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www.hdfcfund.com

THEIR FUTURE DEPENDS ON YOUR DECISION TODAY

HDFC CHILDREN’S GIFT FUND@

Empower and strengthen your child’s future, today.
Don’t let finances get in the way of your child’s dream!
@ Eligibility (of Unit holder): Children not attained the age of majority as on the date of investment by the Investor / Applicant
are eligible as Unit holders in the Scheme.

HDFC Children’s Gift Fund (An open ended fund for investment for Riskometer #
children having a lock-in for at least 5 years or till the child attains
age of majority {whichever is earlier}) is suitable for investors who
are seeking *:

• Capital appreciation over long term

• Investment in equity and equity related instruments as well as debt
and money market instruments

*Investors should consult their financial advisers, if in doubt about

whether the product is suitable for them.

#For latest Riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com

Date of Release: November 08, 2023

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
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 A choice of
opportunities
across asset classes.

Equity
Debt
Gold ETF/
ETCD*

Invest in
ICICI Prudential 21
Multi-Asset Fund

*The scheme will take exposure to Units of Gold ETFs / Exchange Traded Commodity Derivatives.
1123

To invest, contact your Mutual Fund Distributor IPRUTOUCH App | www.iciciprumf.com

ICICI Prudential Multi-Asset Fund (An open ended scheme investing in Equity, Debt and Exchange RISKOM
ME ET
HE
Traded Commodity Derivatives/units of Gold ETFs/units of REITs & InvITs/Preference shares.) is
suitable for investors who are seeking*: C E
R
S

Investors
• Long term wealth creation understand that
• An open ended scheme investing across asset classes their principal
will be at Very
̴UŨǍğơƭųƙơ͘ơŀųƵŝė͘ĐųŨơƵŝƭ͘ƭŀğņƙ͘ǦŨñŨĐņñŝ͘ñėǍņơğƙơ͘ņķ͘ņŨ͘ėųƵĎƭ͘ñĎųƵƭ͘ǎŀğƭŀğƙ͘ƭŀğ͘ƖƙųėƵĐƭ͘ņơ͘ơƵņƭñĎŝğ͘ķųƙ͘ƭŀğŦ̩ High risk

»ŀğ͘¦ņơř̿ų̿Ŧğƭğƙ͘ơƖğĐņǦğė͘ñĎųǍğ͘ǎņŝŝ͘Ďğ͘ğǍñŝƵñƭğė͘ñŨė͘ƵƖėñƭğė͘ųŨ͘ñ͘ŦųŨƭŀŝǔ͘Ďñơņơ̩
Please refer https://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.

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 in a hot ma

December 2023 VOLUME XVII, NUMBER 6

EDITORIAL POLICY 42 COVER STORY

The goal of Wealth Insight, as with
all publications from Value
Research, is not just limited to gen-
erating profitable ideas for its read-
ers; but to also help them in gener-
ating a few of their own. We aim to
bring independent, unbiased and
meticulously-researched stories
that will help you in taking better-in-
formed 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
Good
obtained by speaking to a wide vari-
ety of stakeholders. We firmly stick
to our belief of fundamental
research and value-oriented
companies,
approach as the best way to earn
wealth in the stock market. Equally
important to us is our unwaveringly
focus on long term planning.
but…
Simplicity is the hallmark of our Foolproof scrutiny of
style. Our writing style is simple moat, management,
and so is the presentation of ideas,
but that should not be construed to
and valuation
mean that we over-simplify.
Read, learn and earn – and let’s
grow and evolve as we undertake
this voyage together. 40 WORDS WORTH 54 INTERVIEW
WISDOM
“Our emphasis lies on
EDITOR-IN-CHIEF Dhirendra Kumar The evolution of a evaluating cash-flow
COPYEDITING Anupama Garg and value investor generation”
Mithilesh Bhaumik
Tom Gayner How to avoid quality
RESEARCH & ANALYSIS Hemkesh
Khattar, Karthik Anand Vijay, Kunal
CEO, investing traps?
Bansal, Nipun Arora, Sneha Suri, Markel Group
Udhayaprakash J and Vishal Goyal Trideep Bhattacharya
CIO-Equities,
DESIGN Anand Kumar, Aprajita Anushree,
Kamal Kant Koner, Mukul Ojha and
Edelweiss MF
Nitin Yadav

DATA SOURCE FOR STOCKS AceEquity

MARKETING
Aastha Tiwari, Aditya Roy, Ashish Jain, 57 SPECIAL FEATURE
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4 Wealth Insight December 2023

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market


CONTENTS
7 Edit 32 Analyst’s Diary
by DHIRENDRA KUMAR z Commanding the CPaaS seas
The problem of almost-good stocks z Buffett’s test of economic excellence
Savvy selection over aggressive speculation z Beyond the buzz
z Banking’s changing contours
8 Twitter
37 ABCD ETF
Wit meets Dalal Street
Passive fund investing for women
Aditya Kondawar | @aditya_kondawar | 105.5k

60 Stock Advisor
by DHIRENDRA KUMAR
10 Market Reporter
The glorious uncertainties of equity investing
Buzz of the month
Investor’s innings, analysts’ insights

63 Main Street
14 Stock Story
by SAURABH MUKHERJEA
Explosive market expansion
Outsourcing 2.0: The global capability
Solar Industries’ growth trajectory from local to
centre boom in India
global markets
Diversifying capabilities beyond traditional IT services

66 Straight Talk
16 Big Moves
by ANAND TANDON
The most significant price movements
Economic pulse-checking
2024’s vital signs revealed
21 IPO Tracker
68 Everyday Economics
D-Street debutants by PUJA MEHRA
Here is how the S&P BSE IPO Index has performed over the
last one year and how the biggest IPOs have fared
Lasting love of state controls
Public sector undertakings: A historical overview

22 Monthly Agenda 70 Stock Screen

Quarterly result update Blue-chip and value stocks

How various sectors have performed in Q2 FY24 in terms of Reliable front-line stocks at attractive valuations and
quality stocks available at a discount to their book value
revenue, profit and margins and which companies stand out

74 Wordsworth Now
24 Market Barometer Quotable words from prominent figures
Trends and trails
Here are some charts that will help you make sense of the
current market in terms of valuations and return potential ‹9DOXH5HVHDUFK,QGLD3YW/WG
Wealth Insight is owned by Value Research India Pvt. Ltd.,
5, Commercial Complex, Chitra Vihar, Delhi 110 092.
26 Market Compass
Editor-In-Chief: Dhirendra Kumar.
z Printed and published by Dhirendra Kumar on behalf of Value Research India
Pledging tracker Pvt. Ltd. Published at 5, Commercial Complex, Chitra Vihar, Delhi 110 092.
z Institutional Moves Printed at Option Printofast, 46, Patparganj Industrial Area, Delhi-110092
z Change in promoter stake 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

December 2023 Wealth Insight 5

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 EDIT

The problem of almost-good stocks

Savvy selection over aggressive speculation

that. No, that’s not true. Everyone Some time back, I interviewed
does NOT do that. The conventional Samir Arora, who has just launched
wisdom in investing is to focus on Helios Mutual Fund in his second
finding the best opportunities – the innings in the Indian mutual fund
stocks, funds, or assets that seem industry. In the 1990s, at the dawn of
likely to outperform. Investing in India’s contemporary, post-
resources like books and websites is liberalisation mutual fund sector,
mostly geared toward picking Arora was the CIO at Alliance
winners. On the surface, that makes Mutual Funds in India.
sense – good investments generate Arora says that over the years, he
returns, so identifying them should has settled down on eight factors
By Dhirendra Kumar be the priority. that are the starting point for
However, the most skilled evaluating a stock. They are all
investors take a different approach. fairly obvious factors like

L
ike a cricket team playing to Rather than start by searching for management quality, profitability,
win a limited-overs match, good stocks, they concentrate first growth, valuation, etc. However, the
many investors feel that on avoiding the rest. Their main important thing is that these are
aggression is a great quality in concern is filtering out and initially used not as indicators of
choosing stocks. However, as we all eliminating investments that could whether a stock is to be invested in
have realised while watching the lose money, the ones that give the but whether it is to be avoided.
World Cup, effective aggression, appearance of being good but have That’s not the same thing. These
which gets results, starts with not some caveats. This defensive stance factors are go/no-go indicators. The
trying to hit everything but deciding is crucial for any investment vehicle. crucial thing about Arora’s
what not to hit. Stocks are the same. This principle of eliminating poor methodology is that if a company
In this issue’s cover story, we have choices before seeking great ones falls short in even one of these
explored a fascinating idea that applies well beyond just investing. factors, its stock is off the table,
should be of interest to all equity The masters of investing exhibit a regardless of how exceptional the
investors – what looks like a safety- negative orientation. Before hunting other aspects might be. To take the
first approach to investing is a for standout opportunities, they obvious example, consider valuation.
profits-first approach. devote their efforts to developing Plenty of great companies are
There are good stocks, and there screens highlighting warning signs wonderful investments in every way,
are bad stocks. Neither of these are and red flags. First, they simplify the except that their stocks are
any problems. Good stocks make selection process and safeguard their overpriced, i.e., the valuation is too
money for investors; bad stocks are capital by crossing off objectively high. This means that they cannot
easy to spot, and thus, sensible risky or overvalued investments. be touched.
investors manage to avoid them This discipline and patience put This disciplined strategy ensures
quite easily. The problem arises in them in a superior position to investors avoid pitfalls, even if they
the case of ‘almost good’ stocks. capitalise when quality bargains initially seem alluring. This is
When we start investing – no surface. In essence, a good offence exactly what our cover story focuses
matter what kind – the first thing to starts with an even better defence. on. There is a set of specific mistakes
do is to classify them into the bad The best investors understand that, like this that investors often make.
and the rest and not look at the bad and their results reflect it, just as Learn all about them and how to
again. So far, so good. Everyone does they do with the best cricketers. avoid them.

December 2023 Wealth Insight 7

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TWITTER

Wit meets
Dalal Street
This quote by Usain Bolt is amazing “I trained 4 years to run 9 seconds
Aditya Kondawar and people give up when they don’t see results in 2 months”
@aditya_kondawar Applies to investing as well, Investing is about studying all your life and
not expecting results immediately!It’s about holding on to your
105.5k | Followers conviction when the stock price doesn’t move for years sometimes!

Why Follow Why it’s prudent to let a IPO company list and stabilize its financials -
IPO price `672 , went to `1344, now back at 800
Quite a wild ride

C
o-author of the recently
Financials recently were also really bad. Study the DRHP, pay caution to
launched “The Big Bull valuations and don’t fall in the FOMO trap!
of Dalal Street”, Aditya
Kondawar is a partner and VP An Adhesives company wants to get into lending
of Complete Circle Capital. As A Logistics company wanted to get into Airlines
An Auto Ancillary wanted to get into making tyres
his Twitter bio says, his account
For case 2 and case 3, as soon as the stock took a beating, the company
is all about simplifying equity managements took a U turn and cancelled the plan :)
investing and personal finance. He
shares his perspective, summaries Always remember - You don’t create the markets, the markets create you
of important actions taken by Don’t ever think that you are bigger than the markets because sooner or
later markets will humble you
management, and trends going
How to succeed in markets - Keep your head down, study and be
on in the macroeconomy. But the humble :)
highlights of his tweets are the
interesting tidbits he shares from Never walk into the investing world thinking that you will never make a
various sources that an average mistake because you will definitely make mistakes. Learn from it so that
you don’t make the same mistake again!
investor may not come across. As
someone who is into classic value Morbi - 90% of the tiles in India are manufactured in Morbi, Gujarat and
investing, he highly advocates are exported through the Mundra port, of which 80% is exported to USA
patience and deep understanding (60-70%), Saudi Arabia (20%) and remaining 10% to the UAE.
for wealth creation.

Follow us on
social media
@VROStocks vrostocks VROStocks

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 MARKET REPORTER

An eventful few days at

RBI bans
NOVEMBER 17
z The board of OpenAI, the compa-

Zurich to acquire
ny behind ChatGPT, fired its
co-founder and CEO Sam Altman
Bajaj
stake in Kotak owing to the lack of confidence in his Finance’s
General Insurance
leadership abilities.
z The company’s CTO, Mira Murati,
products
was instated as interim CEO. RBI has stopped Bajaj
Zurich Insurance Company, one of the Finance from sanction-
largest insurance companies in the NOVEMBER 20
ing and disbursing
world, is set to acquire a 51 per cent z Altman and fellow OpenAI co-found-
loans under its prod-
stake in Kotak Mahindra General er Greg Brockman join Microsoft to
ucts, ‘Ecom’ and ‘Insta
Insurance for `4,051 crore. This will lead a new advanced AI team.
EMI Card’. This is due
value Kotak Mahindra Bank’s general z More than 500 OpenAI employees,
to the non-issuance of
insurance arm at `7,943 crore. After including Murati, wrote a letter to the
key fact statements
the initial acquisition, Zurich will board stating, “Your actions have
(KFS, a document con-
acquire another 19 per cent stake over made it obvious that you are incapable
taining vital informa-
the next three years, increasing the of overseeing OpenAI.”
tion about the product)
total stake to 70 per cent. z The employees threatened to follow
to the borrowers, along
Altman to Microsoft. They demanded,
with other deficiencies.
“We will take this step imminently
RBI’s digital lending
unless all current board members
guidelines mandate
resign and the board appoints two new
these details to be pro-
lead independent directors.”
vided in an easy for-
NOVEMBER 22 mat, but the company
z The OpenAI board agrees to comply, did not provide them to
and Altman will return as the CEO. the customers.

`63,000 crore WeWork filed for bankruptcy

is the estimated value of the WeWork, the office-sharing company in the US, filed for
15-year contract signed by bankruptcy amidst a huge debt and consistent losses.
Once a multi-billion dollar company, it has witnessed a
GAIL for the supply of propane significant decline in its operations due to lower demand
to BPCL for its upcoming for office spaces post-pandemic. The company never
petrochemical plant in posted a profit. By the end of June 2023, its liabilities
Maharashtra. surged to $19 billion versus $15 billion in assets.

Prithvi Raj Singh Oberoi passes

away at 94
Popularly known as ‘Biki’, Prithvi Raj Singh Oberoi, the former Chairman
Emeritus of the Oberoi Group, the luxury hotel brand, passed away at 94.
He pioneered the hotel industry and propelled Oberoi hotels to
international fame. He played a significant role in building the brand
during his leadership and stepped down as the group’s Chairman in 2022.

10 Wealth Insight December 2023

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Eris Lifesciences to buy two business units
of Biocon Biologics
Eris Lifesciences has entered into an agreement with Biocon Biologics to
acquire its nephrology & dermatology units of branded formulations India
business for `366 crore. This segment has over 20 mother brands with a
revenue of `90 crore in FY23. Post-deal, Eris would become the second-
largest player in psoriasis, with an 11 per cent market share in India.

Raymond Group to acquire 59 per cent

stake in MPPL
Raymond Group will acquire a 59.3 per cent stake in Maini
Precision Products for `682 crore, which will be financed through
a combination of debt and internal accruals. The acquisition will
be routed through Ring Plus Alpha
(a subsidiary of JK Files and
Shareholders of Engineering). After the deal,
JK Files, Ring Plus, and
Butterfly reject the Maini Precision will be
merger plan with consolidated to form a new
subsidiary, Newco.
Crompton
The public shareholders of Butterfly
Gandhimathi Appliances, a home
appliances manufacturer, have rejected
Tata Group’s first
the proposal to merge with its promoter, IPO since 2004
Crompton Greaves Consumer Electricals.
Tata Technologies, a part of
While Crompton owns 75 per cent of
the Tata Group and a leading
Butterfly, 72.6 per cent of the non-
global engineering services
promoters voted against the merger. As a
result, both companies will continue to High Court orders provider, has launched its
IPO. It will be their first IPO
operate as separate listed entities.
`1,128 crore refund since TCS went public in

to Vodafone Idea
2004. The entire issue of
`3,043 crore is an offer for
The Hon’ble Bombay High sale, and the company’s
Court has instructed the market cap will be `20,283 cr
Income Tax Department to after the issue. The company
refund `1,128 crore with primarily caters to the
interest to Vodafone Idea, automotive industry and
which was paid in excess taxes generates significant revenue
for the assessment year FY17. from the group companies.

`75,000 crore
The amount has to be refunded
within 30 days starting from
November 8, 2023. The order
was passed against the
is the capex planned by Hindustan petition filed by the company
Petroleum for the renewable refinery claiming that the Income Tax
and other downstream marketing Department failed to process
projects in the next five years. the due refund.

December 2023 Wealth Insight 11

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 MARKET REPORTER

Pidilite Industries set to enter ECONOMIC METRICS

lending business .:;JVSSLJ[PVU
Adhesives giant Pidilite Industries plans to set up a 2,00,000 In ` cr
lending business to provide credit to its dealers in the
1,50,000
form of small retail loans. The company will acquire
Pargro Investments (promoter group’s company) 1,00,000
under a share purchase agreement to be entered on or
50,000
before March 31, 2024. After the acquisition, the
company aims to invest `100 crore over the next two 0
years through a combination of debt and equity. Oct '21 Oct '23

0UMSH[PVU!*VUZ\TLY7YPJL0UKL_

10 per cent of 8 % change YoY

7
IndiGo’s fleet
6
grounded 5
InterGlobe Aviation, which
operates IndiGo, will ground 4
Oct '21 Oct '23
more than 30 aircraft in the
upcoming quarter (Q3 FY24).
India’s largest airline announced 0UK\Z[YPHSHJ[P]P[`!0UKL_VM
Ashok Leyland to that Pratt & Whitney (the 0UK\Z[YPHS7YVK\J[PVU
US-based aircraft engine
invest `1,200 crore manufacturer) has identified
20 % change YoY

in Switch Mobility faults in its new-generation GTF

aircraft engine. With quite a few
10

0
Ashok Leyland’s board has planes already unavailable for
approved an investment of operation, IndiGo will now have -10
`1,200 crore in Switch Mobility more than 10 per cent of its Sep '21 Sep '23
through its holding company fleet grounded.
Optare PLC UK. The funds will
be utilised for capex, R&D and `]Z
operations in the UK and India. 72 Inverted scale
Switch Group mainly focuses 75
on electric mobility and has
received orders from state 78
transport undertakings over 81
the last few years. It has a
current order book of over 84
1,200 buses. Nov '21 Nov '23

*Y\KLVPS

`30,000 crore
150 Brent $/barrel

120
is the amount extended by REC to RailTel for
90
infrastructure projects, including telecom,
railways & metro and the KAVACH train collision 60
prevention system in the next five years. Oct '21 Oct '23

12 Wealth Insight December 2023

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 STOCK STORY SOLAR INDUSTRIES

Explosive market
expansion
Solar Industries’ growth trajectory from local to global markets

I
ncorporated in 1995, Solar
Industries is India’s largest
explosives manufacturer. It
produces multiple kinds of
explosives and detonators with
applications both in the defence
and industrial sectors. It has
multiple manufacturing plants in
and outside India, with exports
contributing to 40 per cent of
revenue in FY23. Coal India
continues to be the company’s
largest client ever since its
inception (accounting for
15 per cent of FY23 revenue).
Founder and Chairman
Satyanarayan Nuwal started
trading explosives in 1983. Then,
the company started producing as demand for industrial various mining and infrastructure
detonators and packaged and bulk explosives increased for the projects. Solar’s management saw
explosives between 1995 and 2000 development of housing and the potential opportunity and
before going public in 2006. infrastructure projects. entered the African market
While it continued on a steady However, the turning point through Nigeria and Zambia.
growth path and the mining came when the company started its The manufacturing plants in
industry remained its largest export operations in 2005. Just like these countries commenced
consumer, the company also found India, multiple other developing operations in 2009. This move was
new revenue-generating avenues countries required explosives for followed by the establishment of

Solar Industries Sensex Sensex rebased to stock price

Apr 3, 2006
`53

Nov 12, 2007 Aug 25, 2008 2010 2012 Jun 20, 2013 2016
Acquires 74% Formed a joint Emerges as the Commences Commences Becomes the first
stake in venture with CDMC, a largest explosives operations in operations in Indian company
Navbharat company 100 per producer in India the Nigeria the Turkey to produce HMX
Coalfields cent owned by the in terms of and Zambia plant and HMX
govt. of Chattisgarh revenue plant compounds

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 Revenue and net profit Operating profit and margin
Revenue (` cr, left side) Operating profit (` cr, left side)
Net profit (` cr, right side) Operating profit margin (%, right side)
8,000 1,000 1,600 20
6,000 750 1,200 15
4,000 500 800 10
2,000 250 400 5
0 0 0 0
FY14 FY23 FY14 FY23
another manufacturing plant in
Turkey in 2012. Although the
expansion plans led to a decline in ROE and ROCE
operating margins, the revenue and ROE (%) ROCE (%)
PAT almost tripled between FY09 40
and FY14.
30
Consistent performance in India,
coupled with continued growth in the 20
export market, led to explosive growth 10
of the company. The company also
0
entered the defence segment with the
production of HMX in 2015 and FY14 FY23
received orders in both domestic and
international markets in FY19. As of Export revenue and its share
FY23, the company operates 39 Export revenue (` cr, left side) Export
Nov 8, 2023
revenue as a % of total revenue (right side)
manufacturing plants with a footprint `5,994
in over 75 countries. 3,200 60
In Q2 FY24, Solar Industries’s PAT 2,400 45
rose by 11 per cent. Also, the company 1,600 30
received its largest order of explosives
800 15
from Coal India, which propelled the
0 0
share price up 57.2 per cent in the last
three months. FY14 FY23
Nov 23, 2021
By Hemkesh Khattar `2,859 Jul 11, 2023
`3,541

Aug 8, 2018
Nov 20, 2007
`1,273
`1,189
Aug 3, 2015
`793
May 19, 2020
`870 296

Mar 2017 Jan 19, 2018 Dec 05, 2018 Apr-Jun 2020 Jan-Mar 2021 Oct 09, 2023
Commences Receives order Commences Commences Commences Wins an order
operations in from defence exports of operations in operations in worth `1,853
the South ministry for defence the Ghana Tanzaiana crore from Coal
Africa plant production of products plant plant India
missile propellers

December 2023 Wealth Insight 15

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 BIG MOVES

Large caps
3M returns Price to 3Y avg 3Y earnings 3M price (`)
(%) earnings RoE (%) growth (%) movement

Suzlon Energy 113.2 102.0 – 35.0 42

It has informed about its debt reduction plan and has also received an order for a wind energy project. 20

Vodafone Idea 86.0 – – 11.7 14

Recently, Bombay HC ordered the tax department to refund `1,128 crore. 8

6,850
Solar Industries 57.6 76.2 27.1 54.7
4,346
It received its biggest ever order worth `1,853 crore from Coal India for the supply of bulk explosives.

73
IRFC 53.3 2.0* 14.6 20.7
It raised `2,500 crore via bond issue and signed an MoU with Rites. 48

346
Coal India 48.8 7.6 45.6 27.0
Its revenue and PAT grew 10 and 13 per cent YoY, respectively, in Q2FY24. 232

310
PFC 43.2 1.1* 28.0 26.3
217
Signed an MoU with SJVN to provide financial assistance for projects at an estimated cost of `1,18,826 crore.

330
REC 40.4 1.4* 21.1 27.3
It signed MoU with the Bank of India to co-finance power and infrastructure projects amounting to `30,000 crore. 235

Adani Power 35.9 7.3 32.7 258.0 389

Its Q2 FY24 net profit and revenue increased by 848 and 84 per cent YoY, respectively.
287
122
Zomato 33.9 – -12.8 16.8
It has reported net profit in Q2FY24 for the second straight quarter. 91

41
IOB 31.9 3.4* 9.8 –
Its Q2 FY24 net profit rose 25 per cent YoY. 31

80
PNB 26.0 0.9* 3.5 15.8
Its Q2 FY24 net profit rose four times YoY. 63

Macrotech Developers 21.6 54.8 6.9 -12.9

715 869
Reported a profit of `207 crore in Q2FY24 as against a loss of `931 crore in Q2FY23.

6,047
Linde India 21.0 123.2 15.2 -17.4
Received a letter of acceptance from the Indian Oil Corporation to establish an air separation unit. 4,998
20
Yes Bank 18.8 1.4* -2.5 8.7
17
Its Q2 FY24 net profit jumped 43 per cent on a YoY basis.

110
Union Bank 16.8 1.0* 8.9 22.8
Its net profit almost doubled in Q2FY24 on a YoY basis. 95

*Price to book value Our large-cap universe has 136 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 Nov 16, 2023.

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 BIG MOVES

Mid caps
3M returns Price to 3Y avg 3Y earnings 3M price (`)
(%) earnings RoE (%) growth (%) movement
266
ITI 132.8 – -3.3 -308.3
It signed an MoU with TCIL and C-DOT and introduced laptops and micro PCs under the ‘Smaash’ branding. 114

390
GMDC 119.4 12.3 10.7 74.9
178
The stock rallied due to general market conditions.

15
Jaiprakash Power 102.5 – 2.0 26.0
The company reported an operating profit in Q2FY24 as compared to an operating loss in the preceding year. 7

2,966
MCX 87.9 337.8 9.1 -40.3
It has received approval from SEBI’s tech panel to launch its new web-based commodity derivatives platform. 1,578

862
Maharashtra Seamless 81.3 11.6 13.4 382.3
Its Q2FY24 net profit jumped 55 per cent YoY. It received orders worth `157 crore from Oil India and IOCL. 476

547
Welspun Corp 73.1 17.7 11.4 19.3
Its subsidiary, Sintex, signed an MoU with the Telangana government to establish a manufacturing facility for `350 crore. 316

2,972
Angel One 67.1 24.4 43.2 78.4
Its Q2 FY24 net profit jumped 43 per cent on a YoY basis. 1,779

911
Prestige Estates Projects 66.2 21.3 22.8 67.7
Its revenue and net profit grew by 57 and 505 per cent, YOY, respectively, in Q2FY24. 548

The Fertilisers And Chemicals Travancore 58.1 93.0 69.0 -23.0 731
The stock rallied due to general market conditions. 462

427
Swan Energy 55.0 36.6 -8.9 180.2
It has informed about the upfront payment for acquisition of Reliance Naval and Engineering through NCLT’s resolution plan. 276

Authum Investment 52.6 2.0 29.2 314.2 718

470
It acquired a 1.9 per cent stake in the realty developer DB Realty.

255
Himadri Speciality 50.6 34.3 5.2 51.3
A creditors’ committee approved a resolution plan for the bankrupt Birla Tyres. 170

Jindal Saw 50.2 13.0 5.3 91.4 491

327
Its JV is set to establish India’s first facility for producing and supplying pipes, tubes and connections to the OTCG market.

Ircon International 49.8 16.4 12.6 34.3

155
103
Its Q2 FY24 revenue and net profit grew 33 and 44 per cent YoY, respectively.

2,490
Kaynes Techn 42.4 119.5 16.3 116.7
1,748
It’ll invest `2,800 crore to set up a semiconductor OSAT and compound semiconductor facility near Hyderabad.

Our mid-cap universe has 300 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 Nov 16, 2023.

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 BIG MOVES

Small caps
3M returns Price to 3Y avg 3Y earnings 3M price (`)
(%) earnings RoE (%) growth (%) movement
916
Sky Gold 206.1 32.4 19.1 47.3
Its Q2FY24 profit was up seven times YoY. 299

4
Unitech 190.8 – -207.1 -66.3
The stock rallied due to general market conditions. 1

Mufin Green Finance 183.0 148.6 14.1 53.9 122

It has entered into an agreement to lease 100 Tata Tigor cars to Snap-E Cabs for the next five years. 43

Jai Balaji Industries 164.8 24.6 – 61.7 594

Its net profit jumped more than nine times YoY in Q2FY24. 224

856
Cupid 164.4 44.5 19.3 -8.7
Universal Halwasiya group acquired a 41.8 per cent stake in the company. 324

Insolation Energy 160.7 121.9 37.9 25.7 628

Its subsidiary commercialised the production of 600 MW of solar capacity. 241

20
Jaiprakash Associates 154.8 – -55.1 -186.7
The company’s net loss has narrowed on a YoY basis. 8

147
Apollo Micro Systems 154.2 190.2 4.6 21.3
It plans to set up a defence equipment manufacturing facility in Hyderabad for `150 crore. 58

11
GVK Power & Infra 145.7 0.6 – 58.3
It has reported a profit in both Q2FY24 and Q1FY24 as compared to losses in the same quarters previous year. 5

221
Piccadily Agro 128.0 62.4 11.9 34.2
Its Q2 FY24 net profit jumped three times YoY. Its product won an award at ‘Whiskies of the World’. 97

Shilchar Tech 114.1 29.9 23.6 167.9

1,264 2,707
The company is in the process of expanding its production facilities from 4,000 MVA to 5,000 MVA.

685
Jindal Photo 109.1 4.0 19.7 52.2
Its net profit has more than doubled in Q2FY24 on a YoY basis. 327

Eimco Elecon 106.5 28.3 3.9 37.5

1,538
It has received an order worth `39 crore from JMS Mining for the supply of coal mining equipment. 745

Maan Aluminium 89.9 16.0 34.0 87.1 138

Its Q2FY24 revenue was up 57 per cent YoY. 73

40
GMR Power And Urban Infra 87.3 – -206.6 -997.0
22
It received a letter of award (LoA) for a smart metering project worth `2,470 crore in Uttar Pradesh.

Our small-cap universe (minimum market capitalisation `575 crore) has 1,020 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 Nov 16, 2023.

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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 ,32LQGH[YVWKH6HQVH[
Ideaforge Tech With a slew of IPOs, the IPO Index has performed well in the last few months
140 z IPO z Sensex
94.2% 134
130
HIGHEST
LISTING-DAY LOSS 120
Yatra Online
110 106
-8.5% 100

HIGHEST 90
POST-LISTING GAIN
Kaynes Tech 80 Rebased to 100

221.2% November 2022 November 2023

HIGHEST HIGHEST LOWEST BIGGEST TOTAL

POST-LISTING LOSS SUBSCRIBED IPO SUBSCRIBED IPO IPO ISSUE SIZE
Ideaforge Tech Ideaforge Tech Radiant Cash Mgmt. Mankind Pharma
-38.3% 106.1 times 0.5 times `4,326 cr `46,070 cr

7RS,32VE\LVVXHVL]H
Subscription Issue Issue List Current Listing Change post Sensex Current
Company Listing date ratio (times) size (` cr) price (`) price (`) price (`) gain (%) listing (%) change (%) P/E
Mankind Pharma 09 May 2023 15.3 4,326 1,080 1,300 1,874 20.4 44.2 6.8 58.6
JSW Infras 03 Oct 2023 37.4 2,800 119 143 203 20.2 41.8 0.7 57.6
RR Kabel 20 Sep 2023 18.7 1,965 1,035 1,179 1,657 13.9 40.5 -1.2 98.4
Honasa Consumer 07 Nov 2023 7.6 1,702 324 324 332 0.0 2.5 1.6 –
Five-Star Business Finance 21 Nov 2022 0.7 1,593 474 450 801 -5.1 78.1 7.9 4.9*
Global Health 16 Nov 2022 9.6 1,571 336 398 889 18.5 123.2 6.5 58.6
Concord Biotech 18 Aug 2023 24.9 1,551 741 900 1,309 21.5 45.4 1.6 57.0
KFin Technologies 29 Dec 2022 2.6 1,500 366 369 526 0.8 42.6 7.9 41.6
Archean Chemical 21 Nov 2022 32.2 1,462 407 449 530 10.3 18.1 7.9 16.6
Cello World 06 Nov 2023 38.9 1,430 648 831 791 28.2 -4.9 1.6 63.0
Samhi Hotels 22 Sep 2023 5.3 1,370 126 131 163 3.6 24.5 0.0 –
Sai Silks 27 Sep 2023 4.4 1,201 222 230 277 3.6 20.5 -0.2 43.6
Fusion Micro Finance 15 Nov 2022 2.9 1,104 368 361 593 -2.0 64.4 6.6 2.3*
SBFC Finance 16 Aug 2023 70.2 1,025 57 82 91 43.8 10.6 0.7 3.7*
Sula Vineyards 22 Dec 2022 2.3 960 357 358 479 0.3 33.9 8.5 44.8

Data as of November 16, 2023. *Price-to-book value.

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 MONTHLY AGENDA

Quarterly result update

How various sectors have performed in Q2 FY24 in terms of revenue, profit and
margins and which companies stand out
Change in median

2EVENUE
GROWTH

/PERATING
PROÜT
GROWTH

0!4
GROWTH

OPERATING
PROÜT
MARGIN

PT

Sector QoQ YoY QoQ YoY QoQ YoY QoQ YoY

Automobile 5.9 20.1 14.9 88.5 12.6 98.0 0.8 3.6
Bank 9.7 35.2 - - 6.0 33.9 - -
Capital Goods 10.2 14.1 32.0 35.4 67.8 43.2 1.8 1.7
Chemicals 5.3 -12.5 4.1 -28.8 -0.8 -29.9 -0.1 -2.1
Communication 0.6 4.2 -2.2 17.5 33.4^ 24.3^ -0.5 1.9
Construction 2.4 18.9 4.7 21.2 41.6 29.5 0.3 0.3
Consumer Discretionary -38.3 -31.5 -16.1 -13.4 -22.6 -21.0 0.9 0.7
Consumer Staples 1.0 1.1 -5.8 10.5 -2.9 0.7 -0.9 1.1
Diversified -4.8 1.8 -14.5 0.8 -24.3 -17.5 -1.0 -0.1
Energy -3.0 -6.9 2.5 126.2 -3.5 148.9 0.7 8.0
Financial 9.5 22.2 - - 14.3 32.4 - -
Healthcare 3.4 13.4 1.9 50.6 6.5 35.5 -0.3 4.2
Insurance 15.9 -8.3 - - -10.4 -42.9 - -
Materials -5.7 7.5 -17.7 45.9 -15.3 40.9 -1.8 3.3
Metals & Mining 2.7 2.9 17.8 63.8 -55.3 -22.1 1.4 4.1
Services -2.1 0.5 -22.8 39.3 -38.0 2.3 -1.9 2.0
Technology 1.2 6.8 2.6 4.9 1.3 3.7 0.2 -0.3

Textiles 8.7 3.1 16.5 -7.1 -32.5 -8.0 0.5 -0.7

/PERATING
PROFIT
IS
REPRESENTED
BY
%")4
OR
EARNINGS
BEFORE
INTEREST
AND
TAX
EXCLUDING
OTHER
INCOME 
>
INDICATES
INCREASE
OR
DECREASE
IN
LOSS
1
&9
DATA
AVAILABLE
FOR
 
COMPANIES
AS
ON
.OVEMBER


-IN
M CAP
`
CR
4O
FIND
OUT
WHICH
COMPANIES
ARE
INCLUDED
IN
EACH
OF
THE
SECTORS
VISIT
HTTPSVROINSTOCKSSELECTOR

7RSFRPSDQLHVE\4UHYHQXH 7RSFRPSDQLHVE\43$7
In ` cr In ` cr
Reliance Industries
2,34,956 17,394
2,05,283 1,46,874
HDFC Bank
16,811

Reliance Industries Indian Oil Corporation ONGC SBI

16,100
1,16,657 1,07,877 ONGC
13,734

Indian Oil Corporation

BPCL LIC 13,114

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7RSFRPSDQLHVE\4UHYHQXHJURZWK %RWWRPFRPSDQLHVE\4UHYHQXHJURZWK
)N

9O9 )N

9O9
Mahindra
National Jindal Poly Semac EKI Energy Lifespace
Peroxide Investment Consultants Services Developers

86,770

31,414
2,926 2,027 1,335 -74.5
-78.7 -77.8

Blue Cloud Raj Rayon SG W.S. Vardhman

-99.7 -99.0
Softech Industries Finserve Industries Holdings

7RSFRPSDQLHVE\4RSHUDWLQJSURILWJURZWK %RWWRPFRPSDQLHVE\4RSHUDWLQJSURILWJURZWK
)N

9O9 )N

9O9
6,89,567

36,100 -2,141
29,400 25,683 -1,347
23,653 -11,104 -6,620 -2,941

Network18 Wardwizard Munjal TV18 Max

Indian Oil PVR Inox Blue Cloud Orchid Ambuja Media & Foods and Showa Broadcast India
Corporation Softech Pharma Cements Investment Beverages
%XCLUDING
BANKING
FINANCIAL
SERVICES
AND
INSURANCE
COMPANIES %XCLUDING
BANKING
FINANCIAL
SERVICES
AND
INSURANCE
COMPANIES

7RSFRPSDQLHVE\43$7JURZWK %RWWRPFRPSDQLHVE\43$7JURZWK
)N

9O9 )N

9O9
1,55,000
Wardwizard Foods and Beverages
-5,708

BHEL
-2,068
80,575
Coffee Day Enterprises
-2,032
35,440
26,100 25,467 Prime Focus
-1,940

TCNS Clothing
Sportking Huhtamaki Rane Blue Cloud Atul
India India (Madras) Softech Auto -1,885

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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 The Sensex is the most convenient indicator to

In ’000 tell the state of the Indian market. The 10-year
72
graph presented alongside shows the secular
67,839 run in the markets. However, this rally was
60 punctuated by several bearish phases. The
65,462
most prominent ones include the following:
48 Chinese growth concerns in 2015, demoneti-
sation blues in 2016, the sell-off in 2018 due
to US–China trade war, and the March 2020
36
COVID-19 shock. After staging a remarkable
recovery from the lows of March 2020, the
24 markets yielded to the Russian invasion of
20,193 Ukraine and rising interest rates. With reces-
12 sionary fears easing, Sensex reached a new
Nov ’13 Nov ’23 all-time high.

Sensex’s price to earnings The price-to-earnings ratio of the Sensex is a

40 simple market-valuation ratio. A general
guideline to help understand the valuation is:
35 35.1 Highly undervalued
(mouthwatering Fairly Dangerously
30 valuations) valued overvalued

25 23.0 P/E
12 16 20 24
22.8
20 Undervalued Overvalued

16.8
15 This graph is based on standalone data of Sensex companies.
Nov ’13 Nov ’23 If one takes the consolidated data, the P/E will likely be lower.

Sensex’s price-to-book value

4.0 The price-to-book value ratio tells us how
3.83 many times an investor is ready to pay for
a rupee of net assets. Since book value is
3.6
stable and less volatile than earnings, some
3.34 consider it better than the P/E as a measure
3.2 3.02 of valuation.
If:
2.8 P/B > Median P/B = Overvalued
P/B < Median P/B = Undervalued
2.4 2.36
2.0
Nov ’13 Nov ’23

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Sensex’s dividend yield
1.7% Dividend yield is nothing but the return an
investor gets in the form of dividend on his
investment. It is measured as dividend per
1.5 1.52 share divided by price per share. Generally
speaking, when stocks are cheap, dividend
yields are high.
1.3
1.24 If:
Dividend yield > Median dividend yield
1.22 = Undervalued
1.1
Dividend yield < Median dividend yield
= Overvalued
0.9

0.7
0.72
Nov ’13 Nov ’23

Market cap to GDP

125% Here we have considered the market
capitalisation of all the listed companies on
112 the BSE.
100
107 This measure is Buffett’s personal favourite.
81 He said, “It is probably the single best
75 measure of where valuations stand at any
given moment.”
57 If:
50 Market cap > GDP = Overvalued
Market cap < GDP = Undervalued

25
Considering market cap of all the listed companies on
the BSE, revised estimate of FY22 nominal GDP and
advance estimates of FY23 and FY24 nominal GDP
0
FY14 FY16 FY18 FY20 FY22 FY24

10Y G-sec yield vs Sensex’s earnings yield

4.0%
3.97 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
3.2 2.91 government bond. Sensex’s earnings yield
2.85 is the inverse of the Sensex’s P/E ratio.
The greater the deviation from the median
2.4 in either direction, the greater the degree
of overvaluation or the undervaluation
of the Sensex.
1.6
If:

0.94 Spread > Median = Overvalued

0.8 Spread < Median = Undervalued

0
Nov ’13 Nov ’23 All data as of November 15, 2023

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 MARKET COMPASS

Pledging tracker
Companies that have seen a rise or decline in promoter pledging in Q2 FY24

P
romoter pledging is an important unable to pay back the dues. This may force
analytical parameter. When promoters the financing institution to sell the
pledge shares, they keep shares as pledged stake, which can result in a
collateral with a financial institution, sudden fall in the stock price and the
such as a bank, to raise money. It’s just dilution of promoter stake in the
like mortgaging something for money. company.
Pledging is not always bad. Many Generally speaking, a high
times, promoters pledge their stake for pledged stake also indicates a bad
sound business reasons and later management. Investors should stay
release their pledged shares. But away from companies that have high
pledging takes an ugly turn when the levels of pledging.
pledged stake is high and the promoter is

,QFUHDVHLQSOHGJLQJ
Companies in which promoter pledging has gone up by 20 percentage points and the minimum promoter stake is 25 per cent

M-cap Pledged stake (%) Increase Promoter 3M stock Debt-to-

Company Sector (` cr) Sep '23 Jun '23 (% pt) stake (%) return (%) Z-Score F-Score equity
Polyplex Corporation Plastic Products 3,294 100.0 0.0 100.0 51.0 -14.8 3.7 7 0.2
RattanIndia Power Power 5,236 88.7 0.0 88.7 44.1 28.4 -7.1 5 -1.9
Shilpa Medicare Healthcare 3,322 90.4 12.9 77.5 50.0 24.3 3.0 3 0.5
J Kumar Infraprojects Infrastructure 3,306 51.4 22.7 28.7 46.7 41.0 5.8 6 0.3
Apollo Micro Systems Electricals 3,811 28.2 0.9 27.3 52.7 8.4 9.2 6 0.4
Sigachi Industries Chemicals 1,776 21.7 0.0 21.7 46.1 31.3 12.7 3 0.2

'HFUHDVHLQSOHGJLQJ
Companies in which promoter pledging has come down by 20 percentage points and the minimum promoter stake is 25 per cent
Pledged stake (%)
M-cap Decrease Promoter 3M stock Debt-to-
Company Sector (` cr) Sep '23 Jun '23 (% pt) stake (%) return (%) Z-Score F-Score equity
Prime Focus Media & Entt. 2,968 0.0 100.0 -100.0 70.0 -24.3 1.7 8 7.3
TVS Holdings Auto & Anc. 11,303 16.2 86.9 -70.7 74.5 16.8 1.4 5 10.7
Dr Agarwals Eye Hospital Healthcare 1,311 40.0 99.8 -59.8 71.9 70.3 5.3 6 0.3
Tilaknagar Industries Alcohol 5,319 23.9 75.8 -51.9 42.0 39.5 8.3 6 0.3
Kuantum Papers Paper 1,510 30.0 76.5 -46.5 70.3 -9.9 3.4 8 0.4
Prakash Industries Iron & Steel 2,684 32.8 58.6 -25.8 44.2 85.5 3.2 6 0.1
Jai Balaji Industries Iron & Steel 9,293 32.0 57.3 -25.3 60.0 461.6 4.6 6 0.7
Ashapura Minechem Mining 3,041 30.7 54.8 -24.1 45.3 136.4 2.0 7 1.0
Confidence Petroleum Gases & Fuels 2,468 3.8 27.8 -24.0 61.3 7.0 7.7 3 0.5
Orient Green Power Power 1,966 76.5 100.0 -23.5 32.5 21.8 2.1 7 1.0
Jindal Steel & Power Iron & Steel 66,132 13.3 34.3 -21.0 61.2 17.8 2.8 7 0.3

Min m-cap `1,000 crore as on November 15, 2023. Returns as of September 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 negative net worth.

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 MARKET COMPASS

Institutional
moves
Top five companies across
market caps in which mutual
funds and foreign institutions
have significantly changed their
holdings (in terms of per cent
of equity) between June and
September 2023

,QFUHDVHLQSRVLWLRQ
0XWXDOIXQGV ),,V
Large caps Change Large caps Change
Company Sector Sep ’23 Jun ’23 (% pt) Company Sector Sep ’23 Jun ’23 (% pt)

Suzlon Energy Capital Goods 4.7 0.7 4.0 HDFC Bank Bank 52.6 33.4 19.2
Aurobindo Pharma Healthcare 11.3 8.4 2.9 Patanjali Foods FMCG 10.7 3.0 7.7
Interglobe Aviation Aviation 11.0 8.8 2.2 Adani Power Power 22.2 16.6 5.6
Zomato Retailing 10.6 8.3 2.3 Supreme Industries Plastic Products 23.9 19.1 4.8
Hero MotoCorp Auto & Anc. 12.5 10.3 2.2 IDFC First Bank Bank 24.5 20.9 3.6

Mid caps Change Mid caps Change

Company Sector Sep ’23 Jun ’23 (% pt) Company Sector Sep ’23 Jun ’23 (% pt)

Coforge IT 42.3 27.7 14.6 Titagarh Railsystems Auto & Anc. 16.9 7.1 9.8
BSE Finance 4.8 0.2 4.6 Coforge IT 34.4 24.8 9.6
Federal Bank Bank 37.0 33.1 3.9 Birlasoft IT 17.6 11.3 6.3
PVR Inox Media & Entt. 32.0 28.3 3.7 Zensar Technologies IT 16.7 12.6 4.1
Eris Lifesciences Healthcare 13.9 10.3 3.6 LIC Housing Finance Finance 21.0 17.0 4.0

Small caps Change Small caps Change

Company Sector Sep ’23 Jun ’23 (% pt) Company Sector Sep ’23 Jun ’23 (% pt)

SJS Enterprises Auto & Anc. 26.7 9.2 17.5 SJS Enterprises Auto & Anc. 14.3 5.3 9.0
TD Power Systems Capital Goods 31.4 15.8 15.6 CMS Info Systems IT 23.8 15.3 8.5
NRB Bearings Auto & Anc. 19.5 11.2 8.3 Voltamp Transformers Capital Goods 22.3 14.1 8.2
Sula Vineyards Alcohol 16.5 9.0 7.5 GMM Pfaudler Capital Goods 26.5 18.8 7.7
Prudent Corp. Advisory Finance 15.4 9.2 6.2 Orchid Pharma Healthcare 8.1 0.5 7.6

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'HFUHDVHLQSRVLWLRQ
0XWXDOIXQGV ),,V
Large caps Change Large caps Change
Company Sector Sep ’23 Jun ’23 (% pt) Company Sector Sep ’23 Jun ’23 (% pt)

Supreme Industries Plastic Products 11.1 15.0 -3.9 Adani Enterprises Trading 18.1 22.9 -4.8
Ashok Leyland Auto & Anc. 10.1 13.2 -3.1 Adani Ports and SEZ Logistics 13.8 17.0 -3.2
NHPC Power 7.4 9.4 -2.0 Zomato Retailing 58.0 60.7 -2.7
Cummins India Auto & Anc. 17.7 19.6 -1.9 Indus Towers Telecom 21.4 23.9 -2.5
Tube Investments Auto & Anc. 9.1 10.5 -1.4 Adani Energy Solutions Power 18.6 21.1 -2.5

Mid caps Change Mid caps Change

Company Sector Sep ’23 Jun ’23 (% pt) Company Sector Sep ’23 Jun ’23 (% pt)

IDFC Finance 10.7 16.8 -6.1 IRB Infra. Developers Infrastructure 5.5 48.4 -42.9
LIC Housing Finance Finance 15.3 18.7 -3.4 Amara Raja Energy Auto & Anc. 24.6 35.2 -10.6
Tata Motors DVR Auto & Anc. 25.7 28.8 -3.1 Bombay Burmah Trading Agri 8.3 16.4 -8.1
Chambal Fert. & Chem. Chemicals 8.7 11.2 -2.5 Piramal Enterprises Finance 21.6 27.9 -6.3
CG Cons. Electricals Cons. Durables 35.4 37.5 -2.1 UPL Chemicals 33.6 38.0 -4.4

Small caps Change Small caps Change

Company Sector Sep ’23 Jun ’23 (% pt) Company Sector Sep ’23 Jun ’23 (% pt)

Camlin Fine Sciences Chemicals 2.7 8.5 -5.8 Camlin Fine Sciences Chemicals 1.6 31.5 -29.9
Apex Frozen Foods Agri 0.0 4.5 -4.5 Shriram Pistons & Rings Capital Goods 30.8 41.7 -10.9
Tarsons Products Plastic Products 2.5 6.7 -4.2 Shriram Properties Realty 15.3 23.8 -8.5
VIP Industries FMCG 10.6 14.2 -3.6 Niyogin Fintech Finance 25.8 33.5 -7.7
Globus Spirits Alcohol 1.0 4.3 -3.3 Sula Vineyards Alcohol 26.7 34.4 -7.7

7RSKROGLQJVRIPXWXDOIXQGV 7RSKROGLQJVRI),,V
% of Amount % of Amount
M-cap equity invested M-cap equity invested
Company name Sector (` cr) held (` cr) Company name Sector (` cr) held (` cr)
Coforge IT 32,911 42.3 13,918 One97 Comm. (Paytm) IT 58,332 71.2 41,544
Kalpataru Projects Infrastructure 10,689 39.4 4,213 CarTrade Tech Auto & Anc. 3,992 70.1 2,800
Gateway Distriparks Logistics 4,829 39.0 1,881 Delhivery Logistics 30,216 65.5 19,791
Federal Bank Bank 36,495 37.0 13,507 Samhi Hotels Hospitality 3,443 64.9 2,233
Equitas SFB Bank 11,007 36.3 3,991 360 One Wam Finance 20,069 61.9 12,417
CG Cons. Electricals Cons. Durables 18,066 35.4 6,401 Max Healthcare Healthcare 58,227 60.6 35,280
MCX Finance 14,825 35.1 5,204 Ugro Capital Finance 2,627 58.3 1,532
Greenply Industries Const. Materials 2,503 32.2 806 Zomato Retailing 1,04,749 58.0 60,723
PVR Inox Media & Entt. 16,193 32.0 5,186 PNB Housing Finance Finance 20,531 57.5 11,807
KNR Constructions Infrastructure 7,404 31.8 2,352 Redington Trading 12,136 56.3 6,827

M-cap as on November 15, 2023. Other data as of September 2023. M-cap as on November 15, 2023. Other data as of September 2023.

December 2023 Wealth Insight 29

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 MARKET COMPASS

Change in promoter stake

Companies that have seen a rise or decline in promoter stake in Q2 FY24

H
igher promoter holding shows that holdings. Hence, one needs to dig deeper
promoters are bullish about their while tracking promoter stake.
company. In contrast, a fall in The tables below list companies in which
promoter stake is usually a negative the promoter stake has changed notably
development. over the last quarter. We took companies
However, corporate actions, such as where the promoter stake in the previous
rights issue, mergers, and promoter quarter was at least 25 per cent and changed
reclassification, can also impact promoter by at least 7 percentage points.

,QFUHDVHLQSURPRWHUVWDNH
Companies where the promoter stake in the previous quarter was at least 25 per cent and has risen by at least 7 percentage points
Promoters’ stake (%)
Company Sector M-cap (` cr) Sep '23 Jun '23 Increase in promoter holdings (% pt) 3M return (%)
TCNS Clothing Textile 2,252 61.1 31.5 29.6 -12.7
Unichem Labs Healthcare 2,929 70.2 50.9 19.3 9.1
Bombay Burmah Trading Agri 10,039 74.1 65.9 8.2 25.4

)DOOLQSURPRWHUVWDNH
Companies where the promoter stake in the previous quarter was at least 25 per cent and has fallen by at least 7 percentage points
Promoters’ stake (%)
Company Sector M-cap (` cr) Sep '23 Jun '23 Decrease in promoter holdings (% pt) 3M return (%)
SJS Enterprises Auto & Anc. 1,930 21.8 51.3 -29.5 20.6
Blue Cloud Softech IT 1,706 10.5 39.6 -29.1 7.5
Coforge IT 32,911 0.0 26.6 -26.6 8.9
HDFC Bank Bank 11,41,723 0.0 25.5 -25.5 -11.2
Restaurant Brands Asia Hospitality 5,768 15.4 40.8 -25.4 15.9
TD Power Systems Capital Goods 4,362 34.3 58.4 -24.1 6.8
CMS Info Systems IT 5,965 26.7 46.5 -19.8 -7.1
GMM Pfaudler Capital Goods 7,417 25.2 38.7 -13.5 24.5
Voltamp Transformers Capital Goods 5,321 38.0 50.0 -12.0 9.8
Shivalik Bimetal Controls Non-Ferrous Metals 3,140 51.1 60.6 -9.5 -16.3
EFC Trading 1,104 56.8 65.4 -8.6 21.5
Balu Forge Industries Capital Goods 2,564 57.5 65.4 -7.9 34.1
Lancer Container Lines Logistics 1,892 46.1 53.9 -7.8 102.2
PG Electroplast Cons. Durables 5,793 53.6 61.2 -7.6 14.7
Sheela Foam FMCG 11,937 65.5 73.0 -7.5 -4.5
Inox Wind Capital Goods 8,455 64.6 72.0 -7.4 19.2
Tatva Chintan Pharma Chemicals 3,543 72.0 79.2 -7.2 -13.0
Patanjali Foods FMCG 52,466 73.8 80.8 -7.0 4.5
M-cap more than `1,000 crore as on November 15, 2023. Returns as of September 2023.

30 Wealth Insight December 2023

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 ANALYST’S DIARY

Commanding the CPaaS seas

Tanla Platforms and its journey to being a multibagger

D
espite the turbulent business environment in the
ever-evolving IT landscape, some companies have
generated significant wealth for shareholders.
One such multibagger is Tanla Platforms, whose share
price has jumped about 31 times in the last five years.
This software company specialises in communication
services and has reported an annual PAT growth of 88 per
cent over the last five years!
These numbers captured our attention, and we decided
to analyse this company and uncover the factors behind
such a heartening performance.

Company’s business
Tanla Platforms provides messaging and communication
services to enterprises and organisations. Dominating
the Indian market with a 45 per cent share, the company
specialises in services indispensable in today’s digital
world: risk-free OTP generation, eKYC, and promotional
activities. This focus on the niche yet growing sector of online transactions.
Communication Platform as a Service (CPaaS) has posi- For instance, consider the number of UPI transactions
tioned Tanla as a pivotal player in the segment. or OTP authentications we use daily. The company’s
While Tanla might seem like a lucrative investment robust digital infrastructure, capable of handling two-
opportunity today, before FY20, the company struggled to step authentication for enterprises, bank OTPs, and even
achieve consistent growth and profitability. The median vaccination-related communication for government bod-
net profit margin and ROE over FY15-19 stood at 2.4 and ies, has placed it at the forefront of this digital revolution.
2.9 per cent, respectively.
So, what catalysed Tanla’s remarkable turnaround? Operational efficiency
Along with the exceptional revenue and PAT growth,
Rise of online transactions Tanla’s operational efficiency is another cornerstone of
A significant factor behind this surge is the exponential its success. The company operates on an asset-light model
growth of the internet, e-commerce, and data storage, with no long-term borrowings. This strategic approach
which has, in turn, spurred a massive demand for secure has kept costs like employee expenses, depreciation, and
interest expenses minimal.
These expenses represent a small portion of the compa-
Share price performance ny’s total expenses (except for in FY20, when the company
The share price has grown phenomenally over the last five years recorded a depreciation of `378 crore, following changes
7,500 Tanla Platforms BSE IT in TRAI policies and execution of blockchain technology).
6,000 Further, Tanla has maintained positive cash flow from
4,500 operations, thus solidifying its financial stability through
3,000 three share buybacks since FY20.
1,500
Acquisitions and partnerships
0
Strategic acquisitions and partnerships have also signifi-
Nov ‘18 Rebased to stock price Nov ‘23
Data as of November 2, 2023
cantly influenced the company’s growth trajectory. Tanla
Platforms recognised the increase in promotional activi-

32 Wealth Insight December 2023

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ties by B2C and D2C companies through messaging and
social media. To ride this wave, it acquired Karix and …is also reflected in its profitability
Gamooga in FY20, which helped Tanla leverage AI and ROCE and operating profit margin have been given a lift
big data for marketing campaigns. 75 Operating profit margin (%) ROCE (%)
Since the acquisition, the combined revenue and PAT
50
of both companies have grown annually by 23.5 and 144.4
25
per cent, respectively.
Furthermore, Tanla’s collaboration with Microsoft 0
led to the creation of Wisely, a new digital platform -25
that allows seamless communication through block-
-50
chain technology, avoids spam messages, carries out
FY18 FY23
promotional activities for clients, performs market
analytics and creates a virtual marketplace for enter-
prises and suppliers. The management expects it to be The company strategically acquired ValueFirst, a lead-
a high-margin and high-growth segment. As of FY23, ing CPaaS player in India and the Middle East, in June
the digital platform segment reported a revenue of 2023. This is in line with its aspiration to consolidate its
`303 crore, accounting for 9 per cent of the company’s market leadership and its expansion in the Middle East
overall revenue). and the Asia-Pacific region.
This acquisition, however, led to an increase in good-
Current performance will on the balance sheet, rising from `134 crore in March
Despite these successes and revenue growth of 4.6 per 2023 to `264 crore in September 2023. Goodwill as a per-
cent, the company reported a drop in PAT of 17 per cent centage of equity stood at 15.1 per cent in September 2023.
in FY23. A slowdown in promotional activities from vari-
ous businesses, a high-margin segment, resulted in dete- A word of caution
riorating profitability. However, the company offset vol- Like many other small-cap companies, Tanla’s financial
ume decline by recording a 51 per cent jump in total cli- performance exhibits inconsistencies investors should
ents in Q2 FY24. The revenue and PAT grew 16.3 and 32.4 not overlook. For instance, the fall in PAT in FY23 was
per cent, respectively, in H1 FY24. followed by a stark drop in the share price because of
inconsistent financial performance. The company cur-
rently trades at a P/E of 24.6, which is significantly lower
Tanla’s explosive growth…
than the five-year median P/E of 31.2.
Company’s financials have turned around darmatically in the last five years
Metric Revenue (` cr) PAT (` cr) CFO (` cr)
Moreover, the industry is also becoming increasingly
competitive. While the company remains the market
FY18 792 19 32
leader in the CPaaS segment, it faces tough competition
FY19 1,004 30 -30
from Route Mobile and multiple other private players.
FY20 1,943 -211 239 The entry of Bharti Airtel in the CPaaS business with the
FY21 2,341 356 561 launch of Airtel IQ further intensifies the competition in
FY22 3,206 539 486 the industry. So, its profit margins and long-term growth
prospects must be carefully evaluated.
FY23 3,355 448 247
By Hemkesh Khattar

Invest like pros

Learn the craft of investing by reading about the
investment styles of world-class money managers
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 ANALYST’S DIARY

Buffett’s test of
economic excellence
I
n his 1987 letter to the shareholders of Berkshire Then, we picked companies with a 10-year profit
Hathaway, Warren Buffett disclosed two quantitative before tax and exceptional items growth of at least

Indraprastha
filters to gauge the economic excellence of companies: 5 per cent per annum. We were left with
z A 10-year average return on equity of at least 20 per cent 30 companies.
z A return on equity of at least 15 per cent in each of

Gas
IEX
CAM
those 10 years.

HDF C
21.6

S
As Buffett faithfuls, we had to find out which Indian
15.8*

AM
Ma arma

C
companies ace this excellence test. So, we applied the 18.9*
Ph
nki
filters to listed Indian companies with some tweaks.
nd
9.1*
z Market cap greater than `500 crore
Or
Vin ics

26,796
21.1*
ga

11,213
ati

z At least a 10-year financial history

n

11,046
z A 10-year average return on equity of at least 48
43.2 58,3
Ba erv
Fin

20 per cent
jaj

746
s

21.5
z A return on equity of at least 69, 46.7
Ab 38.0 34.7
b 7
15 per cent in each of the last 10 years
In ott ,76 36.1
d 17
z Current P/E less than the five- i a 1
5 25. 14.9
year median P/E 32.5 0 ,12 14.9
2,5 .1 15.4
Ka RR 25
15.4
be
l 93 5
32 companies passed ,6 23
.6 15.
30.3* 47 35.9
16.0
the above Br .6
Ind itann 19 37.3
benchmarks. ust ia .8 35.3
ries 26
24

.0 5
20 54.
,3

26.6
15

I
Gen CICI L .1 40
.4
eral omb
.2

20
32

25

Insu ard ^
6,5

ran 4.7
ce
1,0

12.2*
.1

.1
.

46
20
48
5
,67

T
.2

Hold VS
.9
67

22

80

ings
.0

34.5
20

.6
970

43
.3
22
10,

Valiant
28.

.5

Organic
38

s -35.4*
0
27.
7
1,19

6
15.
33.7

SBI Cards an
36.1

d
Payment Ser 1.1*
vices
14.1
70,910

29.2

36.4

30.8

Fine Organic
13,557

37.3*
32.6

39.1

Industries
29.6

10Y share M-cap 10Y average 10Y PBT P/E

price return (` cr) ROE (%) & exceptional
(% pa) items growth
*Returns since listing; ^Price-to-book value; Price data as of October 31, 2023 (% pa)

34 Wealth Insight December 2023

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 43.2 per cent 7 16
is the 10-year annualised FMCG companies featured in companies in our list are
return of Vinati Organics, the our list, making the FMCG debt-free. Except for financial
highest in our list among the sector the clear winner of the companies, all the companies
companies listed in the last excellence contest. The have a debt-to-equity ratio of
10 years. chemicals sector is the close less than one time.
runner-up with six companies.
Distribution of 10Y
Berger
Paints

revenue growth
Paints
Asian

e
co

Ind on Lif
MC
Mari

Valiant Organics, Bajaj Finserv and

ia A

24.4
p

20.3 SBI Cards have grown by more than

Nip

17.4 20 per cent per annum

S

5.3*
ile tan
TC

13
Un ndus
r

65,099
ve

2,87,4
09 12.7
Hi

69,4 8
27 6
24,
ies

436 15.2
du e
In dilit

3
str

12
Pi

23.7 ,32
28.3 ,44
36.7 2
5,8 25.0 G ne Less than 10-15% 15-20% More than
21. 3,6
5 38 P& ygie 10% 20%
14.2 39 1, H
13.2 .2 25 20.0
12.9 ,0
22 fi
12. 69 no
2 .6 Sa ia
12 Ind
56

67.8 .1 25 12.0
,9

56.8 .0
07

49.2 11
27. .6 s
osy
7
Inf
17

11
51

27
,42

.6 .5
.9

13.1
0

56
.8
gar
ana
5,6
23
11

Mah
90
.4
.4

8,0

.1
as
9.5* G
44
10
77

.8

26
. 5

10,
.0
30

VST tries
201
10
.3

s
Indu
.0

8.0
22.
4
22

4,96
.8

9.1

0
37.8

Dabur
8.9

12.0 India
8.8

93,705
16.1

28.1
8.8

Swaraj
54.1

15.2 Engines
2,445
31.6
8.5
17.9

2,33,705

Nestle
15.9 India
78.7

62.5
7.7

P/E 10Y PBT 10Y average M-cap 10Y share

& exceptional ROE (%) (` cr) price return
items growth (% pa)
(% pa)

December 2023 Wealth Insight 35

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 ANALYST’S DIARY

Beyond the buzz

The potential pitfalls of chasing momentum

A
s we navigate through FY24, a remarkable
trend has emerged in the stock market. Picture
this: by October 27, 2023, over a hundred ϮϱϬ

companies, each boasting a market cap of more than

ϮϬϬ

ϭϱϬ

ϭϬϬ

ϱϬ

`500 crore, have seen their share prices soar, at least

doubling in value!
No wonder investors are excited and eager to
dive into the markets, hoping for this momentum
to continue.
While this recent momentum in stock values is
enticing and tempting, it doesn’t necessarily promise
long-term gains. Historically, share prices often rise
with a prevailing trend and then plateau for some
time before the reality of the market sets in as the
craze slows down. The transience of momentum
In such a scenario, it makes sense to question the Nine out of 13 times, Sensex beat more than 50 per cent of the companies
wisdom of chasing momentum. % of stocks Sensex
Prior period Post doubling underperforming Sensex return (%)
To put this into perspective and ensure that the
data supports our theory, we studied the companies 2009 - 2010 2010 - 2011 63.0 9.8

whose stock prices at least doubled and compared 2010 - 2011 2011 - 2012 63.2 -10.0
them with the Sensex one year later. We analysed 2011 - 2012 2012 - 2013 72.4 8.9
this data over the last 15 years and broke this period 2012 - 2013 2013 - 2014 51.3 18.4
into 13 periods, i.e., 2009-2011, 2010-2012 and so on. For
2013 - 2014 2014 - 2015 35.1 25.9
instance, we studied companies that at least doubled
2014 - 2015 2015 - 2016 38.2 -10.6
their stock prices during 2009-2010 and then tracked
how they fared the following year, i.e., 2010-2011. 2015 - 2016 2016 - 2017 36.6 18.4
Here’s what we found. 2016 - 2017 2017 - 2018 50.9 11.6
Our findings were a bit surprising. Contrary to the 2017 - 2018 2018 - 2019 82.5 16.5
investors’ expectation of continued momentum, eight
2018 - 2019 2019 - 2020 68.4 -29.4
out of 13 times, more than 50 per cent of these
2019 - 2020 2020 - 2021 50.0 77.0
companies couldn’t even beat the Sensex!
Since this universe also included companies with 2020 - 2021 2021 - 2022 30.2 18.5
a market cap of less than `500 crore, we wondered if 2021 - 2022 2022 - 2023 68.4 -0.3
the momentum impacts micro-cap companies more
than larger companies. the market. It is vital to consider long-term business
So, we looked at the data again after excluding prospects when making investment decisions.
these companies, only to discover that the results It is essential to look beyond the immediate surge
were almost the same. In six out of 13 periods, more in stock prices and to keep a few things in mind.
than 50 per cent of the stocks underperformed Additionally, it is crucial to identify the sustainability
the Sensex. of the factors that led to the rally because, over the
long term, only companies with sustainable growth
What’s the takeaway for investors? will build wealth, rather than those that rise
This trend underscores a critical lesson. It can be momentarily and then quickly fade away.
risky to invest by following just an ongoing rally in By Vishal Goyal

36 Wealth Insight December 2023

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Passive fund investing for women
Gone are the days when
investment decisions were
the domain of the men.
In today’s modern
world, women have
taken
charge
of their To that extent, AMFI data* shows that the number
finances. of women mutual fund investors has grown by
nearly 60% over December 2019-2022.
However, there is still a long way to go.

*Data disclosed in an AMFI press conference in April 2023

While women’s participation in making investment

decisions is rising, it is still low compared to men.
So, what can be done about it?

INDEX
Armed with a basic FUND
understanding of various
ETF
investment avenues, women
can take control of their
fortune. Does it feel like too
much work? Well, there is One of the easiest ways to invest can
an easy and relatively be through passive funds .
low-cost way in which They simply track an underlying index
women can dip their feet and seek to generate returns as per
into the investment world. that. They comprise index funds and
exchange-traded funds/fund of funds.

Passive funds have many asset classes under their gamut such as debt, equity,
commodities, etc. Depending on your goal and risk appetite, you can choose among
these to take care of your investment needs. Moreover, these funds also offer the
ability to invest at regular intervals - be it monthly, quarterly or annually.

The views expressed here constitute only the opinions and do not constitute
Women can take control of their any guidelines or recommendation on any course of action to be followed by the
financial future through… 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.

December 2023 Wealth Insight 37

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 ANALYST’S DIARY

Banking’s changing contours

PSU’s rise, private’s resilience

T
he Indian banking sector is transforming. Today,
it is experiencing robust credit demand, fortified
balance sheets, and fewer defaults. Banks have
been posting record profits and growth every quarter,
which is reflected in their share price performance.
Surprisingly, the public sector banks have been the
winners of this trend.
Let’s roll back a bit. All PSU banks have delivered
staggering returns in the last three years, and many
have even hit the 52-week highs recently. The Nifty
PSU Bank Index is up 70 per cent in the last year.
These institutions, once considered wealth destroyers,
are now some of the market’s best wealth creators in
recent times.
Recent profits have significantly narrowed the
valuation gap between public and private sector
banks. But to understand this shift, we must look at
the journey in phases.
9DOXDWLRQJDS3ULYDWHDQGSXEOLFVHFWRUV
After a long underperformance by PSUs, the P/B ratio gap has finally
started to narrow
2005-10: The good times
India witnessed an infrastructure boom during this 3.0 z PSU Bank z Private Banks
period. Realty and infrastructure companies 2.4
vigorously expanded their operations, and banks were
1.8
willing to fund this expansion. No wonder both public
1.2
and private banks posted exceptional growth during
the period. On a median basis, advances grew by 28 0.6
and 29 per cent for public and private banks, 0
respectively. Return on assets started showing healthy Mar 2005 Mar 2023
improvement, too.
While both segments had strong growth in their corporate loan portfolio, PSU banks were significantly
more aggressive with it. During the period, corporate
loans as a percentage of the total loan book formed
(TXDOO\ZHLJKWHGEDQNLQJLQGH[YV6HQVH[ 48 per cent for PSU banks compared to 36 per cent for
Banking companies have generated index beating returns in the past private banks. However, these aggressive methods
one year
backfired in the later years.
155 z Equally weighted index z Sensex
140 2011-20: The unveiling of PSU banks’ true
125 financial picture
110 During this decade-long period, the underbelly of
PSU banks’ loan books was exposed. RBI conducted
95
an asset quality review (AQR) to assess the accurate
80 Rebased to 100
state of their financial health. The findings surprised
Nov 2022 Nov 2023
everyone. PSU banks had not just high levels of
Data as of Nov 1, 2023. The equally weighted index comprises of the top 5 private and PSU banks.
stressed loans but also other discrepancies. They had

38 Wealth Insight December 2023

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downplayed their non-performing assets
significantly, and the corresponding loan provisions 2YHUWKH\HDUV
were insufficient. Private banks have fared consistently well while PSUs have been all
PSU bank executives endeavoured to perpetuate the over the place
appearance of financial stability in their statements by Advances Deposits Median Median
Bank growth (% pa) growth (% pa) ROA (%) gross NPA (%)
disbursing aggressive loans without any proper due
diligence, by extending their repayment periods or by Phase 1: 2005-2010
providing more loans to the distressed parties. When Private 29.3 19.9 1.3 2.4
reality emerged and became clear, PSUs’ valuation and PSU 27.5 21.1 1.0 2.1
asset quality both took a hit, to the point that a lot of
Phase 2: 2011-2020
these banks started trading at half their book value
Private 17.1 14.0 1.3 2.1
during the period 2014-16!
On the other hand, barring a few exceptions, such PSU 6.0 8.0 0.3 7.8

as YES Bank and ICICI Bank, all other private banks Phase 3: 2021-2023
were growing steadily. Their loan book, too, was Private 12.0 10.0 1.2 3.3
strong, given their higher exposure to retail loans. PSU 10.3 9.0 0.5 7.7
As a result of high quality and growth, they were
Growth has been calculated using the median growth of the top 10 private and PSU banks in
outperforming public banks and also commanded the specified time period
higher valuations.

2021-2023: Are good times back? recent years, which is in sharp contrast to the upward
Following the onset of the Covid-19 pandemic, one of the trend seen in the 2011-20 period.
biggest fears that haunted every investor was whether On the other hand, private banks’ valuations started
the NPA levels would rise unprecedentedly. But as it to taper off from their highs seen in 2019 due to various
turned out, after a few hiccups, NPAs started to taper off, internal and external reasons, such as company struc-
and loan growth reached a decadal high. ture changes, management changes and governance
Upon addressing their past balance sheet issues (such as those seen in IndusInd Bank).
discrepancies, public banks witnessed marked Nevertheless, these banks have consistently demonstrat-
decreases in NPA levels, culminating in considerable ed robust loan book growth, maintained a healthy asset
profit escalation. The magnitude of these profits is quality, and delivered improved return metrics.
such that SBI became the most profitable Indian
company in FY23, overtaking Reliance Industries. Conclusion
While the median gross NPA ratio for public sector PSU banks have reported a remarkable improvement
banks looks similar to the 2011-20 period, both in their asset quality, it continues to be high when
numbers tell a completely opposite story. As shown in compared to private banks. They were able to
the graph’ Asset quality trend of PSU banks’, their achieve this after massive write-offs and completely
gross NPA ratio has witnessed a downward trend in changing their loan portfolio. Their focus on
corporate loans has reduced tremendously in recent
$VVHWTXDOLW\WUHQGRI368EDQNV years as they only contribute to 30 per cent of their
total loan book as of December 2022. In addition, the
Gross NPA ratio has fallen to one of its lowest points in last eight years
positive re-rating can be attributed to the low base
20 % effect, as their P/B multiples reached a low of 0.35
16 times during the pandemic.
12
On the other hand, private banks have shown
sustainable growth numbers over a longer period of
8
time. With the history of both public and private
4 banks in mind, it remains to be seen whether the
0 narrowing valuation gaps between both will be
Mar 2005 Mar 2023
sustained over the long term or not.
By Kunal Bansal and Nipun Arora

December 2023 Wealth Insight 39

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 WORDS WORTH WISDOM

;64.(@5,9 CEO, Markel Group

The evolution of a
value investor
Lessons from the journey of Tom Gayner

T
om Gayner is the CEO of Markel Group. Often
described as a “mini Berkshire”, Markel is a
conglomerate with interests in insurance,
investments and other business ventures. Gayner joined the
firm in 1990 and has been the Chief Investment Officer since
2001. He is regarded as one of the best investors of the
current time. While we couldn’t ascertain the return
generated by Markel’s investment portfolio, the company
has generated an annualised return of 14.5 per cent (as of
Illustration: ANAND

October 31, 2023) since its listing in December 1986.

In one of his talks, Gayner describes his evolution as a
value investor and his investment framework. We came
across that video and assimilated some of the key things he
said for you. In fact, there are also a lot of other
interesting investing nuggets that will benefit
you. To watch the entire video (which we
recommend you do), follow this link:
https://tinyurl.com/2cv5asv2

SPOTTING VALUE…
Gayner began by reflecting on his
beginnings and said that most investors
choose the path of quantitative
evaluation to start their investing
journey. The reason is quite simple.
Beginner investors derive comfort
from the black-and-white nature of
quantitative metrics. He calls this
kind of approach ‘spotting value’. You
are looking to buy something worth
`100 for `50. You invest with the idea
that the value gap will close down.
However, he cautioned by saying,
“That’s really the best way to start, but I
think that is only a partial step along
the journey of becoming an
accomplished investor.”

40 Wealth Insight December

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em
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…OR SPOTTING THE CREATION OF VALUE
After failing to strike gold using a purely quantitative Earlier, he used to focus on the convergence of price
approach, Gayner moved on to something he calls and value. But such convergence didn’t materialise for
‘spotting the creation of value’. one reason or another. Therefore, Gayner started
Here’s how he describes it, “So instead of saying focusing on companies with the potential to increase
that I firmly believe that something is worth this, I’m their intrinsic value year after year.
now asking myself - what will it be worth next year? In this endeavour, he evaluates companies based on
And the year after that? And the decade after that?” four criteria.

THE FOUR LENSES

1. Profitable + good returns on 3. Reinvestment
capital + low debt A company can be profitable, have a high
According to Gayner, he doesn’t return on capital and be debt-free. Yet, it
know how to evaluate companies might turn out to be a mediocre investment.
that are in their infancy. So, he wants One of the reasons for such an eventuality is
to see a demonstrated record of profitability. that the company may not have many
According to him, the lack of profit can be reinvestment opportunities.
attributed to one of two things. Either the business Gayner notes that a perfect business earns a high rate
is doing something that the world doesn’t care of return on capital. It then takes the profit it makes and
about, i.e., there is not much demand for its reinvests this money at a similar rate year after year. The
offerings. Or, the business is just not good enough. worst kind of business, he opines, is one that earns low
His rationale for sticking with low-debt rates of return on capital and still needs more capital.
companies is quite straightforward, “Generally Of the four lenses, he focuses the most on reinvestment.
speaking, high-quality, high-integrity people don’t He constantly thinks about how big the company can
use a lot of debt. So, if you see a business that become and how scalable it is.
relies on a bunch of debt to operate and be
successful, that adds a layer of concern or diligence 4. Valuation
that you have to do.” Gayner is of the opinion that there are two
types of mistakes which an investor can
2. Management team make when valuing companies. The first is
In Gayner’s perspective, “When that you pay too much. This is fairly
I am looking for people, I’m straightforward. However, he adds that this is not the
looking for two attributes - worst mistake. It’s a mistake you can recover from.
character and ability. One without On the other hand, the mistake that costs (read haunts)
the other is worthless.” you more is one where you think that the company is
He likens evaluating a management team to overvalued, and the company ends up compounding
dating. Just like you date to determine if wealth in future years. You didn’t buy it because it didn’t
someone is the right fit for you, similarly, you meet your valuation test.
need to read about the management team to For example, Gayner shares that in 1984, he learnt
decide whether to invest. about Warren Buffett and Berkshire Hathaway. The share
He concurs that he can meet the management price was around $380, and he thought, “No stock could
teams because of his position. Nevertheless, he possibly be worth that kind of money.” Those words were
insists that he derives most of his insights about the soon followed by, “I didn’t buy it, to my everlasting
management team from reading annual reports, regret.” (For the curious, as of October 31, 2023, Berkshire
magazine articles and other such disclosures. Hathaway Class A share price was $5,17,825!)

THE SECRET MANTRA

Reminiscing about his career, he shares a piece was probably 70 years old, and I was brand new
of advice he received from his mentor, “When I in the investment business… One day, he said,
first started out in the investment business, I had a “Tom, the secret to success in investing is lasting
very wonderful mentor named Ned Reynolds. He the first 30 years.”

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 COVER STORY

Good
companies,
but…

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 COVER STORY COVER STORY

Foolproof scrutiny of moat,

management, and valuation
By Udhayaprakash and Hemkesh Khattar

I
n search of the next glittering In this story, we uncover three hidden traps:
multibagger, investors often come across companies with a strong moat and management
fool’s gold. These are companies that, on but an expensive valuation, companies with a
paper, look enticing. However, deep in solid moat and valuation but poor management,
their books or in the boardrooms lurks and companies with effective management and
limitations, factors that stop them from valuation but without a moat.
achieving their true potential. While not We briefly explain each of these traps and
wealth destroyers, these companies have the provide five hand-picked examples for each
potential to trap your portfolio in a perpetual category. As stated previously, these
state of underperformance. companies don’t necessarily erode wealth but
We recently came across Todd Wenning’s might fail to deliver adequate returns for
insights on investment traps. He runs an investors due to their shortcomings. Also,
investing newsletter in the US called the Flyover this story must not be construed as any
Stocks and has over two decades of investing recommendation, and investors must do their
experience. According to him, a company is a due diligence.
good investment if it excels in three aspects:
moat, management, and valuation.
A moat provides a competitive advantage
against other industry players and Hidden traps
accelerates growth. Yet, if the management is Are you guilty of falling prey to any of these?
inefficient, the moat would offer little help.
Is the great business priced to perform
Similarly, robust management and a strong
moat are inconsequential to your returns if
you bought the company at an unsustainable
valuation. So, only a company meeting all
three criteria is a viable investment option. Quality at
any price?
But that’s an ideal scenario. Management Moat
In reality, most promising companies in STRONG
the market only meet two of the three BUY
Avoid Beware of
criteria. Although their numbers, market turnaround quality
position, or valuation may seem enticing, traps traps
they lack one of the three critical aspects. Good jockeys Does the
won’t do well market know
Only when we dive deep do we realise one of Price
on broken something
these elements is missing. down nags you don’t
These scenarios are what a trap is - a
situation that might be easily overlooked but
one that must be avoided. Taken from Todd Wenning’s article titled ‘Mind the Gap’

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 COVER STORY TRAP 1 QUALITY AT ANY PRICE

Costly
Credentials
Valuation vs value

P
eter Lynch said, “It’s a real tragedy when at a P/E of 390 times! In fact, during the entire year,
you buy a stock that’s overpriced, the Infosys did not trade below a P/E of 125 times. Despite
company is a big success, and still you its strong fundamental growth, high valuation
don’t make any money.” These words resulted in sub-par returns for the investor.
resonate deeply with us when considering Identifying these companies isn’t overly complex.
the trap of overvaluation in stock Since they have both a strong moat and good
investment. Even the best companies can disappoint management, they enjoy consistently high ROCE.
investors if purchased at a sky-high valuation. Their historical growth is usually impressive and
Consider the tech giant Infosys. Since 2000, its might entice investors. However, a closer look at their
revenue and net profit have jumped 166 and 84 times, valuations may paint a less rosy picture.
respectively. So, if you had an opportunity to invest in In this section, we have slightly refined our
the company on January 3, 2000, you’d have generated methodology to select better examples. While these
impressive wealth. Right? companies have decent ROCE, either their recent past
No! Your annualised returns would have been just growth has been muted, their future growth prospects
10.7 per cent, underperforming the Sensex. may not be as good as they were earlier, or their
Why? Because you would have bought the company valuation is too high to justify their growth prospects.

RELAXO FOOTWEARS

Footwear’s stride and stumble

F
rom humble beginnings in the 1970s to being the 17 crore pairs of footwear! A strong distribution
largest Indian footwear manufacturer by volume, network and an increased focus on multi-brand outlets
Relaxo is known for brands like ‘Sparx’, ‘Flite’, further strengthen this. With a presence in over 65,000
and ‘Bahamas’. Currently, it has eight production retail stores, Relaxo has carved a niche and established
facilities capable of crafting about 1,50,000 pairs daily. itself in this unorganised market.
Relaxo’s secret? Dominating the No wonder, over the years, the company has
mass market segment is Relaxo’s consistently traded at a pretty expensive
biggest moat and is reflected in its valuation. Currently, it trades at a P/E of
healthy financial growth. In FY23 116.5 times with a five-year median of 95 times.
alone, the company sold However, its recent performance and growth prospects
do not reflect this valuation. In the last five years, its
volume growth has been just 2 per cent annually, and
the operating profit has fallen by 3 per cent annually.
P/E
This underperformance is primarily caused by a
116.5
change in customer preference, as seen in the growth
5Y median numbers of players in the premium segment. Despite
ROCE (%)
24.8 its muted growth, its current volumes continue to be
the highest in the industry and are four times that of
the second-largest player. In short, Relaxo’s valuation
may be tempting but is it worth the hefty price?

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AVENUE SUPERMARTS PIDILITE INDUSTRIES

D-Mart's dynamic Slowdown in

dilemma stickiness
A
venue Supermarts, aka ‘D-mart’, steered by the
legendary investor Radhakishan Damani, is
like the supermarket version of a blockbuster
movie - big, popular, and everywhere. The company
operates 336 stores as of September 2023. Its revenue
recipe? Its food segment, which offers a mix of staples,
dairy, processed foods, and more, contributed to a
P/E
significant 56 per cent of FY23 revenue. Merchandise 89.9
and apparel contributed 23 per cent to revenue,
5Y median
followed by FMCG at 21 per cent. ROCE (%)
For two decades, D-mart’s business strategy has 29.9
always been the high volume, low margin game,

P
which has allowed it to sell at a lower price. This idilite Industries, renowned for Fevicol, is a
was achieved through strong inventory and leading manufacturer of adhesives, sealants,
purchase management. construction chemicals, and industrial resins
The business has consistently in India. The company primarily draws revenue
optimised its supply chain, from the consumer segment, accounting for 81 per
expanded rapidly, and achieved the best cost-based cent of FY23 revenue, followed by the B2B and other
synergies. Since FY12, its store count has increased by products segment.
18 per cent annually. In the last five years alone, its Its biggest strength is its brand positioning, which
operating profit has posted a healthy growth of 20 per was established over the years. It was achieved
cent annually. As a result of a strong brand presence through continuous innovation in products and
and consistent expansion, it has always commanded a packaging, acquisitions, and
high P/E, never trading below 80 times in its history! significant advertising efforts. The
Even now, it trades at a hefty P/E of 101.7 times. adhesive manufacturer’s marketing
However, it now faces challenges from online game is so strong it sticks in your
giants and heavyweights like Reliance Retail etc. memory like, well, ‘Fevicol ka jod’.
Besides, given that the company trades at such a Its six-decade-long partnership with advertising
high P/E, the stock offers limited appeal to investors, agency Ogilvy and consistent marketing spend has
especially if growth prospects remain unchanged, done wonders for the company in terms of brand
casting doubts on its investment attractiveness. establishment. Apart from this the company also
P/E
made several acquisitions over the years to
101.7 consolidate its position in the adhesives industry.
As a long-standing leader in the market for
5Y median
ROCE (%) decades, Pidilite has witnessed explosive growth and
20.8 wealth generation. Also, given its brand positioning,
the company has consistently earned a high market
valuation with a five-year median P/E of 90 times!
But lately, the company’s growth has plateaued. Its
operating and net profit grew annually by
7 and 6 per cent, respectively, over the last five years.
Despite Pidilite’s recent expansion into the paints
segment, and its strategy to lend to its distributors,
the current P/E of 89.9 times offers little comfort.

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 COVER STORY
P&G HYGIENE AND HEALTH PAGE INDUSTRIES

Household names, Premium comfort,

modest gains pricey tag
A
s a US-based Procter & Gamble subsidiary, P&G
Hygiene and Health is one of India’s largest
FMCG companies. It holds leadership positions
in various segments, including feminine care, fabric
care, and hair care.
The company’s biggest strength is its robust
portfolio. Almost all its products are household names
and enjoy strong brand stickiness in consumers’
minds. Some of these names are Whisper, Pampers, P/E
Tide, Ariel, Head & Shoulders, Pantene, and Olay. 79.8
These brands have primarily thrived due to persistent 5Y median
marketing, with the company allocating about ROCE (%)
10 per cent of its revenue to advertising on average. 59.1

P
Despite a successful portfolio, the age Industries is the driving force behind the
company is struggling because of manufacturing and distribution of Jockey, one of
increased competition in all segments. the largest premium innerwear brands. In India,
This has not played out particularly well Jockey and Speedo are exclusively manufactured and
for P&G, and it seems to be losing its distributed by the company, which leads this market
edge. As a result of these developments, the FMCG segment in terms of revenue and profitability.
giant’s annual operating and net profit growth have Since its listing, long-term investors have seen
been modest at just 5 and 6 per cent, respectively, over substantial wealth generation over the past decade. The
the last five years. Additionally, the rate of foundation of this growth lies in the company’s market
reinvestment has decreased significantly as dividend leadership, strong fundamentals, and consistent
payouts have increased. revenue and earnings growth. The management’s
However, the key concern is the company’s effective capital allocation has also significantly
valuation. Currently, it trades at a P/E of 77.6 times expanded its
and has a five-year median P/E of 80 times! Although distribution and
its brand position in the market has always sales network. Over the past 10 years, Page Industries
commanded a higher valuation, given the poor growth has posted an annual revenue and profit after tax
in recent years and lower reinvestment rates, this growth of 18.4 and 17.6 per cent, respectively, while
valuation must be considered before investing. maintaining a 10-year median return on capital
employed of 62.2 per cent.
However, since the pandemic, rising cotton and other
key raw material prices have shrunk profit margins and
volume growth. The competitive business environment
has intensified with the entry of numerous domestic
and international premium textile brands.
P/E This competition, along with increased trade
77.6 receivables and inventories, has impacted the
5Y median company’s operational efficiency too. As a result of this
ROCE (%) struggle, its operating profit growth has just been at
88.2 9 per cent annually over the last five years. Although
the company has corrected over the last year, its
current P/E of 79.8 raises concerns about valuation.

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 COVER STORY TRAP 2 THE QUALITY SMOKESCREEN

The Leadership Lens

Strategic moves, subtle clues

T
his scenario is a deceptive investment trap.
At first glance, these companies seem to be
optimum investment choices.
However, the real issue might lie with
their management. This encompasses not
just corrupt practices but also poor
management decisions, including but not limited to poor
capital allocation, lack of strategic focus, etc.
Some notable examples include several multinational presently have a healthy ROCE, a closer look reveals the
pharmaceutical firms listed in India. These firms are trend of significant deterioration of ROCE over the past
market leaders in their therapeutic areas and boast high few years.
returns on capital. Despite this, they trade at relatively To select the most relevant examples, we applied the
low P/E ratios. However, considering their growth and following filters:
prospects, a low P/E might just be well-deserved. These z Current five-year median ROCE above 15 per cent.
companies’ earnings growth has stagnated significantly z Five-year median between FY14-18 is higher than the
because their parent companies haven’t consistently current number.
launched products. However, these are qualitative z P/E of less than 20 times.
factors. Is it possible to identify them quantitatively? z Their revenue and operating profit have grown at less
These companies trade at a low P/E. While they than 10 per cent annually in the last five years.

CASTROL INDIA

Grease without growth

W
ith a history of over 100 years, Castrol has of over 50 per cent with a negative cash conversion cycle,
become synonymous with engine oil in India. It bolstered by a debt-free status and substantial cash
is the second-largest producer of automotive and reserves on the balance sheet.
industrial lubricants in the country, and almost all of its Yet, Castrol’s extensive market presence and scale
revenue comes from the sale of lubricant products. haven’t translated into substantial revenue or profit
Operational excellence and a significant business scale growth. During FY18-23, it recorded an annual revenue
are the biggest advantages of the lubricant manufacturer. growth rate of only 6 per cent and an annual operating
Over the past decade, it has consistently reported a ROCE profit growth of just 1 per cent. This stagnation is further
mirrored in its negligible share price return during the
same period, raising questions about its growth potential.
The company’s stagnation can partly be attributed to
its operation in a mature, slow-growth industry.
However, a critical factor is its inaction towards growth.
The company has made no attempt at meaningful capex
towards capacity expansion or acquisitions. Further, its
P/E minimal investment in marketing has led to a decline in
16.3 market share, contrasting sharply with its competitors.
5Y median Hence, despite a favourable valuation, this trend, coupled
ROCE (%) with no announced plans for significant future expansion,
67.4 suggests that the lack of growth may persist.

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SUN TV NETWORK ORACLE FINANCIAL SERVICES

Broadcasting blues Comfortable,

not conquering
O
racle has been one of the most consistent
performers in the Indian IT sector for the last
decade. It is an offshoot of the US-based Oracle
Corp and primarily serves financial institutions with
IT solutions and services. Like many other major IT
P/E
companies, Oracle generates the majority of its revenue
14.3 (about 51 per cent in FY23) from North America and
Europe. Moreover, it also has a significant footprint in
5Y median
ROCE (%) the Middle East and Asia Pacific.
Oracle’s efficiency is reflected in its consistent and
30.8
industry-leading operating margins. A five-year median
ROCE of 37.2 per cent and its ability to generate free

S
un TV is one of the biggest entertainment and cash flow without a significant need for reinvestment
broadcasting moguls in South India. It runs a might look enticing to investors.
television broadcasting channel, operates a Oracle’s issue is not a challenging business
streaming platform, and produces films. It also owns environment or deteriorating profit margins. Rather, it
the franchise rights of an IPL team. In FY23, the struggles with the scale of business. The management
company generated the majority of its revenue from appears content with the
subscriptions (45.6 per cent), followed by income current scale and has taken
from advertising (40.3 per cent). a few measures to expand the
The company’s strong foothold in the South Indian business. The median dividend payout ratio has been
television industry is evident as it continues to be the more than 95 per cent over the last five years. Most of
most-watched TV channel in most southern states. the free cash flow generated by the company is
Financially robust, Sun TV has a debt-free balance distributed in the form of dividends. As a result, there’s
sheet, high profit margins, and a median ROCE of hardly any reinvestment in the business.
over 30 per cent for the Consequently, despite industry-leading profit
past five years. Also, it has margins, the IT company’s revenue and operating
continuously generated profit have only grown annually at 5 and 7 per cent,
positive free cash flow respectively, over the last five years. While dividends
over the last five years. and valuations of this company may seem lucrative, the
Despite these strengths and consistent profit long-term wealth generation remains a question.
margins, growth has been modest. In the last five P/E
years, annual revenue and operating profit 18.5
increased annually by just 4.9 and 4.2 per cent, 5Y median
respectively. The company’s challenges have been ROCE (%)
compounded by a tough entertainment sector 37.2
landscape, marked by the pandemic’s impact and
the rise of streaming services. Additionally, some
of their movie releases didn’t perform to their
expectations either.
Despite its lower P/E of 14.3, the changing
industry landscape and its conventional
management style should be significant factors
when considering an investment in the company.

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 COVER STORY
VST INDUSTRIES HERO MOTOCORP

Stagnant Muted mileage

smoke signals
I
f you’ve ever bought or considered buying a
motorcycle, you’ve encountered the name
‘Splendor’. Hero Motocorp, the world’s largest two-
wheeler manufacturer by volume, is synonymous with
the brand, even though it manufactures various others.
The company has eight manufacturing facilities with a
total capacity to produce 95 lakh two-wheelers per year.
Hero’s primary strength is its dominant position in
the mass market segment. As of FY23, it holds a
47 per cent market share in India’s domestic motorcycle
P/E market, with Splendor reigning as the world’s top-selling
16.1 two-wheeler. The company manufactures twice the
5Y median volume of its nearest competitor.
ROCE (%)
However, Hero’s intense focus on the mass market
48.3
has led to its neglect of the premium segment. While

S
ince its inception in 1930, VST Industries has been the premium segment expanded in the last decade,
a key player in the Indian tobacco industry. The the mass market remained
company generates 100 per cent of its revenue stagnant, impacting the
from the manufacture and sale of tobacco products and company’s growth. In the last
boasts a nationwide distribution network with a five and 10 years, volumes have fallen annually by
diverse portfolio of cigarette brands. 9 and 2 per cent, respectively.
The high entry barriers in the tobacco and Hero Motocorp’s financial performance in the last
cigarette business have enabled the tobacco five years reflects this stagnation, with its revenue
manufacturer to consistently maintain high profit growing at just 1 per cent and the operating profit falling
margins and ROCE over the last decade. In-house at 6 per cent annually. The five-year median ROCE has
manufacturing and a broad distribution network halved from 50 per cent in FY18 to 25.7 per cent in FY23.
further contribute to its operational The marginal share price growth makes the stock
efficiency, resulting in a median appear attractive at a P/E of 19. However, growth
operating profit margin and ROCE prospects are concerning, because though it has recently
of 27.1 and 48.3 per cent, started focusing on the premium segment, the segment
respectively, in the last five years. has already become too competitive.
Despite its legacy of over 90 years
and its competitive edge, VST has
struggled with growth in recent years. Its volume P/E
growth has been flat over the past five years, unlike its 19.0
major rivals, ITC and Godfrey Phillips. While both of 5Y median
them have diversified their portfolios to improve their ROCE (%)
growth, VST has lagged behind. This stagnation is 25.7
attributed to a continuous increase in the government
taxes on tobacco, stiff domestic competition, and the
management’s lack of diversification.
Although the company is available at an attractive
P/E of 16.1 and is shifting its focus to exports (which
comprised 10.2 per cent of FY23 revenue), it remains to
be seen whether it can keep pace with its competitors
and generate significant wealth for investors.

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 TRAP 3 THE COMEBACK KID COVER STORY

Moat or Mirage?
Leading yet vulnerable

M
ost investors often overlook a In these
common trap. They assume that categories, while
consistent investment in growth the leadership
and seemingly low prices indicate a helps to an
healthy business. However, the extent, it doesn’t
absence of a competitive moat matter much, due
affects these companies because they are present to the nature of
either in commoditised industries, industries with low the industry or
or no entry barriers, or in declining industries. product. Even the
This trap is hidden in plain sight because most largest producer
companies in India fall into this category. Irrespective in a commoditised industry experiences downturns
of the management’s efficiency or justified valuation, with a drop in the price of that commodity. Leadership
an unviable industry and competitive environment in these scenarios provides minimal advantage.
keeps them constantly on their toes. Our chosen examples include companies that are
So, the best examples for this category are market leaders and offer attractive valuations but face
companies with leadership in declining or struggling external challenges, making them risky investments.
industries, industry leaders with no entry barriers, They exhibit some leadership and don’t necessarily
and finally companies that produce commoditised have the poorest return on capital employed, yet the
products because they don’t have any pricing power. their industry outlook diminishes their appeal.

TATA CHEMICALS

Caustic challenges
A
n entity of the Tata conglomerate, Tata Chemicals soda ash and sodium bicarbonate, respectively. This has
specialises in manufacturing alkali (soda ash, contributed to higher efficiency and margins compared
caustic soda), halogen (Chlorine and Bromine), and to its peers, with operating margins consistently above
salt products. As of FY23, the company’s revenue mainly 12 per cent, while others have single-digit margins.
comes from Asia (47 per cent), the Americas (31 per cent), However, this leadership becomes ineffective because
Europe (16 per cent), and the rest from Africa. the company’s revenue is significantly dependent on the
Tata Chemicals’ biggest strength is its scale. The market price of its key product -
company has the largest saltworks in Asia and ranks as soda ash. Due to the volatile nature
the third and the sixth largest global manufacturer of of the industry, its ROCE is
consistently below 15 per cent. For instance, in FY20, an
oversupply of caustic soda led to lower prices worldwide.
Consequently, the company’s revenue fell by 19 per cent.
P/E While it ventured into specialty products to improve
10.8
margins and diversify from basic chemicals, the latter
5Y median continue to drive revenue. Over the last five years, its
ROCE (%)
operating margin has fluctuated significantly, all while
11.2
revenue and operating profit posted a modest single-digit
growth. Despite its scale, leadership, and lucrative
valuation with a P/E of just 10.8, the inherent nature of
this industry and product calls for cautious investing.

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 COVER STORY
JAGRAN PRAKASHAN INDUS TOWERS

Words win, Strong signals,

wallets wane weak profits
J
agran Prakashan, established in 1942, is a
diverse media conglomerate with a presence in
almost all segments, such as newspapers,
magazines, FM radio, digital media, and more. It has
a pan-India presence in both print operations and
radio. No wonder advertising is its primary source
of revenue and contributed to 70 per cent of its total
revenue in FY23.
P/E
As a leading figure in the media sector, Jagran
15.2
boasts of considerable achievements over the years.
Its flagship newspaper, Dainik Jagran, is one of 5Y median
ROCE (%)
India’s largest-selling and most-read newspapers, 27.0
available in 19 cities with eight crore readers!

I
The company is also a leader in the radio ndus Towers specialises in telecommunication
business, with its 39 radio stations and 15 web infrastructure and is India’s largest telecom tower
stations serving 8,765 clients and reaching over service provider. It was established as Bharti
one billion people on social media! On Infratel and merged with Indus in 2018.
top of it, this company trades at a P/E Unlike its peers, Indus has demonstrated consistent
of just 11.1 times. financial performance over the past decade. Its five-
P/E However, this media mogul’s growth year median operating margin and return on capital
11.1 trajectory altered with COVID-19. Due employed were 31 and 27 per cent, respectively. High
5Y median
to an overall slowdown in the print entry barriers in the form of high capital
ROCE (%) and radio industry, its advertising and intensity and the resultant economies of
13.4 circulation revenue decreased scale benefits allow the company to post
annually by 5 and 3 per cent, such numbers.
respectively, over the last five years. Its margins The consolidation of the telecom
have also declined, and the five-year median ROCE industry in India hurt the company
has fallen from 24 per cent in FY18 to just 13 per cent significantly. Previously, the fragmented
in FY23. Although the company has invested in industry with high competition allowed revenue
digital media, its contribution is low. Despite its low generation from multiple clients. However, the
valuation, the bleak industry outlook renders the unprecedented increase in spectrum licence prices and
stock uncertain. market disruption after Reliance Jio’s entry forced
multiple telecom players to exit the business. This
led to a consolidation in the telecom industry from
14 to 3 companies, thus affecting Indus’ client base.
This consolidation resulted in a notable drop in the
average sharing factor and revenue sharing per tower.
Between FY19 and FY23, the company’s revenue grew
by just 3 per cent while net profit fell by 16 per cent
annually. Also, the risk of exposure to revenue
concentration escalated, materialising in FY23 when it
wrote off 18.7 per cent of its total revenue due to non-
payment of dues by Vodafone Idea. Poor industry
landscape diminishes its attractive P/E of 15.2.

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GLENMARK PHARMACEUTICALS ZYDUS LIFESCIENCES

Healer’s hurdle Medicine’s

in finance mixed bag
W
ith a presence in over 80 countries, Glenmark
Pharmaceuticals is a leading generic and
branded generic manufacturer in India. This
pharma company generates its highest revenue from
India, followed by North America and Europe.
In FY23, 31 per cent of Glenmark’s total revenue
came from the Indian market, where it ranks in the top
five in respiratory, dermatology, and cardiology P/E
segments. It is also gaining a significant market share 23.4
in oncology. In North America, the company holds a 5Y median
strong position, ranking 15th by volume, with 183 ROCE (%)

generics approved for commercialisation. Apart from

14.4
generics, Glenmark also launched and commercialised

R
its first global specialty drug, “RYALTRIS”, in 2022, emember Glucon-D? And, the company behind
with multiple other specialty drugs in oncology in the brand? Zydus Lifesciences. One of the leading
various stages of development. pharmaceutical companies, it has multiple
The biggest concern for this pharma leader is its famous consumer wellness brands, including Glucon-D,
inconsistent financial Nycil, and Ever Youth. The company earns most of its
performance. Over the past five revenue from generic formulations and active
years, its revenue and net profit pharmaceutical ingredients (APIs).
grew by 7 and 5 per cent annually. Generic formulations are the backbone of Zydus
Despite backward integration through active Lifesciences. In FY23, it was the fifth-largest generic
pharmaceutical ingredients manufacturing, the company in the US, with the segment contributing to
company has reported fluctuating operating margins, 44 per cent of its total revenue. Even in India, the
with a five-year median of 12.8, lower than many company has established a strong presence and
industry peers. displayed consistent growth in both
Further, persistent long-term borrowing on its generic formulations and consumer
balance sheet indicates heavy reliance on debt. All of wellness products. Additionally,
these factors make it an unpredictable investment Zydus manufactures APIs to achieve
choice despite its attractive P/E of 25.5 times, after backward integration in the production process.
adjusting for exceptional items. However, the US pharma market is very competitive
and presents significant challenges for Zydus. The
P/E
company faces tough competition in the generic
25.5*
formulation segment in spite of its strong position.
5Y median
ROCE (%)
Hence, the revenues and operating profit have grown
14.2 annually at a meager 8 and 4 per cent, respectively, over
the past five years.
The company has also faced impairment losses three
times in the last five years due to its subsidiaries. These
losses and shrinking operating margins due to the rise
in competition have impacted the company’s bottom
line significantly. Hence, caution is recommended
despite the company’s P/E of 23.4.
P/E as of November 3, 2023. *Adjusted for exceptional items.

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 INTERVIEW

TRIDEEP
BHATTACHARYA
CIO-Equities,
Edelweiss MF

“Our emphasis
lies on evaluating
cash-flow generation”
How to avoid quality investing traps?

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I
n the cover story, we shed light on three From a corporate standpoint, we consider
traps that may befall an investor. the ‘consistency of delivery versus promise
However, we didn’t give you any through business cycles as the ultimate
antidote to such outcomes. Well, we have a benchmark and practical definition of
good alibi for that. We wanted to share with ‘quality.’ For investors, recognising such
you the advice of an investing veteran. companies in advance serves as a blueprint
With over 20 years of experience, Trideep for wealth creation.
Bhattacharya is the Chief Investment Officer Drawing from 25 years of experience in
(Equities) at Edelweiss Mutual Fund. We sat evaluating companies across developed and
down with him and sought his thoughts on the emerging markets, I observe that while
near-term outlook of equity, how he defines consistency of delivery is an end result, a
quality companies, and how an investor can few shared characteristics among such
successfully navigate through the various traps companies include:
the market constantly throws. So put your geek z A clear and well-defined ‘right-to-win’ in a
glasses on and learn from one of the masters. ‘growing marketplace.’
z Unwavering focus on execution and,
With the US interest rates at their current z Management possessing the courage of,
levels, what’s your take on equities in the conviction and agility to navigate
short-to-medium term? Are the markets business cycles.
pricing in a recession?
We believe global GDP has surprised on the
positive in 2023 with stronger growth in the The vigour of the moat sets the pace of growth
face of the sharpest tightening of interest rates while an adept management steers the company
over the last 40 years, driven by profligate toward a path of long-term and sustainable growth
fiscal spending by central governments.
In 2024, with the majority of interest-rate
normalisation done, we think the macro In our interactions with companies and
debate will move from ‘interest rate our investment evaluations, we seek these
uncertainty’ to ‘political uncertainty’ as two traits, quantify our assessments to solidify
of the major economies of the world, the US our estimate of intrinsic value, and commit
and India, go through their national elections, to investment if we identify sufficient
closely followed by UK elections in early 2025. economic upside.
While we expect political uncertainty to While our pursuit of quality investments
cause volatility in equity markets in the is continual, one non-negotiable criterion is
near term, we are constructive on Indian corporate governance. As minority
equities over the medium term, driven by shareholders, the alignment of
the twin positives of: management’s interests with ours is
z A de-leveraged balance sheet of India Inc. paramount, as any misalignment could lead
operating at high-capacity utilisation, which to detrimental consequences over time.
could potentially lead to a capex cycle and
z Moderating inflation, which could enhance Which is more important - business moat or
consumers’ spending power over time. management? Can you have a successful
On net balance, these factors have the investment with only one of the two?
potential to make Indian equities one of the Drawing a parallel to the human body, I
favourite destinations for investors in 2024. would equate ‘management’ to the ‘head’
We monitor the situation closely. and consider the ‘business moat’ as the
‘heart’ of the company.
It is said that beauty is in the eye of the Just as in the human body, the vigour of the
beholder. How do you identify a quality heart or business moat sets the pace of growth,
company? What are some of your non- adept management or ‘head’ plays a crucial
negotiable criteria? role in steering the company toward a path of

December 2023 Wealth Insight 55

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 INTERVIEW

long-term and sustainable growth, keeping in

mind the investments for the future. Despite a strong ‘right-to-win’ leading to
favourable return ratios, the growth trajectory
How do you avoid quality traps, i.e.,
may falter if the broader ‘market’ in which the
companies that have a good return on capital
employed but don’t compound wealth? company operates doesn’t offer substantial
In the framework mentioned earlier, it’s growth opportunities
vital to thoroughly explore and evaluate the
nuanced relationship between the ‘right-to-
win’ and the ‘growing marketplace’ to avoid fresh perspective.
such a scenario. In summary, even with a ‘quality
Despite a strong ‘right-to-win’ leading to company’, continuous monitoring is
favourable return ratios, the growth essential for wealth creation considerations.
trajectory may falter if the broader ‘market’
in which the company operates doesn’t offer Can you share some of the mistakes you
substantial growth opportunities. This, in have made along the way with our readers?
consequence, can negatively impact long- And what were the major learnings?
term wealth creation. I would classify my investment errors
spanning the last 25 years into three distinct
Quite often, quality companies trade at categories:
high P/E multiples. Do you think these z A shift in management priorities: This
valuations are justified? What is your often serves as a precursor to capital
approach to valuing such companies? misallocation, resulting in potential losses.
We consider ‘P/E multiples’ to be inherently z Premature selling: Exiting investments
static, requiring adjustment based on the too early, especially during short-term
magnitude, duration, and sustainability of challenging periods for a sound business,
future growth. can lead to suboptimal returns. It’s essential
Therefore, our emphasis lies on evaluating to resist succumbing to short-term
cash-flow generation, its ongoing growth, and pressures and instead maintain
incorporating these factors into our focus on the long-term growth
estimation of the company’s intrinsic value. potential.
Ultimately, we believe that ‘intrinsic z Erosion of the business
value’ serves as a more reliable gauge of moat: In an era of constant
value compared to P/E multiples. disruption, traditional
business moats face
When do you sell a quality company? challenges from emerging
Although quality companies often models. If the management
contribute to the compounding of one’s fails to promptly recognise
portfolio, we remain attentive to certain and adapt to disruptive
indicators that prompt a reassessment of forces, it may result in
our investment in a company: capital losses.
z When a company’s market value I’ve come to recognise
significantly exceeds its intrinsic value, that these areas are often
signalling an overvaluation, we consider challenging to identify at
revisiting our position. the initial investment
z In instances of a thesis violation, where stage. However, diligent
the initial investment rationale is ongoing scrutiny after
compromised due to changes in the initial decision can
management priorities or disruptions, we help mitigate these
re-evaluate our investment decision with a risks.

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 SPECIAL FEATURE

Introducing

Investing simplified, decisions clarified

I
f you are a Delhite looking to furnish your house, Here is what he found.
Kirti Nagar is your go-to place. According to its The company’s peers include Century Plyboards,
Wikipedia page, it is home to India’s largest Greenply Industries, Greenpanel Industries, Rushil
furniture market. Intrigued by this bit of trivia, one Decor and Stylam Industries. Century Plyboards is the
of our analysts headed there. He placed a few orders and largest company in the group in terms of market cap,
then returned home with a spring in his step. revenue and profit, whereas Rushil Decor is the smallest.
As it turns out, this young analyst was eager to Since FY19, Greenlam’s revenue and profit before
research Greenlam Industries. The company operates in tax have grown at the second-slowest rate.
the wood panel industry, which includes plywood, Furthermore, its cash flow from operations has been
laminates, medium-density fibreboard and particle volatile over the years. Its five-year cumulative free
board. Greenlam is one of the top three laminate brands cash flow is negative. Although, on closer inspection, it
in the world. Donning his analyst hat, he analysed the seems the company is undergoing a significant capital
company through growth, quality and valuation lenses. expenditure drive. Between FY22 and September 2023,

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 SPECIAL FEATURE

it incurred `1,276 crore in capital expenditures (or you removed companies with a market
about 22 per cent of revenue over the same period). cap of less than `1,000 crore from
Only Century Plyboards has spent more on capital consideration, you would still have to
expenditure (`1,488 crore) in the peer group. scrutinise about 1,000 companies. Going
(Oh, by the way, the following few paragraphs are for through them one by one is a tedious task.
fundamental analysis enthusiasts. And while we Second, any given company’s financial
encourage everyone to understand fundamentals, some statements contain hundreds of data points. Analysing
of you may find the next section boring! So, you might these data points is a time-consuming process, but it is
want to skip to the section ‘The challenge’.) non-negotiable.
Concomitant to the volatile cash flows and rising Buffett fans will recall that he once said you should
capital expenditure, the company’s capital efficiency go through every company, starting with the A, B, C,
(measured by ROCE) has deteriorated - from about etc. He has also advised, on many occasions, that one
19 per cent in FY19 to 15 per cent in FY23. However, should read the annual report and financial statements
despite the falling capital efficiency, Greenlam has been page by page. And it has worked for him. But mere
able to convert its operating profit into cash. This is mortals like us? We need a trick up our sleeve to get
bolstered by the fact that debtors as a percentage of around these challenges. The question is, does one exist?
revenue stood at just 7 per cent in September 2023 (the
second-lowest among peers). Enter Value Research
In the context of its valuation, the stock trades at a We are known across the investment community for our
P/E of 47.9 times (as of November 13, 2023), higher than mutual fund ratings. Over the last 30 or so years, our
its five-year median P/E of 34 times. It also has the rating system has helped countless investors
highest P/E among its peers. make smart decisions.
It is now time to do the same for
On the other hand… stock investors through ‘Value
While Greenlam drops the ball in terms of Research Stock Ratings’. However, it
quality, its direct competitor, Stylam must be said that this is not our first
Industries, scores big points. With attempt. In 1996, Value Research developed
revenue and profit before tax growth of the ‘BT-Value Research Scripline’ for Business Today.
about 20 and 25 per cent annually, It was one of the pioneering attempts to simplify stock
respectively, the company has a five-year investing and identify fundamentally strong stocks
median ROCE of 24 per cent. with a relative rating.
Moreover, cash flow from operations has increased in Since then, we have attempted more than once to
each of the last five years, barring one. Not only that, enable ‘Value Research Stock Ratings’ for our users, but
unlike Greenlam, whose debt-to-equity ratio has something always held us back. Finally, it seems we
increased, Stylam has become debt-free as of September have cracked the code.
2023. Lastly, the company trades at a P/E of 27 times (five- Over the last two years, our team has worked on this
year median P/E of 25 times). In fact, at a free cash flow project with great rigour and purpose. From January 1,
yield of 4.5 per cent, the company appears very attractive. 2024, we hope you will benefit from our work.
Based on these few metrics, Stylam Industries appears
to be a better bet than Greenlam Industries. Doesn’t it? But what exactly is a stock rating?
But would you be comfortable making an investment Just like our mutual fund ratings, we will rate
decision using only a handful of data points? We hope companies on a five-star rating scale. Every eligible
not! Otherwise, you’ll have to keep knocking on wood. company will be rated on three aspects - quality,
growth and valuation. These ratings are derived from
The challenge historical financial and stock price-related data.
Irrespective of how good you are at analysing Hundreds of data points go as input, and finally, a
companies, there are two challenges that all stock rating is set. Moreover, these ratings are purely
investors face. machine-generated and updated as and when new data
First, you have an option to choose from more than arrives (i.e., daily for price-related data and quarterly
4,000 companies listed across the BSE and NSE. Even if for financials). We arrive at the final rating by

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combining the three ratings in specific allows you to view the ratings of the companies in
proportions to offer a more holistic view. your portfolio.
The sole purpose of ‘Value Research However, it is this next feature that we are very
Stock Ratings’ is to solve the two excited about. Depending on your investing style, you
challenges mentioned above. It will act as will be able to combine our ratings in the manner you
a filter to narrow down the investable desire. For instance, if you are a quality-focused value
universe of an investor, all the while saving you lots of investor, you may explore stocks with both
time and number crunching. a high quality and a high valuation
It is intended to act as a starting point for your rating. Essentially, you can choose the
research. We want to stress that a high rating for a aspect (quality, growth and valuation)
company doesn’t mean you should invest in the and its quantum (one, two, three, four
company. There is no substitute for due diligence. You or five stars) and combine them with
will have to get your hands dirty. It is just that ‘Value your requirements.
Research Stock Ratings’ will make sure that your hands We have barely scratched the surface with these two
don’t get too dirty. features. We have various other features, large and
small, planned for you. The prospect of helping you
A modular offering make smart investment decisions excites and drives us!
‘Value Research Stock Ratings’, by itself, is a pretty nifty As we shared, we hope to be live with ‘Value
tool. But we felt that you deserved more. So, we turned Research Stock Ratings’ by January 1, 2024. We can’t
things up a notch. wait to launch it and then hear from you about it.
First, we have integrated ‘Value Research Stock Hopefully, with the help of ‘Value Research Stock
Ratings’ with ‘My Investments’ on our website. This Ratings’, you won’t have to knock on wood anymore.

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 STOCK ADVISOR

The glorious uncertainties

of equity investing
Investor’s innings, analysts’ insights

cricket commentators of a certain

age used to be fond of? ‘The glori-
ous uncertainties of cricket.’
Well, the uncertainties of equity
investment are even more glori-
ous. People who are not equity
investors like to whine about vol-
atility and risk when they talk
about equity investing. However,
if an investment is not volatile in
the downward direction, there is
By Dhirendra Kumar no chance of it being volatile in
the upward direction. That’s
almost a law of nature. The Nothing could be simpler.

O
riginally, I was writing this uncertainty makes the game I’d like to point out two things
page with a strong cricket worth playing, whether cricket or about this business of reducing
metaphor. However, after equity investing. volatility. Earlier, I spoke about
the World Cup final, I started Of course, it would be foolhar- upward volatility. Diversification
having second thoughts. Do peo- dy to embrace the uncertainty, as potentially reduces that as well.
ple want to think about cricket on we saw in the cricket match we Secondly, I’m saying ‘reduce’ vol-
the ‘morning after’, so to speak? are all trying to forget (sorry!). atility, not eliminate it. You have
Sad after the Indian team’s loss in Equity investors must also a whole team of cricket players;
the World Cup final, wouldn’t employ smart strategies to tem- when one does badly, others
another cricket-themed article per the risk. The most fundamen- should be able to fill in. Or not -
irritate my readers? Perhaps. tal of these is diversification. The apologies again for reminding
However, equity investors are basics are simple. Investors can you of the World Cup final, but
naturally optimistic people; opti- reduce volatility by spreading sometimes the whole stock mar-
mism is a basic requirement for investments across different ket goes down, and you make
becoming an equity investor. So, stocks, sectors, regions, and com- losses for a while. When it hap-
let’s have a bit about how cricket pany sizes. Diversification means pens, it happens - there’s nothing
is played but a lot more about you avoid putting all your eggs in you can do.
how equity investing is done or one basket. When some holdings However, the fact remains that
how it should be done. decline, others may hold steady if you have built a properly
What is the most fundamental or rise to help offset the losses. diversified portfolio, then the
characteristic of equity investing impact is, one, a lot less, and two,
when contrasted with deposits, If an investment is not volatile in over time, it gets smoothened out
bonds and such? To my mind, it’s the downward direction, then there and becomes mostly irrelevant.
the uncertainty, both in the is no chance of it being volatile in However, proper diversification
upward and the downward direc- the upward direction requires research and rebalanc-
tion. Remember the phrase that ing to ensure your portfolio

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 as they are released
Q Continuous updates and analy-

sis on all recommended stocks

straight from our dedicated
analyst team
Q Tools and data to research and

analyse any other stock

Many investors make good
choices, but in the ups and downs
of the markets, they lose confidence
and bail out too early. What we do
is give you all the inputs you need
for you to maintain the strength of
your convictions. A major part of
our job is to keep in touch and sup-
port you when things look shaky.
All things said and done,
recommendations are just that -
something that we recommend you
do. A lot of people give recommen-
dations. The real achievement of
Illustration: ANAND Value Research Stock Advisor
is that all those members are
aligns with your risk tolerance It gives you a list of stocks to buy becoming real investors themselves
and time horizon. While no and their investment thesis. More and not just consumers of invest-
investor can avoid experiencing than that, our researchers and ment information. It’s time for you
occasional declines, a diversified analysts keep re-examining the to join their ranks.
portfolio ensures you won’t be thesis and keep it updated and
wiped out from any single bet fresh, so to speak. Members get Value Research Stock Advisor is a
gone bad. Equity investing will not just the ‘what’ but the ‘why.’ premium service where you get
always involve roller coaster This is a long game in which you promising stocks along with their
rides, but diversification miti- need all the help you can get. full analyses. We also actively track
gates the plunges and turns the That’s the role of Value Research the underlying companies for you
experience into more of a gentle Stock Advisor. We don’t pretend and keep you posted on the major
train ride. The irony is that to make all the decisions for you - developments in them, including
embracing uncertainty requires we are your research assistant when to sell a stock. Additionally,
careful planning and balanced team, but our goal is to make you members get exclusive access to a
prudence. Equity investors can the investor. range of tools and data which they
ultimately thrive amidst the ups Let me just recap what you get can use to study any other stock.
and downs by pairing a tolerance when you become a member: You can subscribe to the service
for volatility with a diversified, Q Access to all our stock picks
at www.valueresearchstocks.com
or scan the QR code.
long-term approach. Q A set of starter stocks selected

Still, all the information, from our recommendations. Use

knowledge, research, and the this set to start building your
sheer amount of work that goes portfolio right away!
into achieving all this is not Q The complete investment thesis

something any individual, part- for all recommended stocks so

time investor can do. As I’m fond that you understand why you are
of saying, this is where Value investing
Research Stock Advisor comes in. Q New recommendations as soon

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 Invest with confidence

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 MAIN STREET

Outsourcing 2.0: The global

capability centre boom in India
Diversifying capabilities beyond traditional IT services

before, it will go to the best, eficiary in this trend, with its rela-
smartest, most productive, or tively cheap yet skilled labour
cheapest worker—wherever he being more than capable of han-
or she resides.” dling IT services for global giants.
Tom Friedman, The World is According to a joint report by
Flat: A Brief History of the McKinsey and NASSCOM in 2005,
Twenty-First Century (2005) India accounted for 65 per cent of
the total offshore IT industry and
India’s transition from just 46 per cent of the global business
an IT outsourcing hub to process outsourcing (BPO).
‘outsourcing of everything’ Fast forward 17 years, and
By Saurabh Mukherjea Throughout the 1990s and the India’s position as an outsourcing
noughties, India came to the fore hub has only strengthened.
as the back-end processor for all According to NASSCOM, around

“G
irls, when I was growing things IT and IT services. This 1,600 Global Capability Centers
up, my parents used to happened mainly because, in the (GCCs) are set up in India,
say to me, ‘Tom, finish new millennium, for the first employing approximately two
your dinner—people in China and time, the transfer of information million people and generating
India are starving.’ My advice to over the internet from one corner revenues to the tune of roughly
you is, “Girls, finish your home- of the world to the other became $50 billion per annum.
work—people in China and India super fast and super cheap. This Interestingly, whilst all this is
are starving for your jobs.” And change opened countless opportu- happening in India, the West is
in a flat world, they can have nities for businesses across the grappling with massive labour
these jobs because, in a flat world, world to spread out their opera- shortages. With Western econo-
there is no such thing as an tions and earn outsized profits mies returning to normalcy after
American job. There is just a job, cost-effectively. lockdowns and a structural lack
and in more cases than ever India emerged as a massive ben- of required skillsets amongst

*&&VDUHRQDQXSWUHQGLQ,QGLDRQO\WRSDFHXSIXUWKHULQWKHGD\VWRFRPH
$46.0 bn 11.4% 1,580+ 1.66 mn+
GCC market size (FY23) FY15-23 annualised growth in Total no. of Total installed
GCC market size GCCs (FY23) GCC talent (FY23)

9 9 Medium High
New GCCs added in New GCCs added GCC Intensity Index GCC Intensity Index
Jan-Mar ‘23 in Apr-Jun ‘23 (Jan-Mar ‘23) (Apr-Jun ‘23)

Source: Marcellus Investment Managers, NASSCOM

December 2023 Wealth Insight 63

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 MAIN STREET

Illustration: ANAND

their citizens, the job vacancy personnel has exceeded what is ble that many of these jobs will be
rates in Western economies are available in the country. outsourced to India.
shooting up. Moreover, the European trend of
The US is also reeling under sim- shortage of skilled workers is more Indian GCCs are now serving a
ilar labour shortage issues, where or less true for the American econo- diverse set of functionalities
people are simply choosing not to my as well, with around 40 per cent (beyond IT services)
go back to work post-pandemic. If of the shortage in workers being in GCCs today in India can handle
we look from the supply side, the professional and business services functionalities like HR, payroll,
data shows that employment oppor- and financial activities. marketing, manufacturing, etc.
tunities are well over the unem- Given the kinds of jobs for As we travel around India and
ployment rate, which means that which the West is facing labour speak to real estate developers
people willing and able to work are shortages and their hostility to (who are busy finding office space
employed. Still, the requirement for migration from Asia, it is inevita- for the GCCs), bankers (who are
busy building banking lines into
the GCCs) and recruiters (who are
Specialist and ‘outsourcable’ occupations are reported as having
busy finding talent for the GCCs),
labour shortages in Europe
we can see the ongoing surge in
Number of countries (out of % of countries that reported GCC numbers in India.
Occupations 29) that reported shortage the shortage as 'severe'
To put things in some context -
Applications programmers 15 64
if we take the 85 GCCs set up in
Health care assistants 12 60 the last 12 months (source:
Software developers 15 58 NASSCOM report), it appears that
Software and applications developers and 14 58 India is on a run-rate wherein a
analysts not elsewhere classified brand new GCC is setting up shop
Civil engineers 11 57 every five days.
Systems analysts 12 56
Investment implications
Source: Marcellus Investment Managers, European Labour Authority report on labour shortages and surpluses Given the infra & lifestyle issues
2022; underlying data taken from EURES National Coordination Offices
posed by the Tier 1 cities (e.g., long

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$URXQGSHUFHQWRIODERXUVKRUWDJHLQWKH86LVLQVHFWRUVWKDWDUHHDVLO\µRXWVRXUFDEOH¶
Professional and Financial Durable Goods
Business Services Activities Other Services Manufacturing

30 9 3 1

31 16 8 2 0

Education and Government Leisure and Information Mining and

Health Services Workers Hospitality Logging

Source: Marcellus Investment Managers, US Bureau of Labor Statistics, US Chamber of Commerce Analysis

commutes, high population densi- those parts of the country where in India in GCCs, if GCCs continue
ty, high cost of living) and given (a) law & order is a given, (b) growing at the rate that they have
the improvement in road & airline there is high availability of (i.e., adding approximately 100
connectivity to Tier 2 cities, it is skilled talent, and (c) physical GCCs each year), then five years
but natural that we are now seeing infrastructure is in a relatively hence, it is likely that a further
GCCs coming up in cities like much better shape. six lakh Indians will find employ-
Indore, Nashik, Tirunelveli, With more such GCCs being set ment in GCCs.
Coimbatore and so on. up in tier 2 towns in the country, Assuming that each of these jobs
The preponderance of GCCs in more employment opportunities pays, on average, `7 lakh per
India’s ‘southern seven’ states are going to be created. Going by annum and that the GCC boom
underscores the preference of for- NASSCOM’s estimate that around sustains over the next five years,
eign investors to set up shop in two million people currently work such employment will inject into
the Indian economy an additional
$9 billion per annum (for the next
Diversification in the verticals served by GCCs in India is evident in
five years). Applying on this, the
data for Q2 CY2023
standard Keynesian fiscal multipli-
GCC expansion in Q2 CY2023
er of 2.3 times (to account for the
Industry (as a % of all GCC expansions) Locations of expansion
spillover benefits of these GCC
Semiconductors 10 Pune
employees’ spending on leisure &
Telecom and Networking 10 Bengaluru consumption) suggests a benefit to
Professional Services 10 Pune, Chennai, Kolkata the Indian economy of $20 billion
Transportation and Heavy Engg 10 Hyderabad per annum, i.e., 0.4 per cent per
BFSI 20 Bengaluru, Gurugram, Hyderabad annum of GDP five years out.

Industrial 20 Hyderabad
Saurabh Mukherjea is part of the
Consumer Electronics 10 Hyderabad Investments team at Marcellus
Software and Internet 10 Hyderabad Investment Managers (www.marcellus.
in). He is the author of ‘Diamonds in the
Source: Marcellus Investment Managers, NASSCOM - Zinnov Research and Ananlysis, News Articles Dust: Consistent Compounding for
Extraordinary Wealth Creation’.

December 2023 Wealth Insight 65

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 STRAIGHT TALK

Economic pulse-checking
2024’s vital signs revealed

major components of the US the previous month. A figure

Consumer Price Index (CPI). Rents below 50 indicates contraction,
have finally started to move down, while that above 50 signals an
and while wage growth has expansion. In October 2023, the
remained sticky, the peak increase figure was 46.7 – the twelfth con-
seems to be in the past. This is secutive month of contraction.
despite labour unions winning The “new orders” component
large wage increases across vari- declined from 49.2 in September
ous sectors – autos and hotels/casi- to 45.5 in October. US imports,
nos being among the latest to reach too, have declined in 10 of the
wage agreements in the USA. past 11 months. All this signals a
By Anand Tandon slowing down of the economy.
Employment figures – signs
of cooling Does this imply an economic

T
he year 2023 delivered several
surprises. Stock markets sur- The tech sector witnessed signifi- recession? Not necessarily
prised by being on the upside cant layoffs in the US in the early There are conflicting opinions on
despite geopolitical and economic part of 2023. However, the job mar- whether the recession forecast will
headwinds. Global GDP outper- ket remained tight for most of the come true. While most economists
formed even bullish expectations, year – raising concerns that infla- predict a 50-50 chance of a reces-
coming in at 2.7 per cent. As the US tion would rise quickly if any mon- sion in the US in 2024 (which is
enters fiscal 2024 (the US follows a etary or fiscal stimulus was to be lower than the 65 per cent predict-
fiscal calendar of September- applied. Job growth is finally slow- ed last year), some are more posi-
October), it is time to look ahead to ing. An increase in non-farm pay- tive. In a recent report, Goldman
the new year and bring out the roll (NFP) was reported at 336,000 in Sachs (GS) estimates that there is
crystal ball once more. Sep 2023. This was subsequently only a 15 per cent chance of a
revised down to 297,000. The recession. They offer the following
Inflation – the consensus view October figure came in at 150,000 as reasons for optimism.
is that the worst is over (the consensus was 180,000). This Lower inflation results in high-
Covid saw several countries push- has resulted in the unemployment er disposable income for consum-
ing large revival packages to sus- rate at 3.9 per cent - the highest ers, the backbone of the US econo-
tain economic growth. Unlike in since January 2022. my. Given strong labour markets,
the years leading to the pandemic, The ISM Purchasing Managers GS predicts a slower yet positive
the money multiplier did not fall. Index (PMI) is a reliable guide to growth of at least 2 per cent in pri-
Coupled with supply chain disrup- the monthly level of manufactur- vate consumption expenditure
tions that restricted production, ing activity in the manufacturing (PCE). A factor that GS doesn’t
inflation flared up. Major central sector in the USA compared to seem to be concerned about is stu-
banks reduced their balance sheets dent debt – repayment of which
and raised policy rates. This, for A figure below 50 in the ISM PMI had been frozen for 3.5 years. The
now, seems to have pushed the indicates contraction in the Biden administration had come
inflation genie back in the bottle. manufacturing sector. In October up with a plan to forgive up to
Most G10 economies now face fall- 2023, the US witnessed the twelfth $20,000 in the student debt of
ing core inflation. consecutive month of contraction. 43 million students, and the US
Services and housing are two Supreme Court struck this down.

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While the government has come
up with alternatives, it is estimat-
ed that approximately 27 million
students will have to start repay-
ing from October 1, 2023. This will
hurt PCE.
Further, GS has argued that
economic growth is being ham-
pered by interest rate hikes and
tighter fiscal conditions. The neg-
ative impact of rate hikes is felt
about six months after the policy
action. However, the drag on
growth is expected to be lower in
the current year as policy action
recedes. Fiscal consolidation is
unlikely in an election year
despite the end of stimulus meas-
ures. GS estimates that the nega-
tive impact on growth will not Illustration: ANAND
exceed 0.2 per cent.
GS also estimates that manufac- these views, is the rising and Where does this leave India?
turing activity will revert to the unsustainable fiscal deficit of the The Indian economy has demonstrat-
mean as headwinds of the previous US economy. In fiscal 2023 ed remarkable resilience in the face
year fade. These include a weak (October 2022 – September 2023), of global headwinds. Even assuming
demand environment in China the US fiscal deficit widened to a soft landing in key developed mar-
after its re-opening, the shock of $1.7 trillion (about 7 per cent of kets, India will likely face a signifi-
non-availability of Russian gas in GDP). This was also a key reason cant slowdown in demand for its key
Europe, and rebalanced invento- for GDP growth in the past year. export – that of IT services.
ries to compensate for higher pro- US debt is expected to reach Another adverse factor is a possi-
duction in 2022. almost 150 per cent of GDP by 2030. ble reduction in foreign inflows on
The most important reason for- With interest rates at current lev- account of reduced interest rate dif-
warded by Goldman Sachs is the els, interest charges alone will ferentials between domestic rates and
central banks’ action. GS argues exceed 20 per cent of the current rates in developed markets. Higher
that if given a chance to avoid a budget. Programs such as the interest rates are likely to sustain for
recession, central banks will take Infrastructure Investment and Jobs some time, implying a lowering of
the opportunity. They forecast that Act 2021, Inflation Reduction Act valuation multiples. Despite a reason-
central banks are largely at a (IRA), and CHIPS Act 2022 have the able growth rate, it is, therefore,
point where they are comfortable potential for on-shore manufactur- unlikely that the benchmark index
with the inflation trajectory and ing but can lead to inflated incen- that trades at the higher end of its
will be willing to cut policy rates tives. One research house esti- historic range has much upside.
at the first sign of economic weak- mates that IRA alone could end up It appears that equity returns
ness. Further sustained increase costing over $1 trillion in subsidies. may remain subdued for some time
in rates is unlikely. Thus far, the status of the US as earnings catch up to bring valu-
The near-term trend of stock Dollar as a reserve currency has ations into more attractive territo-
markets is likely positive. allowed the USA to run high defi- ry. Even as the world emerges into
cits without being penalised by ero- an easier economic environment, a
But what about the US deficit? sion in value. This privilege may widely diversified portfolio seems
The elephant in the room, and one not last forever, even as geopoliti- the most attractive option for the
that has the potential to upset cal stress takes its toll. next 12 months.

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 EVERYDAY ECONOMICS

Lasting love of state controls

Public sector undertakings: A historical overview

(BHEL). In 1965, the government petrol, cement and aerospace

started making cement by setting equipment. After Pt. Nehru died,
up the public sector unit, the the government even started mak-
Cement Corporation of India. The ing and selling bread, which was
idea was to help achieve self-suffi- made by Modern Bakeries and was
ciency in cement, which, at that called Modern Bread. Nehruvian
time, was always in short supply. planning system’s early efforts at
Similarly, Hindustan making India self-sufficient were
Aeronautics Limited (HAL), the directed at creating strategic capa-
aerospace and defence company, bility in the state sector as the pri-
had already been set up even vate sector was not deep-pocketed
By Puja Mehra before independence – in 1940. It enough. But the government mind-
began aircraft manufacturing in set, as it tends to in every country,
1942 for the Indian Air Force. soon lost sight of strategic goals

E
leven years after independ- Pandit Nehru, India’s first prime and spawned the licence-permit
ence in 1947, the govern- minister, inaugurated the govern- raj, which, while benefiting a
ment of India corporatised ment-owned Hindustan Antibiotics handful of select business groups,
its salt department in 1958 to set Limited in 1954. Another PSU, stunted the rest of the economy,
up the government company Indian Rare Earths Limited, has choking its access to technology,
Hindustan Salts. The government been mining and refining rare capital, raw material and markets.
remains in the business of making Air India, which was founded by
Nehruvian policies were directed
salt even today. In 1928, Burmah J R D Tata in 1932 as Tata Airlines,
Shell Oil Storage & Distribution
at creating strategic capability in was nationalised and renamed as
Company of India was incorporat- the state sector as the private Air India in 1960. Before that, in
ed in England to enter the petrole- sector was not deep-pocketed 1948, the Government of India had
um products business. In 1952, enough. But the government acquired a 49 per cent stake in it.
this company set up a refinery in mindset soon lost sight of Five years later, in 1953, the gov-
Bombay, now Mumbai. In 1955, it strategic goals and spawned the ernment nationalised it, although
introduced LPG as a cooking fuel licence-permit raj. Tata remained its chairman till
in Indian homes. All of Burmah 1977. The airline was eventually
Shell’s business in the country run into heavy losses by the gov-
was nationalised by the earth metals since 1952. A year ernment. In 2022, it was handed
Government of India in 1976, and after independence, Indian back to the Tatas, although taxpay-
the merged refinery and market- Telephone Industries Limited was ers will continue to pay most of its
ing company was renamed Bharat founded in 1948 as the Indian gov- accumulated debts.
Petroleum Corporation (BPCL). ernment’s departmental factory for Similarly, during the Indira
SIn 1954, the government of making telephone devices and Gandhi era of socialism, a whole
India established Bharat equipment. It was later incorporat- lot of companies, including banks,
Electronics Limited (BEL), an aer- ed as a public company in 1950. were nationalised, which has not
ospace and defence electronics The list goes on… been reversed, although the Modi
manufacturing company. Two During the post-independence government has said many times it
years later, it set up the power gen- years, what is referred to as the will privatise nationalised banks.
eration equipment manufacturer Nehruvian socialism era, the gov- The government also entered
Bharat Heavy Electricals Limited ernment produced and sold salt, car making in 1981, partnering

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 Illustration: ANAND

with the Japanese Suzuki Motor flour under the brand name Bharat at an election rally, would continue
Company. The joint venture was Atta through NAFED and other for another five years at the cost of
granted permission to import two agencies at a discount of `6-7 a kg to `2 lakh crore a year. Is India so poor
models, which were completely the market price. This is the same that more than half of the population
assembled in the first two years, government that wanted to encour- needs to get food grains free from
with an initial target of using just age the private sector and markets the government?
33 per cent of domestic compo- in Indian agriculture through the The disastrous results of govern-
nents. Cars started rolling out of farm laws that it abruptly repealed ment being in the business of food
Maruti’s factories in 1984. in Parliament, fearing losses of are well-documented. They range
In 1991, India liberalised, thus votes in Punjab elections, which it from over-production of wheat and
reversing the mess created by the rice, over-procurement of these,
licence era. Production and inno- If you thought India had learnt especially from farmers of Punjab
vation by the private sector grew, the lesson in 1991 that state and Haryana, and mountains of
and dependence on imports and intervention runs the economy to expensive food stocks that rot even
government companies reduced. as cereal inflation remains high. The
the ground, you were wrong.
The economy saw the benefits of farmers have no incentive to either
Good old populism never goes
competition. The National Stock grow other nutritious food crops or
out of fashion.
Exchange was set up in 1992. Real pay attention to what the consumer
GDP growth in the manufacturing markets are demanding. If you
sector during Manmohan Singh’s thought India had learnt the lesson
years as finance minister was suffered anyway. in 1991 that state intervention runs
10.9 per cent, and aggregate GDP Why does the world’s fast- the economy to the ground, you were
growth during this period aver- est-growing economy need to relapse wrong. Good old populism never
aged 6.7 per cent, something India into old mistakes? This, when under goes out of fashion.
had never seen until then. New the National Food Security Act, 2013, Free food grains, Bharat Atta,
private sector banks, ICICI Bank which was ironically passed when what’ll be served next on the popu-
and HDFC Bank, were set up in Manmohan Singh was prime minis- list platter in the run-up to the Lok
1994. The reforms he instituted ter, the government already provides Sabha elections next year? Bharat
were continued by subsequent free food, at the rate of 5 kg (10 kg Halwa, Bharat Puri, Bharat Dhokla
governments. In 2000, Modern during the Covid pandemic) of grain and Bharat Dosa?
Breads was privatised. per person per month, to more than
And so, it seems odd that 23 80 crore Indians, which is 57 per cent Puja Mehra is a Delhi-based journalist and the
author of ‘The Lost Decade (2008-18):
years later, the Modi government of the population. This plan, as the How the India Growth Story Devolved
has started selling packaged wheat prime minister recently announced into Growth Without a Story’

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 STOCK SCREEN

Blue-chip and value stocks

Reliable front-line stocks at attractive valuations and quality stocks available at
a discount to their book value

A
stock screen filters out companies based on are less risky than their smaller counterparts. However,
certain criteria. Its main advantage is that it these stocks have already been ‘discovered’ (i.e., known
helps you generate stock ideas with just a few to most investors). For this reason, they generally trade
clicks. Once you have the list of ‘deserving’ at a premium.
stocks, you can research them further to find the ones Discount to book value: This screen is an old-school
worth investing in. value investor’s dream. The usual belief is that
The Value Research website provides you buying a stock for less than its book value
many ready-made stock screens. Here we will give you a margin of safety. However,
will be covering two such screens: that might not be true. Therefore, we
‘attractive blue chips’ and ‘discount to have applied additional filters to weed
book value’. We have also given a out poor companies.
concise stock list from the other
screens. To get the full list in real time, A word of caution
visit www.valueresearchonline.com/ Note that mere inclusion in a stock
stocks/selector. screen does not mean that a stock is
investment-worthy. Consider the output
What do these screens offer? of stock screens as the starting point for
This month we have got two stock screens for your research. You must apply your own
you. The first one will help you invest in blue-chip analysis to select companies.
companies at attractive valuations and the second one However, if you are interested in a list of stocks to
can help you profit from companies at a deep discount. invest in right away, then subscribe to our
Attractive blue chips: Blue-chip stocks are the largest and recommendation service at Value Research Stock
the most consistently profitable companies. Owing to Advisor. You can access the details by visiting
their strong balance sheet and high market share, they www.valueresearchstocks.com.

Key terms
<UP]LYZLJVTWHUPLZ ratio, while a value stock will have a market price of the stock. Since the two can service more than twice its
relatively lower P/E ratio. denominator in this ratio is the market current interest charges.
Should have traded on all the days for
7YPJL[VIVVR]HS\L7) price, a stock’s dividend yield changes 9L[\YUVULX\P[`96,
the last two quarters and should have
every day.
a market capitalisation of more than The ratio of the price of a stock to the Measured by taking profit after tax as
`500 crore, the lower cut-off for small- book value per share of the company. +LI[[VLX\P[`+,) a percentage of the net worth of the
cap stocks as per the Value Research It shows how much premium investors Calculated as the ratio of total company. Indicates how efficiently the
criteria. are willing to pay for the underlying outstanding borrowings of the company has been able to utilise
4JHW net assets of the company. company to its total equity capital. investors’ money.
7YPJLLHYUPUNZ[VNYV^[O7,. Tells us which companies use :[VJRZ[`SL
Stands for market capitalisation.
excessive leverage to achieve growth.
Obtained by multiplying stock price by Ratio of price-to-earnings to the EPS Derived from a combination of the
Conventionally, a debt-to-equity ratio
the total number of shares. Shows a (earnings per share) growth of a stock’s valuation – growth or value –
of less than two is considered safe.
company’s market value or size. stock. Demonstrates how high a price and its market capitalisation – large,
we are paying for the growth that we 0U[LYLZ[JV]LYHNLYH[PV0*9 mid and small.
7YPJL[VLHYUPUNZ7, Growth Value
are purchasing. In all our analyses, This indicator is generally used to For example,
The ratio of the stock price and
we have taken five-year historic gauge whether a company has the here is the Large
earnings per share (EPS). It shows in
EPS growth. ability to service its debt. Calculated stock style of
multiples how much investors are Mid
+P]PKLUK`PLSK as the ratio of operating profit to a large-cap
willing to pay for the earnings. The
interest outgo. For instance, a growth stock. Small
thumb rule of valuing a stock is that a Defined as the percentage of the
company with an ICR of more than
high-growth stock will have a high P/E dividend paid per share to the current

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Attractive blue chips No. of companies that
CLEAREDTHElLTERS

437
Reasons to invest The filters 389
Liquidity M-cap greater than `9,630 cr 321
Large companies in respective D/E 0 to 2
businesses 111
Interest coverage ratio more than 2
Strong balance sheets ROE 5Y avg more than 20% 38
Liked by institutions EPS 5Y growth more than 20%
17
PEG (5Y) 0 to 1.5
5Y ROE consistency without losing 20% year on year
4

Attractive bluechips
Company Stock Debt-equity Interest 5Y avg 5Y EPS Market cap Share 52-week
Industry style P/E PEG ratio coverage ratio RoE (%) growth (%) (` cr) price (`) high/low (`)

Hindustan Aeronautics 23.8 0.51 0.0 102.1 24.7 24 1,43,593 2,147 2,167-1,150
Defence & Aerospace

SRF 39.8 1.18 0.4 14.8 20.7 25 69,031 2,329 2,636-2,040

Diversified

Coromandel International
16.1 0.73 0.0 15.2 26.8 23 32,678 1,113 1,185-838
Other Fertilisers

Angel One
24.6 0.35 0.4 14.1 32.2 48 25,112 2,996 3,090-999
Brokerage Services

Data as of November 20, 2023

Discount to book value No. of companies that

CLEAREDTHElLTERS
Reasons to invest The filters
1,531
Really cheap M-cap greater than `500 cr Companies must have a five-
Relatively undervalued Debt-equity ratio of less than year earnings growth of more 1,356
1.5 times than 10%
Companies with assets
Return on net worth of more than Price-to-book should be between 885
10% in the most recent year 0.01 and 1
584
25
Bargain hunt
Company Stock 5Y EPS Dividend Debt-equity Market cap Share 52-week
Industry style P/E P/B growth (%) yield (%) ratio RoE (%) (` cr) price (`) high/low (`)

ONGC 5.8 0.80 10 5.7 0.5 12.1 2,48,964 198 203-133

Oil & Gas Exploration

Bank of Baroda 5.6 0.90 43 2.8 1.0 14.9 1,02,238 198 220-147
Banking

Union Bank of India 6.7 0.95 18 2.8 0.6 12.2 80,314 108 116-60
Banking

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 STOCK SCREEN
Company Stock 5Y EPS Dividend Debt-equity Market cap Share 52-week
Industry style P/E P/B growth (%) yield (%) ratio RoE (%) (` cr) price (`) high/low (`)

Canara Bank 5.2 0.93 26 3.0 0.8 16.4 72,420 399 411-269
Banking

Oil India 5.8 0.85 17 6.4 0.5 28.5 34,050 314 339-194
Oil & Gas Exploration

Great Eastern Shipping 4.4 1.00 40 3.7 0.4 28.1 11,116 780 920-532
Shipping

Karnataka Bank 5.6 0.84 29 2.3 0.2 16.5 7,620 220 258-125
Banking

Gujarat State Fertilisers 6.9 0.59 22 5.5 0.0 10.6 7,292 183 216-116
Nitrogenous Fertilizer.

Shipping Corp. 6.9 0.87 23 0.3 0.4 13.5 6,186 133 164-79
Shipping

Nava 6.1 0.86 24 1.6 0.5 22.2 5,462 377 474-180

Diversified

South Indian Bank 5.7 0.73 15 1.2 1.0 12.4 5,209 25 28-14
Banking

PTC India 9.1 0.93 17 4.9 1.3 10.4 4,736 160 166-74
Electricity Distribution

DCB Bank 6.9 0.79 14 1.1 1.0 11.5 3,522 113 141-97
Banking

Sunflag Iron and Steel 20.7 0.71 54 0.0 0.2 43.8 3,387 188 249-86
Finished Steel

Kirloskar Industries 12.2 0.79 35 0.3 0.3 17.2 3,215 3,237 3,758-1,771
Castings & Forgings

Tamil Nadu Newsprint 4.9 0.88 33 1.9 1.0 22.0 1,824 264 303-200
Paper

Dhunseri Ventures 4.3 0.40 60 1.5 0.1 23.1 1,138 324 347-211
Bakery & Milling Prod.

GFL 0.5 0.41 26 0.0 0.0 152.9 1,069 98 118-45

Investment Services

RSWM 93.5 0.63 32 2.9 0.9 10.4 817 172 232-144

Cotton & Blended Yarn

Tamilnadu Petroproducts 11.2 0.94 12 1.7 0.1 12.0 792 88 102-68

Organic Chemicals

Jindal Poly Inv. 2.4 0.29 19 0.0 0.0 20.7 723 686 788-397
Misc. Fin.services

Shreyas Shipping 22.9 0.85 16 0.5 0.6 27.2 666 303 506-215
Shipping

Zuari Agro Chemicals 1.4 0.40 32 0.0 1.3 56.9 647 154 179-116
Other Fertilisers

Dhunseri Investments 4.5 0.25 24 0.2 0.1 25.1 619 1,014 1,024-555
Investment Services

Data as of November 20, 2023. This is not the full list. For the full list, visit https://tinyurl.com/mrxd2k8x

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Want more? Here you go
Other screens available on the Value Research website, along with their themes
and some of their stocks
P/E P/E

Reasonably priced Karur Vysya Bank 8.9 Arman Financial Services 13.7
growth stocks ESAF Small Finance Bank 11.9 LT Foods 14.4
Combines growth and value investing and Kirloskar Industries 12.2 WPIL 14.5
spills out companies with high earnings growth Jindal Saw 12.5 Tata Motors 14.6
trading at a cheap valuation Nuvama Wealth Management 13.3 Ceinsys Tech 14.7

Fiem Industries 16.4 Granules India 22.6

Quality stocks
Archean Chemical 16.4 Neuland Labs 26.0
available cheap
Dr. Reddy’s Labs 18.3 Stylam Industries 27.7
Companies that clear our essential checks on
solvency, accounting, recent financial CMS Info Systems 18.9 Aarti Surfactants 28.2
performance and valuation Rushil Décor 20.2 Fine Organic Industries 28.4

Sharda Motor 15.3 Jyoti Resins & Adhesives 35.2

Small-cap growth
Jubilant Industries 17.4 GMM Pfaudler 38.7
companies
Likhitha Infrastructure 18.2 Dreamfolks Services 40.0
Wades through the small-cap maze and gives
out fundamentally strong small caps that are Shilchar Tech 29.5 Venus Pipes & Tubes 45.8
available at a reasonable valuation Roto Pumps 32.7 HP Adhesives 52.7

Kama Holdings 10.4 Sandur Manganese 14.7

Value Guru
Siyaram Silks 11.8 National Peroxide 17.5
screens
Shriram Pistons & Rings 13.3 EMS 21.2
A set of five screens, these give you lists of
companies based on the criteria of legendary GNA Axles 13.8 Infosys 24.0
investors, viz., Benjamin Graham, Joel Uniparts India 14.4 Polyplex Corp. 45.6
Greenblatt, John Neff , Peter Lynch and
Walter Schloss
Dividend yield (%) Dividend yield (%)

Oil India 6.4 GE Shipping 3.7

High dividend
ONGC 5.7 REC 3.6
yield stocks
GSFC 5.5 PFC 3.3
A screen for those looking for a steady stream
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GNFC 4.3

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 WORDSWORTH NOW

UDAY KOTAK
Former MD & CEO, Kotak Mahindra Bank
What the financial industry should focus on, for growth.
The question we have to ask for the future is what are we doing for
our aspirations? And this is where I think there is an opportunity for
Indian bankers and policymakers to manage risks but get a little
bolder. Yes, we want to minimise accidents on the road. The way to do
it is to have better traffic signals, better supervision, and better
regulation. But, we must encourage a lot more cars on the road and
lot more roads to be built.
Business Today, November 12, 2023

ERIC SCHMIDT DEVIKA BULCHANDANI

Former CEO, Google Global CEO,Ogilvy & Mather
On Sam Altman being fired as There is also too much information.
CEO from OpenAI.
Complications mean you get so
Sam Altman is a hero of
mine. He built a company
influenced by all this and you
from nothing to $90 Billion in want me to follow this data.
value, and changed our Suddenly, you forget why
collective world forever. I you wanted to use that
can’t wait to see what he
does next. I, and billions of data in the first place. That
people, will benefit from his kind of slavery to
future work- it’s going to be technology becomes
simply incredible. Thank you
a complication.
@sama (Sam Altman) for all
Business Today,
you have done for all of us.
November 26, 2023
Twitter, November 18, 2023

JANET YELLEN
Secretary of the Treasury, USA
On Moody’s negative outlook for the US.
This is a decision that I disagree with. The American
economy is fundamentally strong, and Treasury securities
remain the world’s preeminent safe and liquid asset. Our
unemployment rate is near historic lows, inflation
has come down significantly and our economy
grew by almost 5% in the third quarter.
Reuters, November 14, 2023

74 Wealth Insight December 2023

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 BIG THINGS
START SMALL
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Investments in Retirement Education Long Term
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