Growth Score of at least eight
Cholamandalam Inv. and Fin.
29.6
Indian Hotels
66.0
Kotak Mahindra Bank
19.7
Siemens
78.5
Axis Bank
24.4
Titan
95.0
Dr Reddy’s Labs
20.5
Tube Investments
54.5
Top value mid caps
Muthoot Finance
7.2
Chambal Fert. and Chem.
12.0
This filter spills out attractively priced mid caps with reasonable quality
Manappuram Finance
7.6
Petronet LNG
12.1
7.7
High quality small caps
JK Paper
Small-cap stocks rated high on Quality Score
H.G. Infra Engineering
Sun TV Network
12.9
Bandhan Bank
11.0
Gujarat State Petronet
13.5
Mahanagar Gas
11.6
Indraprastha Gas
15.8
LIC Housing Finance
Reasonably priced growth stocks
Kama Hotels (India)
2.4
Karur Vysysa Bank
Ramky Infrastructure
3.3
Jindal Saw
11.0
A filter for high growth stocks trading at reasonable valuations
Huhtamaki India
6.3
LT Foods
11.7
International Conveyors
9.5
Motilal Oswal Financial Services
13.9
Suryoday Small Bank
9.5
Jindal Steel & Power
14.2
Attractive Bluechips
Angel One
25.8
High growth large caps with strong fundamentals and reasonable valuations
Hindustan Aeronautics
32.9
SRF
47.1
For all the screens and to customise them as per your requirements, visit z Stock Rating
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9.9
WORDSWORTH NOW Nirmala Sitharaman Finance Minister, India
On concerns for the Indian economy:
The challenges and worries are more external… wars abroad, uncertainty in the Red Sea, marine lines getting affected, supply chain disruptions. I think in the last three to four years, uncertainties have become the rule of the game. We have to live with them. Business Today, February 3, 2024
Satya Nadella
Sam Altman
CEO, Microsoft
CEO, OpenAI
On productivity improvement using AI:
On India becoming a developed nation:
I always think it’s worth remembering that we’re on this long, continuous curve. Right now, we have AI systems that can do tasks. They certainly can’t do jobs, but they can do tasks, and there’s productivity gain there. Eventually, they will be able to do more things that we think of like a job today, and we will, of course, find new jobs and better jobs.
At the end of the day, what’s the difference between being a developed country and a developing country? It is just the rate of growth over long periods of time.
Unconfuse me with Bill Gates podcast,
Economic Times,
January 11, 2024
February 12, 2024
Dilip Shangvi Founder and Managing Director, Sun Pharmaceuticals
On improvements to be made for India’s future:
Today, Indian pharma’s regulatory landscape is one of the most complex ecosystems when it comes to R&D. The existing regulatory landscape involves multiple agencies, often leading to lengthy approval timelines. Simplifying processes like these is crucial not only for speeding up the journey from lab to market and fostering sustainable growth but also for nurturing innovation. Business Today, February 18, 2024
74 Wealth Insight March 2024
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