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 Aim to capture
IndianSTRIKE
+ Global A BALANCE
Opportunities
BETWEEN
WITH

ICICI Prudential
MNC Fund
Aim to benefit from global To invest, contact your Mutual Fund Distributor
diversification with multinationals Download Visit
IPRUTOUCH App www.iciciprumf.com

This map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized
by the Survey of India. The stocks/sectors mentioned in this document do not constitute any recommendation of the same and the scheme/ICICI Prudential Mutual Fund may or may not have any future
position in these stocks/sectors.

ICICI Prudential MNC Fund (An open ended equity scheme following MNC theme)
Mode
is suitable for investors who are seeking*: Mode
rate ra
High tely
de to
e

Hi
rat
Mo Low

• Long term wealth creation

gh

• An open ended equity scheme that aims to provide capital appreciation by investing Investors understand
Very
High
Low

predominantly in equity and equity related securities within MNC space. that their principal will
be at Very High risk
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

The Risk-o-meter(s) specified above will be evaluated and updated on a monthly basis. Please refer https://www.icicipruamc.com/news-and-updates/all-news for more details.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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SEPTEMBER 2021
Volume XV, Number 3 42 COVER STORY

EDITORIAL POLICY
The goal of Wealth Insight, as with
all publications from Value
Research, is not just limited to
generating profitable ideas for its
readers; but to also help them in
generating a few of their own. We
aim to bring independent, unbiased
and meticulously- researched
stories that will help you in taking
better-informed investment
decisions, encouraging you to
indulge in a bit of research on your
own as well.
All our stories are backed by
quantitative data. To this, we add
rigorous qualitative research

THE ULTIMATE
obtained by speaking to a wide
variety of stakeholders. We firmly
stick to our belief of fundamental
research and value-oriented
approach as the best way to earn

MEASURE
wealth in the stock market. Equally
important to us is our unwaveringly
focus on long term planning.
Simplicity is the hallmark of
our style. Our writing style is
simple and so is the presentation
of ideas, but that should not be THE SECRET OF
MULTIBAGGERS
construed to mean that we
over-simplify.
Read, learn and earn – and let’s
grow and evolve as we undertake
this voyage together. REVEALED!
Editor
Dhirendra Kumar
Senior Editor
Vibhu Vats
Copyediting
Debjani Chattopadhyay,
10 STOCK ADVISOR 38 INTERVIEW
‘The current
Ruchira Sharma
Research & Analysis
Does Stock Advisor elevated level
Arul Selvan, Danish Khanna
and Udhayaprakash J give you a portfolio? of the small-
The answer is both a yes and a no,
Design
Mukul Ojha and Sneha Verma depending on what you do cap index
Production Manager
Hira Lal signals a
Data source for stocks
AceEquity near-term
correction’
‹9DOXH5HVHDUFK,QGLD3YW/WG
Wealth Insight is owned by Value
Research India Pvt. Ltd., 5, Commercial
Complex, Chitra Vihar,
Delhi 110 092.

Editor: Dhirendra Kumar.

Printed and published by Dhirendra
Kumar on behalf of Value Research India
Pvt. Ltd. Published at 5, Commercial
Complex, Chitra Vihar, Delhi 110 092.
Printed at Option Printofast, 46,
Patparganj Industrial Area, Delhi-110092
Advertising Contact:
Venkat K Naidu +91-9664048666
Biswa Ranjan Palo +91-9664075875

Circulation
Hira Lal 9958058407 ANOOP BHASKAR, Head – Equities, IDFC AMC
Total pages 64, including cover

4 Wealth Insight September 2021

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Columns
7 8 INSIGHT
Naval Ravikant
EDIT
Angel speak @naval
by DHIRENDRA KUMAR Followers
Naval Ravikant’s 1.3M
Something new Twitter page
Understanding the quality
and nature of a company’s cash flows
can be a powerful investing tool in your hands
12 MARKET MOVES 22 VIS-À-VIS

Market Reporter The gold

48 Stock story: Bharti Airtel financiers
STRAIGHT TALK
A competitive analysis
by ANAND TANDON Big Moves of Manappuram Finance and
Index Watch: S&P BSE IT Muthoot Finance, two leading
Cryptos: How gold-loan companies in India
promising are they?
Cryptocurrencies, like Bitcoin,
are the talk of the town.
An assessment of their
24
viability, usefulness and investment case.
‘Investing for your
future by investing
in the future’
Usefulness of thematic and smart-beta
ETFs in an investor’s portfolio

:^HY\W4VOHU[`, CEO, Mirae Asset Mutual Fund

26 WORDS WORTH WISDOM 28 MARKET COMPASS

Insightful quotes Institutional moves

50 Change in promoter
EVERYDAY ECONOMICS of Nassim stake/Pledging tracker
by PUJA MEHRA
Nicholas Taleb IPO tracker
Trait or theory?
Prof Kaushik Basu’s memoir
‘Policymaker’s Journal’ is full of
wit and brilliance. A few of his explanations
34 ANALYST’S DIARY
about the basic traits of people, Play the gold rush
bureaucracies and societies.
through shovel suppliers
Feeling low about low
54 STOCK SCREEN
margins?
High dividend-yield stocks The Street’s daredevils
Reasonably priced growth stocks
Attractive blue chips
62 WORDS WORTH NOW

',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

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 EDIT

Something new
Understanding the quality and nature of a company’s cash flows
can be a powerful investing tool in your hands

DHIRENDRA KUMAR
Many readers would already have kind of cash-flow quality and sustainability that Mr
observed that the cover story of this issue breaks from Mukherjea is discussing. There’s a big-cap headline
our normal pattern. This cover story is an especially name like Asian Paints that everyone knows to be an
insightful article written by Saurabh Mukherjea, one of exceptional business. There are also other names that
our regular contributors, that we have ‘promoted’ to the are less known but which discerning equity investors
position of a cover story. Mr Mukherjea is part of the have long understood to be quite investment worthy. On
Investments team at Marcellus Investment Managers, a the other side of the fence, we have some standard
Mumbai-based portfolio manager and investment advisor. examples of companies that are known to be struggling
The reason for this special cover story? There are businesses in terms of the quality of their financials,
more than one. One, I’d like to draw the attention of all of though not in size.
our readers to this story and make sure that every one of So, for most of us, there are no real surprises in the
them reads it. That’s because it’s a compact tutorial on an identities of these companies. What then, you might
aspect of equity analysis that all investors should be wonder, is the point of all this? The answer is very
aware of, even if they do not practise it themselves. Two, simple: confidence. It’s one thing to know that these are
there’s a deeper significance to considering cash-flow good stocks by reputation, history and a superficial
quality as a major input into investment decisions. It examination of their financials. It’s quite another to have
forces you to look into the most important aspects of the a deeper understanding of why they are in that category.
business, the ones that will actually determine whether a Much more importantly, a detailed article like this is an
company will sustainably be an investment-worthy educational endeavour. The idea is not that you’ll make a
vehicle for your investments. great investment portfolio by these examples, but that
In recent times, there has been a lot of excitement you will learn about an analytical tool that will stand you
about stock investing. Much of this excitement has been in good stead while evaluating dozens of other companies,
generated by the Zomato IPO. Moreover, the initial and as a filter that will help you pick out investment-
success of the Zomato IPO has raised expectations that worthy stocks that you may not have noticed otherwise.
other internet companies will soon follow with their own The contrast with the Zomato-type company could not
IPOs. This massive amount of noise around this type of be more stark or more educational. As you would notice,
stock is unfortunate. As readers of this magazine and the point is not that they evaluate poorly under this kind
my columns elsewhere would know very well, I am of a framework, but that they cannot be evaluated at all!
deeply sceptical of the IPOs of such companies. When I Read the article carefully and you will understand.
say such companies, I mean all those businesses whose As I’ve said many a time, when you read ‘Wealth
IPOs are being evaluated on unproven projections Insight’, you will get a lot of stock ideas. However,
instead of actual feet-on-the-ground money being learning how to research and how to invest is just as
generated from the business. important a goal. Unlike our Stock Advisor service (www.
When you read our cover story, take a close look at the valueresearchstocks.com), do not treat ‘Wealth Insight’
companies that are being discussed, the examples of the as a ready-to-use list of stocks.

September 2021 Wealth Insight 7

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 INSIGHT

Angel speak
1. Seek wealth, not money or status. Wealth is
having assets that earn while you sleep. Money is
how we transfer time and wealth. Status is your
place in the social hierarchy.
Naval Ravikant
@naval
2. Understand that ethical wealth creation is
Followers possible. If you secretly despise wealth, it will

1.3M
elude you.

3. Ignore people playing status games. They gain

status by attacking people playing wealth
Why Follow creation games.

An advisor, angel investor,

and entrepreneur, Naval 4. You’re not going to get rich renting out your time.
Ravikant is the co- You must own equity - a piece of a business - to
founder, chairman, and gain your financial freedom.
former CEO of AngelList.
He also co-founded the 5. Play iterated games. All the returns in life,
consumer product review whether in wealth, relationships, or knowledge,
site Epinions. He’s so come from compound interest.
far invested in over 200
companies, including Uber,
Twitter, and ClubHouse. 6. Specific knowledge is knowledge that you cannot
Naval Ravikant is also be trained for. If society can train you, it can train
a podcaster who shares someone else, and replace you.
advice on pursuing wealth
and happiness.
7. The inevitable endpoint of crypto is maximum
Strikingly, for someone
decentralization and maximum privacy.
who is followed by
millions on Twitter as well
as Instagram, he doesn’t 8. Whether you’re excited or nervous when your
believe in following favorite asset falls in price marks whether you’re
anyone. investing or merely speculating.

8 Wealth Insight September 2021

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 www.valueresearchstocks.com

Does Stock
Advisor give you
a portfolio?

The answer is both a yes and a no, depending on what you do

Dhirendra Kumar that’s true. The original meaning keep each client’s share certifi-

W
of the word is simply a bag cates in a separate portfolio. From
hat is a portfolio? A designed to carry documents in. It there, the word gradually came to
portfolio is a leather became associated with invest- mean any kind of collection of
bag, a type of brief- ments because, in the early twenti- documents. In finance, it specifi-
case. No, seriously, eth century, stockbrokers would cally came to mean the invest-

10 Wealth Insight September 2021

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 Advisor service are NOT a portfo- like to keep things simple, the
Our recommendation set is lio. We do not make an attempt to names are quite self-explanatory.
much more differentiated include or exclude a particular
stock because they fit a pattern. If,
Of course, there are nuances
about how exactly we interpret
now and there are actually at any point, the economic and these terms but if you go by their
market circumstances are such obvious, literal meaning you won’t
three subtypes that we that a large number of stocks of a be wrong.
classify as such: Best Buys particular type (say, large-cap or
mid-cap, or a particular sector, or
However, that is all. Quite delib-
erately, I have stopped here in
Now, All Weather and dividend payers, or any other terms of Stock Advisor providing
characteristic) become suitable in you with a ready-made portfolio.
Dividend Play every other way, we will definitely Essentially, we have provided you
consider them for inclusion in our with all the ingredients but not
ments held by an investor. recommendations. the final dish. They are carefully
That’s the broad meaning. The For us, the dominant qualifier chosen high-quality ingredients.
word is used in investing with will always be the stock itself and They’re labelled accurately so you
many slightly different connota- not other stocks that might be on know how they taste. However,
tions. It could simply mean all the the recommended list at the time. whether you want a spicy dish or
investments you have – your com- When we began the service, our
plete asset base. It could mean one stocks list was relatively undiffer-
For us, the dominant
specific type of asset class, as in
your mutual funds being a fund
entiated. The number of stocks was
small compared to today – just 10 –
qualifier will always be
portfolio and your stocks being and creating subsections was a lit- the stock itself and not
your equity portfolio. That’s a split tle pointless. The focus was entirely
by what is in the portfolio. It could on choosing good investments and
other stocks that might
also be by a goal, as in your retire-
ment portfolio or your children’s
was likely to stay that way for years
to come. However, I say ‘relatively
be on the recommended
education portfolio. undifferentiated’ because as our list at the time
At Value Research, we always long-time members would recall,
recommend goal-based portfolios we always had the concept of ‘All a mild one, a sweet one or a pun-
for mutual funds, simply because Weather’ stocks, even in the begin- gent one, that’s up to you.
we can recommend specific types ning. The name is self-explanatory, I believe that this is the
of funds for any type of goal. as is the role such stocks would approach that equity investors
However, stocks are a different play in a portfolio. Therefore, even want for themselves. Equity inves-
beast altogether. Since companies at that time, although that set of 10 tors tend to be (or become) a lot
are run not for investment goals stocks was not a portfolio, our more independent and self-willed
but according to their own busi- members could use the ‘All than mutual fund investors and it’s
ness goals, portfolio construction Weather’ label as guidance to tune best to give them everything they
in stocks is a very different kind their stock investments depending need to create a portfolio for them-
of activity. The ultimate goal is on their preference. selves but not try and microman-
obviously the same – for you to be From that point, almost four age what they will buy and sell.
able to meet your life’s financial years ago (how time flies!), our Do you agree with our
goals. However, the method is recommendation list has grown to approach?
more complex because of the as many as 46 stocks. However, the If you do, head to www.valuere-
nature of the investments. set is much more differentiated searchstocks.com. You will find a
Let’s see how our Value now and there are actually three total of 46 recommended stocks, of
Research Stock Advisor service subtypes that we classify as such. which 17 are ‘Best Buys Now’ and
deals with this. The stocks that are The three are Best Buys Now, All 13 are ‘All Weather’. Take your
recommended by the Stock Weather and Dividend Play. Since I pick and cook your dish. WI

Value Research Stock Advisor is a premium service where you get promising stocks along with their full analyses.
We also actively track the underlying companies for you and keep you posted on the major developments in
them, including when to sell a stock. Additionally, members get exclusive access to a range of tools and data
which they can use to study any other stock. You can subscribe to the service at www.valueresearchstocks.com.

September 2021 Wealth Insight 11

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 MARKET
MOVES MARKET REPORTER

Newsmakers of the month

Key business, economic and market events over the last one month
PM announces `100 trillion z MedPlus: `1,639 crore in India. Now the focus shifts
national infra master plan z Sapphire Foods (one of the back to the arbitration based in
During his Independence Day largest franchisees of Yum! Singapore, which will finally
speech, Prime Minister Narendra Brands): `1,150 crore decide the fate of the `24,713 crore
Modi announced a `100 trillion z VLCC Health Care: Fresh Issue deal.
infrastructure scheme that will of `300 crore and offer for sale
help create jobs and boost the of 89.22 lakh shares Rare split verdict in SAT delays
economy. The programme will be z Sterlite Power: `1,250 crore PNB Housing fundraise
named ‘Gati Shakti’ and is aimed The uncertainty over the equity
at increasing connectivity between RBI allows HDFC Bank to issue fund infusion in PNB Housing is
road, rail, air and waterways to new credit cards set to continue as the two-member
increase industrial productivity The eight-month ban imposed by Securities Appellate Tribunal gave
and making manufacturing in the RBI, which prevented HDFC a split verdict. This means that
India globally competitive. Bank from issuing new credit until a third member gives a
cards, has ended. HDFC Bank, the verdict, which could take further
Indian government removes market leader in credit cards, has time, the company would not be
retrospective taxes said that it intends to able to go ahead with its much-
The Indian government has aggressively focus on this awaited capital infusion.
decided to nullify its retrospective segment going forward. But the
taxation law. This is expected to ban against digital-business- SEBI relaxes IPO lock-in
solve disputes with entities like generating activities continues. requirements for promoters
Cairn and Vodafone, which were in New-age companies and financial
the midst of enforcing arbitration ;VWJYLKP[JHYKPZZ\LYZI`THY investors are set to benefit with
awards in foreign countries to RL[ZOHYLHUKU\TILYVMJHYKZ SEBI reducing the lock-in
recover dues from the Indian requirement for 20 per cent of
government. promoters’ shareholding from
three years to 18 months. At the
23.61
Sensex, Nifty touch all-time highs 28.29 [1.48] same time, the lock-in period for
[1.78]
On August 18, 2021, the Sensex non-promoter shareholders has
breached the 56,000 mark for the Market share (%) also been reduced from one year to
first time. The index scaled from a [Credit cards (cr)] six months and certain disclosure
level of 50,000 in January this year 19.17 requirements have been removed.
11.36 [1.20]
and took seven months to reach [0.71]
this milestone. The Nifty 50
17.57
New vehicle-scrappage policy
reached its all-time high of 16,700. [1.10] The government has launched the
National Automobile Scrappage
Key IPOs announced in August HDFC Bank SBI ICICI Bank Policy, which envisages, among
The IPO boom this year doesn’t Axis Bank Others other things, mandatory scrapping
seem to be losing momentum, with of all government-owned four-
the following companies wheelers after they have
announcing their IPOs in August Amazon wins court case against completed 15 years. Though
(until 20th) and tentative amounts Future Retail scrapping has not been made
to be raised. Amazon won a key legal battle in mandatory for private vehicles,
z PB Fintech (Policybazaar.com, its quest to prevent Reliance from they must pass a fitness test after
Paisabazaar.com): `6,017 crore taking over the Future Group 15 years of use. The scheme also
z Adani Wilmar (Fortune Oil): when the Supreme Court ruled proposes various incentives if an
`4,500 crore that the interim award by a owner voluntarily chooses to
z Nykaa: `4,000 crore foreign tribunal can be enforced scrap old private vehicles.

12 Wealth Insight September 2021

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 MARKET
MARKET REPORTER MOVES

BSE introduces additional

surveillance of small caps
designed to be at or above par
with globally benchmarked
ECONOMIC METRICS
BSE has introduced additional financial centres.
surveillance rules which curb the .+7NYV^[O
excessive price movement in Zomato reports a loss of `356 8 % change YoY
securities. As per the new rule, crore in Q1 0
the securities will have six Post its bumper-listing, Zomato -8
monthly, yearly, two-yearly and has announced its first quarterly
-16
three-yearly circuit filters. Post results, wherein it reported a
-24
this announcement, there was consolidated net loss of `356 crore
heavy selling in small and mid in Q1 FY22 against `100 crore loss -32
caps. Later, BSE clarified that this in the corresponding quarter last Mar 2019 Mar 2021
new rule is applicable to year. However, during the quarter,
companies which are listed only the company recorded its highest- 0UMSH[PVU!*VUZ\TLY7YPJL0UKL_
on its platform and have a market ever gross order value which
8 % change YoY
cap of less than `1,000 crore. increased by 37 per cent to `4,540
7
crore.
6
Overseas investments to become
easier New airline raises funds from 5
Indian investors will soon be able Rakesh Jhunjhunwala 4
to invest directly in international Billionaire investor Rakesh 3
stocks via NSE’s subsidiary Jhunjhunwala has decided to Jun 2019 Jul 2021
exchange in GIFT city. BSE also back the latest entrant in India’s
plans to offer a similar facility low-cost aviation industry, Akasa
.:;JVSSLJ[PVU
through its subsidiary ‘India Air. The airline has received $35
150000 In ` cr
International Exchange’. Gujarat million from the Big Bull and is
International Finance Tec-city expected to function as an ultra- 120000
(GIFT) is being developed as a low-cost carrier in a market that 90000
global financial and IT services has no profitable players at 60000
hub, a first of its kind in India, present. 30000
0
Jul 2019 Jul 2021

Vi’s troubles mount of `9,152 crore. Earlier this 059]Z<:+

Vodafone Idea’s problems don’t month, Kumar Mangalam Birla
80
seem to be ending anytime soon. stepped down as the company’s
77
In the first quarter of FY22, the director and non-executive
company lost almost 12.4 million chairman and offered to hand 74
subscribers, the most in the last over his stake for free to any 71
six quarters. Also, it posted a loss government or non-government 68
of `7,319 crore in Q1 on a revenue entity. WI 65
Aug 2019 Aug 2021
=P!9L]LU\LHUKSVZZLZ
15000 Revenue (` cr) Losses (` cr)
0UK\Z[YPHSHJ[P]P[`!0UKL_VM
0 0UK\Z[YPHS7YVK\J[PVU
150 % change YoY
-15000
100
-30000 50
0
-45000
-50
-60000 -100
Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Jun 2019 Jun 2021

September 2021 Wealth Insight 13

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 MARKET
MOVES STOCK STORY BHARTI AIRTEL

Survival of the fittest

Having survived the travails of Indian telecom, if there is one company that
exemplifies the Darwinian evolutionary theory, it’s Airtel

I
ndian telecom is a classic example of Debt-to-equity
the disruption in a booming industry. The company’s debt jumped post its acquisition of Zain’s
Africa operations in 2010 and has since kept going up.
Thanks to its high growth rate, at one
2.5
point, this sector had as many as 13
2.0
players, all competing on price. This led to
diminishing margins and profits for all 1.5
15-Oct-07 1.0
concerned, resulting in all but three `517
players exiting the scene. 0.5
Bharti Airtel was not just among the 0.0
initial entrants in the sector, it has also FY02 FY21
proved to be the most perseverant. The
JAN 2011
company enjoyed an initial phase of rapid
Launches 3G services in
growth, suffered intense competition, India. Growth expectations
made a big acquisition overseas, retained rise due to the increased
its turf despite the entry of Reliance data usage.
Industries and survived the price wars for
many years. However, the company’s
shareholders suffered in terms of the
dismal returns (about 6 per cent pa over
the last 10 years, as on August 18, 2021) the
stock generated.
During this period, its peer Vodafone-
Idea kept turning weaker. Recently, Kumar
Mangalam Birla offered his stake in
Vodafone Idea to the government or any
other willing entity for free. The woes of
Vodafone-Idea are likely to further fortify
JUN 2010
the position of Airtel. That might also Enters 15 African
drive the sector to become a duopoly. countries after
Here is a timeline of the key events in MAY 2010
buying Zain’s
the company’s history. WI Wins 3G spectrum in 13 circles stake for $9 bn,
Arul Selvan for `12,300 cr. Seven players financed with
vie for the spectrum. $8.3 bn of debt

JAN 2002
Launches an IPO priced
at `45 per share. Raises
`648 cr and is valued at
about `8,100 crore.

18-Feb-02
`20

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 MARKET
STOCK STORY MOVES
Revenue Net proÀt and operating margin
The company has shown a steady rise in revenues, 'XHWRLQWHQVHFRPSHWLWLRQWKHSURÀWVKDYHVKRZQOLPLWHG 13-Aug-21
thanks to the growth in the sector. growth, with losses in recent years. `637
120000 In ` cr 15,000z1HWSURÀW ` cr) z Operating margin (%) 50
10,000 45
100000 5,000 40
80000 0 35
-5,000 30
60000 -10,000 25
-15,000 20
40000 -20,000 15
20000 -25,000 10
-30,000 5
0 -35,000 0
FY02 FY21 FY02 FY21

Average revenue per user

26-Dec-17
Despite the boom in the sector, revenue per user has DEC 2017
been continously declining. Reliance Communication `498
1,000 In ` cr shuts down operations
after years of losses.
800 JUN 2019
Industry begins a phase of
600 consolidation. Airtel Africa raises
$750 mn by
400 simultaneously listing
200 on the London Stock
Exchange and
0
SEP 2016 Nigerian Stock
Dec 2001 Jun 2021
Reliance Jio enters. Exchange at a $3.9
The price of voice bn market cap. Stock
calls drops to zero drops 13% on debut.
FEB 2012 and data prices
Supreme court cancels 122 crash by more than
licences issued to 11 companies 90%.
for 2G operations. Airtel not FEB 2020
affected at all. Government approves
Bharti’s acquisition of
Tata Teleservices.
Telecom industry
JAN–MAR 2018 remains with just 3
Aircel and Uninor private players and
shut down all BSNL.
operations.
OCT 2019
23-Oct-18 The Supreme Court delivers verdict
`263 on AGR (adjusted gross revenues)
dues. Airtel to pay about `44,000
cr and Vodafone-Idea `58,000 cr.
29-Aug-12
`222

September 2021 Wealth Insight 15

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 MARKET
MOVES BIG MOVES

Large caps Price to earnings Net profit (` crore)

3M returns (%) 3Y avg RoE (%) 3Y earnings growth (%) 3M price (`) movement

2,701

63.4 47 982
Piramal Enterprises
With steady revenues, its profits grew 8 per cent in
Q1 FY22. Its acquisition of DHFL remains on track. 2.0 -39.6 1,653

2,841

61.4 42 1,281
Mphasis
Its Q1 FY22 profits increased by 23 per cent. Blackstone plans to
raise $1.1 billion for the part buyout. 20.5 12.1
1,761
3,196

53.9 42 1,241
MindTree
In Q1 FY22, the company’s profits grew 61 per cent and
revenues grew 20 per cent. 24.8 26.9 2,077

51.9 458 844

4,787
Apollo Hospitals
As occupancy levels increased, its Q1 FY22 profit was `489 crore
compared to a loss in the year-ago period. 7.5 31.9
3,152
1,413

48.2 28 4,762
Tech Mahindra
Its net profits increased by around 40 per cent YoY and
25 per cent sequentially in Q1 FY22. 20.2 6.8
953

45.8
4,071
Gland Pharma 67 –
The stock gained on the back of a 31 per cent YoY rise in Q1 FY22
net profit. 20.6 45.9 2,793

8,981

41.1 38 1,417
SRF
The stock reached new heights owing to 3.5 times revenue
growth of the technical-fibre segment in Q1 FY22. 19.8 42.3 6,365

726

37.3 29 1,693
Gujarat Gas
It reported a seven-fold increase in profits and a three-time
growth in revenue in Q1 FY22. 26.8 76.2
528
1,500

30.4 9 22,120
Tata Steel
1,150
Rising steel prices have improved the outlook for steel
companies in general. It also reduced its debts significantly. 8.8 6.2

-10.4 97 1,305
Adani Transmission
The group company’s stock prices dropped after reports of an
16.6 3.6 1,194 1,070
FII account freeze.

Our large-cap universe has 106 large companies, making the top 70 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in the last three months.
Data as on August 18, 2021.

16 Wealth Insight September 2021

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 MARKET
MOVES BIG MOVES

Mid caps Price to earnings Net profit (` crore)

3M returns (%) 3Y avg RoE (%) 3Y earnings growth (%) 3M price (`) movement

244

116.2 51 792
JSW Energy
It plans to enter the green hydrogen space and unlock
value by spinning off thermal power plants. 7.0 82.4
113
1,686

105.7 – -141
Gujarat Fluorochemicals
Its net profits more than doubled, as the company
reported 63 per cent revenue growth in Q1 FY22. – –
820
4,013

93.9 46 260
Lux Industries
Its quarterly profits in Q1 FY22 grew 73 per cent. It gave
guidance for double-digit growth for the year. 27.6 28.3
2,070
1,433

92.3 142 148

Happiest Minds Technologies
Its revenue grew 10 per cent and operating margins stayed
consistent in Q1 FY22. 55.7 143.2
745
1,193

82.7 27 371
Angel Broking
The company has decided to foray into the asset-management
industry and plans to apply for a mutual fund license. 21.7 40.1
653

77.1 14 927
Redington India 165
The stock rose as the company announced a 1:1 bonus
issue. 14.3 25.3
93
678

77.0 12 916
PNB Housing Finance
The stock surged following the board’s approval of `4,000 crore
capital infusion by the Carlyle Group and other investors. 12.8 -0.4 383

422

62.0 31 378
Birlasoft
Net profits for Q1 FY22 more than doubled, owing to steady
margins and small revenue growth. 15.2 10.9
260
203

59.7 35 407
Firstsource Solutions
The stock rose amid the rally in mid-cap stocks.
13.5 5.2 127

989

45.8 20 760
DCM Shriram
Its EPS increased by over two times in Q1 FY22. Rating
agency ICRA has upgraded its credit ratings from AA to AA+. 20.7 5.2 679

Our mid-cap universe has 226 mid-sized companies, making the next 20 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in the last three months.
Data as on August 18, 2021.

18 Wealth Insight September 2021

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 MARKET
BIG MOVES MOVES

Small caps Price to earnings Net profit (` crore)

3M returns (%) 3Y avg RoE (%) 3Y earnings growth (%) 3M price (`) movement

31

361.5 7 487
Brightcom Group
The company signed a letter of intent to acquire a digital-
marketing company having clients such as Netflix. 15.3 0.9
7

303.1
26
Andhra Cements – -205
The lender consortium invited expression of interest for the sale of
two cement plants of the company. – -187.4 6

16

266.9 199 4
Mishtann Foods
Its quarterly sales increased by 168 per cent and profits
increased by 3,420 per cent in Q1 FY22. 14.8 -16.6 4

51

241.8 – 0
RattanIndia Enterprises
The company is venturing into the electric-vehicle space by
acquiring a stake in two-wheeler maker Revolt Intellicorp. -0.1 24.4 15

65

216.5 255 9
Lloyds Metals and Energy
Iron and steel companies are benefiting from the rising
steel prices. 0 -6.5 21
398

214.5 9 167
Nahar Spinning Mills
In Q1 FY22, it posted `100 crore profits compared to a loss
in the year-ago period. Sales jumped by 2.5 times. -0.8 365.7
127

200.0 – -1,279
GTL Infrastructure 2
A jump in the consumption of data post-COVID is
benefiting telecom players. -105.1 11.9 1

172.3 – -1,246
Tata Teleservices (Mah) 35
The stock rose amid reports of Tata Group reviving the
company by seeking help in creating a super app. 0.0 23.3
13

126.1
727
Aditya Vision 35 143
In Q1 FY22, it reported growth in all metrics, with operating
profit increasing by 62 per cent and EPS doubling. 27.6 101.8
321

87.8
4,374
Vijay Solvex 20 66
Rising prices of edible oil have had a positive impact on this
Rajasthan-based mustard-oil processor. 10.9 31.9
2,329
Our small-cap universe (minimum market capitalisation `500 crore) has 710 small-cap companies, making the last 10 per cent of the total market capitalisation.
The list mentions the stocks that have fluctuated most wildly in the last three months. Data as on August 18, 2021.

September 2021 Wealth Insight 19

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 MARKET
MOVES INDEX WATCH

S&P BSE IT
The IT index is among the best performers over the last year and a half. As the pandemic struck and the
economic activity was halted, IT companies were among the least impacted. On the contrary, their
performance numbers improved. This improved performance is reflected in the index returns and
valuations, which are way above the median value.

2L`U\TILYZ 0UKL_TV]LTLU[ 0;:LUZL_4LKPHU

35000

32.6
Price to earnings
8.4
Price to book
28000

21000

14000

1.29
Dividend yield (%)
33.3
Market cap (` lakh cr)
7000

0
Sensex rebased to index
Aug ’16 Aug ’17 Aug ’18 Aug ’19 Aug ’20 Aug ’21

0UKL_^LPNO[Z  7YPJL[VIVVR]HS\L7)
9.0

 0UMVZ`Z 7.5
 
;*: 6.0
4.6
/*3;LJOUVSVNPLZ 4.5

 >PWYV
 3.0
 ;LJO4HOPUKYH
 1.5
4WOHZPZ Aug ’16 Aug ’17 Aug ’18 Aug ’19 Aug ’20 Aug ’21
3HYZLU ;V\IYV

4PUK[YLL
7LYZPZ[LU[:`Z[LTZ
7YPJL[VLHYUPUNZ7,
;H[H,S_ZP 42

6[OLYZ 36

30

24
=HS\H[PVUZKP]PKLUKZHUKYL[\YUZ 18.9
18
Dividend
Company name P/B P/E yield (%) 1Y return (%)
12
Tata Elxsi 18.7 66.4 1.1 327.5 Aug ’16 Aug ’17 Aug ’18 Aug ’19 Aug ’20 Aug ’21
A negative P/E indicates a loss
Persistent Systems 8.2 46.4 0.6 215.4
Mindtree 10.3 38.6 0.9 149.8
Mphasis 7.6 40.2 2.4 126.7
+P]PKLUK`PLSK
3.0%
Wipro 5.8 28.9 0.2 117.5
2.5
Larsen & Toubro Infotech 10.8 41.5 0.8 95.6
1.9%
Tech Mahindra 5.1 27.6 3.3 89.7 2.0

Infosys 8.9 35.5 1.6 78.0 1.5

HCL Technologies 4.8 26.7 0.9 56.2 1.0
Tata Consultancy Services 13.6 37.3 1.1 54.2 0.5
Data as on August 16, 2021 Aug ’16 Aug ’17 Aug ’18 Aug ’19 Aug ’20 Aug ’21

20 Wealth Insight September 2021

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3UHVHQWLQJ%DURGD%XVLQHVV&\FOH)XQGDQLQYHVWPHQWDSSURDFKEDVHGRQLGHQWLI\LQJWKHHFRQRPLFWUHQG7KHEXVLQHVVF\FOHVKDYH
SKDVHV5HFRYHU\*URZWK([SDQVLRQDQG&RQWUDFWLRQHDFKSKDVHRijHUVXQLTXH2SSRUWXQLWLHVDQG5HZDUGV'RPHVWLFHFRQRP\LV
VKRZLQJ LQLWLDOV VLJQV RI UHFRYHU\ DOWKRXJK WKH SDFH RI UHFRYHU\ KDV EHHQ UHODWLYHO\ VORZ +RZHYHU WKHUH DUH VHYHUDO LQYHVWPHQW
RSSRUWXQLWLHVZKLFKDUHHPHUJLQJ WKH%XVLQHVV&\FOH)XQGFRXOGFDSLWDOL]HRQWKHP
7RLQYHVWRUWRNQRZPRUHORJRQWRZZZEDURGDPIFRPRUFRQWDFW\RXU0XWXDO)XQG'LVWULEXWRUWRGD\

0XWXDO)XQGLQYHVWPHQWVDUHVXEMHFWWRPDUNHWULVNVUHDGDOOVFKHPHUHODWHGGRFXPHQWVFDUHIXOO\
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 Vis-à-vis

The gold financiers

Here is a competitive analysis of Manappuram Finance and Muthoot
Finance, two leading gold-loan companies in India
Manappuram Finance Muthoot Finance
Apart from gold loans, Manappuram is involved in With gold loans accounting for 90 per cent of its loan
other types of lending such as microfinance, vehicle book and around 99 per cent of its profits, Muthoot
finance, etc. But all these segments (33 per cent of the Finance is nearly a pure-play gold lender. The
loan book) are not as profitable as the gold segment. company’s larger size helps it get higher credit
Therefore, its market capitalisation is around 75 per ratings (AA+) and enables it to borrow at lower
cent lower than that of Muthoot, although interest rates. So, it enjoys higher profit margins.
Manappuram’s AUM (around `24,700 crore) is only 57 Better operational efficiency and lower bad loans
per cent lower than that of Muthoot. (GNPA of 0.88 per cent) are two positives.

Financials All numbers in ` cr Financials All numbers in ` cr

Net interest Net Net Market Gold AUM AUM Net interest Net Net Market Gold AUM AUM
income profit worth cap per branch (gold Loans) income profit worth cap per branch (gold Loans)

4,112 1,725 7,307 14,401 5.4 19,100 7,132 3,819 15,760 59,157 11.2 52,622

Price chart Price to book

500 Manappuram Finance Muthoot Finance 5 Manappuram Finance Muthoot Finance
400 4
300 3
200 2
100 1
0 Rebased to 100 0
Aug 16, 2016 Aug 16, 2021 Aug 16, 2016 Aug 16, 2021

29.0 27.4
27.7 1.9 0.74
27.8 3.8 1.01
13.0 14.2 ROE (%) Price to book Dividend yield (%)

Five-year annualised growth

37.18 36.36
Capital adequacy (%) Interest spread (%)
24.02 22.78
18.93 19.04

1.9 0.9 1.5 -

Assets under management Net interest income EPS
Gross non-performing assets (%) Net non-performing assets (%)
Balance sheet and profit-loss data as of FY21. Price related data as on August 16, 2021

!
The gold-loan industry is considered to be safer and more profitable than traditional lending.
Companies in this industry have managed to reach out to customers who are not covered by the
formal banking system. Minimum documentation, faster processing times, lower default rates and
higher recovery rates make them a sound bet during troubled times.

22 Wealth Insight September 2021

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‘Investing for your future by
investing in the future’
Thematic investing seeks to tap future trends and diversification by building portfolios based on more
hence aids in wealth creation, says Swarup Mohanty than one theme.
of Mirae Asset Mutual Fund. We also speak to him
about smart-beta ETFs, the newly launched Mirae What are your views on smart-beta ETFs? Amid the
Asset NYSE FANG+ ETF and how investors should active-vs-passive debate, do you think that the smart-
approach ETF investing. beta strategy will gain investor interest?
Smart beta refers to an indexing strategy which seeks to
What role do thematic ETFs play in one’s portfolio? use certain well-researched factors to select stocks and
Thematic investing is a forward-looking investment weigh stocks in order to create an index portfolio. The
approach, which attempts to capture future trends. It idea is to move away from a plain-vanilla index, where
seeks to embrace the changes we anticipate allocation of assets is simply based on market cap, and
happening in the world. It is often touted as investing use some intelligent factors or scheme to select and
for your future by investing in the future. It plays the allocate the money in supposedly a smarter manner.
following role in one’s portfolio: What was once perceived to be a source of alpha is
z Opportunity to take focused exposure in a secular now being converted into a smart-beta index product
theme like consumption or emerging that you can invest in or track using a low-cost
themes like electric vehicles, product such as ETFs. By such an investment,
e-commerce, etc. investors get an opportunity to avoid the fund-manager
z Thematic investing focuses on a risk, along with continuing to keep exposure intact to
selection of stocks to capitalise on some of the factors that the investor is keen on. Smart-
a future growth trend. Selecting a beta ETFs may lead to a portfolio with a more-targeted
few companies involved in risk-and-return profile and behaviour (consider low-
internet of things, blockchain or volatility investing or momentum investing) than what
renewable energy, for example, traditional investing provides. The strategies involved
could yield huge results should still passively follow indices but take things like value,
those industries develop as liquidity, quality and momentum into consideration.
expected. Smart-beta ETFs have already gained popular
z Thematic-investing momentum across the globe. As at the end of June
strategies are also highly 2021, there were 1,325 smart-beta equity ETFs/ETPs
customisable and can vary (exchange-traded products), managing assets of $1.24
significantly based on an trillion (almost 14 per cent of the total ETF market). In
investor’s preferences. the last five years, the total AUM under smart-beta
While thematic ETFs has grown at a CAGR of 22.8 per cent per annum.
funds are highly However, in India’s context currently, since the overall
concentrated, ETF space is still evolving, smart-beta strategy ETFs
investors can are at the very minimal and are expected to grow in
still achieve the coming years, just like they have evolved
elsewhere in global markets.

One invests in mutual funds because one doesn’t want

:^HY\W4VOHU[` to take active calls on stocks/sectors. However, with
CEO, Mirae Asset Mutual Fund sectoral/thematic funds and ETFs, the decision to
invest in a particular sector/theme is left in the hands

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 An Investors Education Initiative by

of investors. Do you think that these funds make sense Further, Since the index tracks performance of only
for investors, especially the ones who do not have 10 stocks, it is equal-weighted in order to provide
much knowledge of the market? diversification to mitigate risk arising from
Portfolio construction generally should imbibe the concentration towards few stocks. Generally, when a
policy of following core and satellite portfolio strategy portfolio is tracking the performance of a limited
or approach. Broad-based sectoral diversified mutual number of stocks, it is prudent to use equal-weighing
funds or ETFs are an excellent tool for building as opposed to, let’s say, market-cap weighing to ensure
strategic asset allocation. increased diversification and capture the performance
Sectoral/thematic funds or ETFs can play an of each stock in a focused portfolio.
important role in deciding your satellite-portfolio Historically, we have seen that the FANG+ index
strategy. For instance, if you are an active investor, you has higher volatility vis-à-vis Nifty 50 and NASDAQ
can form your core portfolio via active funds and you 100, but for each unit of risk, it has compensated
can use sectorial/thematic ETFs as a satellite portfolio. investors well enough.
You can also use ETFs tracking specific sectors to
add to your portfolio if you want to take a tactical call The most-traded ETFs in India are the ones that track
or for that matter, if a particular sector is under- the major indices such as the Nifty and the Sensex. Do
represented in your fund manager’s portfolio. For you believe that there may be a liquidity constraint
instance, if your active fund portfolio is currently that sectoral or smart-beta ETFs may face? Will this
under-representing a particular sector that you believe also cause an issue in the efficient tracking of the
might do well, in such a case, you can take exposure to underlying indices?
such a sector via ETFs. First and foremost, there are two ways of buying an
Also, long-term structural and mega-trend themes ETF. One is through the exchange, where you can buy
that are shaping our lives, such as ESG, technological as small as one unit. The other way is through the
advancement, healthcare and genomic revolution, etc., AMC, where you can buy only in specific lots (creation
can be tracked using ETFs/funds, hence aiding your unit). The second method is generally adopted by large
asset-allocation strategies. or institutional investors.
Buying ETFs on an exchange is similar to buying
ETFs are considered a great tool to diversify globally. stocks, with certain things to keep in mind such as
You have also recently launched an NYSE FANG+ ETF, when you buy through the exchange, check the order
which invests in top 10 tech names. Does it not add book and also check the price quoted on the exchange
concentration risk in terms of the number of securities with the indicative NAV (I-NAV) published on AMC’s
and sector? website. I-NAV will help you in knowing whether you
The intent of the fund is to provide focused and are buying it at right price or not on the exchange as
concentrated exposure to these 10 big tech I-NAVs are the real-time price of the portfolio,
companies. Although on the face of it, it looks like you excluding any transaction charges.
are investing in merely 10 names but these 10 As far as liquidity is concerned, an ETF can be as
companies are engaged in multiple line of businesses. liquid as its underlying constituents. In case of the
For instance, since their inception, these companies Nifty 50 or Sensex 30, you generally don’t find
have acquired/invested in 1,000+ companies liquidity as constraints because the underlying stocks
representing different businesses, segments and are also liquid and hence track the indices efficiently.
opportunities. Globally, there are only a handful of Similarly, the liquidity of sectoral or smart-beta ETFs
companies which are leaders in their respective will depend upon the underlying of such indices and
domain and are also investing significantly in both relatively, the tracking error in such cases may be
R&D and external investments to grow their portfolio slightly higher than that in normal broad-based
of products and services. indices. WI

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.
Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.

September 2021 Wealth Insight 25

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 WORDS WORTH
WISDOM

‘You are rich if money you

refuse tastes better than
money you accept’

.ASSIMÖ.ICHOLASÖ4ALEBÖ
STARTEDÖHISÖCAREERÖASÖAÖ
DERIVATIVESÖTRADERÖONÖ7ALLÖ
3TREETÖ(EÖISÖAÖMATHEMATICALÖ
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OFÖ0ROCRUSTESl ÖANDÖk3KINÖINÖ
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26 We
26 Wealth
Weal
a th Ins
Insight
nsight September 2021
ns
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 WORDS WORTH
WISDOM

Life is the cumulative

The three most harmful effect of a handful Many want to learn
addictions are heroin, of series of how to memorize
carbohydrates, and a significant shocks. things; few seek that
monthly salary. rare ability to forget.

The longer one goes You can’t predict in

The key to wealth is that
without a market general, but you can
it doesn’t matter. Once
trauma, the worse the predict that those who
you’ve had it, you don’t
rely on predictions are
think anything of it; you damage when taking more risks, will
can wear cheap watches. commotion occurs. have some trouble,
perhaps even go bust.
Why? Someone who
An idea starts to be We favor the sensational predicts will be fragile
interesting when you get and the extremely visible. to prediction errors. An
scared of taking it to its This affects the way we overconfident pilot will
logical conclusion. judge heroes. There is eventually crash the
little room in our plane. And numerical
consciousness for heroes prediction leads people
who do not deliver visible to take more risks.
The difference between results—or those heroes
technology and slavery who focus on process
is that slaves are fully rather than results. You may not get rich
aware that they are by being honorable;
not free. but you will probably
Not everything that stay rich by being
happens happens for a
reason, but everything
upright.
Wind extinguishes a that survives survives for
candle and energizes fire. a reason.
Likewise with People focus on role
randomness, uncertainty, models; it is more
chaos: you want to use effective to find
them, not hide from them. Freedom is always antimodels – people
You want to be the fire associated with risk you don’t want
and wish for taking, whether it leads to resemble when you
the wind. to it or comes from it. grow up.
September 2021 Wealth Insight 27
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 MARKET
C MPASS

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 March 2021
and June 2021

Increase in stake
Mutual funds FIIs
Large caps Change Change
Company name Sector Jun ’21 Mar ’21 (% pt) Company name Sector Jun ’21 Mar ’21 (% pt)
SBI Life Insurance Insurance 8.6 5.9 2.7 Piramal Enterprises Healthcare 33.3 29.1 4.2
Hero MotoCorp Automobile 6.3 4.7 1.6 SBI Cards and Payment Finance 12.5 8.6 3.9
Alkem Laboratories Healthcare 8.4 6.9 1.5 Tata Steel Iron & Steel 21.9 18.6 3.3
Mphasis IT 13.6 12.3 1.3 Colgate-Palmolive FMCG 18.6 16.9 1.7
Mindtree IT 8.7 7.6 1.1 Cipla Healthcare 24.8 23.3 1.5

Mid caps Change Change

Company name Sector Jun ’21 Mar ’21 (% pt) Company name Sector Jun ’21 Mar ’21 (% pt)
Zee Entertainment Media 8.1 3.7 4.4 Coforge IT 19.4 14.6 4.8
TVS Motor Company Automobile 15.8 11.5 4.3 Max Financial Services Finance 26.3 23.1 3.2
CG Consumer Electricals Consumer Durables 31.5 27.9 3.6 Aarti Industries Chemicals 11.9 8.7 3.2
Max Healthcare Healthcare 7.9 4.8 3.1 IDFC First Bank Bank 15.1 11.9 3.2
V-Guard Industries Capital Goods 13.0 10.4 2.6 Voltas Consumer Durables 17.2 14.4 2.8

Small caps Change Change

Company name Sector Jun ’21 Mar ’21 (% pt) Company name Sector Jun ’21 Mar ’21 (% pt)
Alicon Castalloy Automobile 9.5 0.0 9.5 Suryoday SFB Bank 7.7 0.0 7.7
Zensar Technologies IT 9.2 1.6 7.6 5Paisa Capital Finance 25.1 17.5 7.6
MTAR Technologies Capital Goods 21.0 14.1 6.9 Kiri Industries Chemicals 30.4 24.0 6.4
Brigade Enterprises Realty 23.4 19.0 4.4 Newgen Software IT 20.5 14.6 5.9
Suryoday SFB Bank 6.1 2.1 4.0 Paisalo Digital Finance 20.0 14.2 5.8

28 Wealth Insight September 2021

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 MARKET
C MPASS

Decrease in stake
Mutual funds FIIs
Large caps Change Change
Company name Sector Jun ’21 Mar ’21 (% pt) Company name Sector Jun ’21 Mar ’21 (% pt)
Godrej Consumer Products FMCG 0.2 2.2 -2.0 Vedanta Non-Ferrous Metals 10.3 16.3 -6.0
Lupin Healthcare 11.4 13.1 -1.7 SBI Life Insurance Insurance 27.2 30.5 -3.3
Jindal Steel & Power Iron & Steel 12.4 13.8 -1.4 Hero MotoCorp Automobile 35.0 37.2 -2.2
Cipla Healthcare 13.4 14.6 -1.2 Adani Ports and SEZ Logistics 15.7 17.9 -2.2
Britannia Industries FMCG 3.8 4.8 -1.0 Tech Mahindra IT 36.2 38.3 -2.1

Mid caps Change Change

Company name Sector Jun ’21 Mar ’21 (% pt) Company name Sector Jun ’21 Mar ’21 (% pt)
Poonawalla Fincorp Finance 4.0 7.9 -3.9 Poonawalla Fincorp Finance 5.3 18.9 -13.6
Happiest Minds Tech IT 3.3 6.6 -3.3 Zee Entertainment Media 57.5 64.2 -6.7
Angel Broking Finance 9.1 11.9 -2.8 Jubilant Ingrevia Healthcare 18.7 24.3 -5.6
PCL Crude Oil 11.7 14.2 -2.5 Granules India Healthcare 18.4 23.1 -4.7
Cholamandalam Inv Finance 17.9 20.3 -2.4 Escorts Automobile 21.3 26.0 -4.7

Small caps Change Change

Company name Sector Jun ’21 Mar ’21 (% pt) Company name Sector Jun ’21 Mar ’21 (% pt)
Praj Industries Capital Goods 6.8 14.7 -7.9 Cerebra Integrated Trading 0.0 23.6 -23.6
Gufic Biosciences Healthcare 3.2 8.2 -5.0 Hindustan Media Ventures Media 4.0 13.8 -9.8
Jagran Prakashan Media 11.8 16.6 -4.8 Thyrocare Technologies Healthcare 13.2 20.5 -7.3
Rane Holdings Finance 5.9 10.6 -4.7 Rossell India Agri 0.7 7.3 -6.6
Anup Engineering Capital Goods 2.6 7.3 -4.7 Kolte-Patil Developers Realty 5.3 9.9 -4.6

Top 10 holdings of mutual funds Top 10 holdings of FIIs

Market % of Amount % of Amount
cap equity invested Market cap equity invested
Company name Sector (` cr) held (` cr) Company name Sector (` cr) held (` cr)

KNR Constructions Infrastructure 8,019 32.6 2,614 HDFC Finance 4,80,072 72.2 3,46,708
Federal Bank Bank 17,893 32.6 5,831 Shriram Transport Finance Finance 34,807 59.6 20,759
CG Consumer Electricals Consumer Durables 29,503 31.5 9,287 Zee Entertainment Media 17,438 57.5 10,020
City Union Bank Bank 11,230 31.0 3,476 Apollo Hospitals Healthcare 57,870 53.2 30,804
Greenply Industries Const Materials 2,130 30.8 656 Axis Bank Bank 2,33,268 52.5 1,22,442
Equitas Holdings Finance 4,175 29.8 1,243 IndusInd Bank Bank 80,584 52.1 41,944
Techno Electric Infrastructure 3,176 29.6 941 ICICI Bank Bank 4,80,488 48.0 2,30,778
DCB Bank Bank 2,833 27.0 765 Kotak Mahindra Bank Bank 3,53,098 42.8 1,51,020
Ahluwalia Contracts Realty 2,442 26.6 649 Jubilant FoodWorks FMCG 48,472 41.7 20,223
PNC Infratech Infrastructure 7,544 26.5 2,001 Redington Trading 12,506 41.2 5,155
M-cap as on August 11, 2021. Other data as of June 2021.

September 2021 Wealth Insight 29

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Change in promoter stake

Companies that have seen a rise or decline in promoter stake in Q1 FY22

M
any investors track the change in promoter one should also be mindful that promoter holdings can
holding. A significant rise in promoter holding be impacted by corporate actions also. For instance, a
may mean that the promoter is bullish about rights issue, a merger, a reclassification of promoter
his company. On the other hand, a significant fall in can all cause the reported promoter holding to change.
promoter stake is taken as a negative development. Hence, dig deeper into the following companies to make
However, while tracking the change in promoter stake, sense of the change in promoter stake. WI

9PZLPUWYVTV[LYZ[HRL
Companies where the promoter stake in Q4 FY21 was at least 25 per cent and has risen by at least 3 percentage points in Q1 FY22
Promoters’ stake (%)
Company name Sector M-cap (` cr) Jun-21 Mar-21 Increase in promoter holdings (% pt) 3M return (%)

United Breweries Alcohol 36,662 72.7 57.7 15.0 16.5

Vedanta Non - Ferrous Metals 1,25,065 65.2 55.1 10.1 13.7
Venus Remedies Healthcare 632 40.8 35.9 4.9 41.7
Lux Industries Textile 12,092 74.4 69.5 4.9 95.4
Steel Exchange Iron & Steel 724 49.8 45.0 4.8 4.4
Jagran Prakashan Media & Entertainment 1,650 69.4 65.8 3.6 10.2
Nava Bharat Ventures Power 1,565 49.1 45.5 3.6 46.6
Central Bank Of India Bank 17,883 93.1 89.8 3.3 63.8
Insecticides Chemicals 1,471 72.2 68.9 3.3 55.1
M-cap more than `500 crore and as on August 16, 2021. Returns as of June 2021.

-HSSPUWYVTV[LYZ[HRL
Companies where the promoter stake in Q4 FY21 was at least 25 per cent and has fallen by at least 3 percentage points in Q1 FY22
Promoters’ stake (%)
Company name Sector M-cap (` cr) Jun-21 Mar-21 Decrease in promoter holdings (% pt) 3M return (%)

JSW Ispat Special Products Iron & Steel 1,733 53.2 74.4 -21.2 35.8
Lloyds Metals & Energy Iron & Steel 2,575 45.0 65.9 -20.9 353.6
Federal-Mogul Goetze Automobile & Ancillaries 1,557 75.0 94.9 -19.9 10.4
Accelya Solutions IT 1,895 74.7 89.3 -14.6 33.1
Punjab Alkalies & Chem Chemicals 562 34.6 48.9 -14.3 -12.3
Asian Granito India Construction Materials 560 26.1 38.0 -11.9 17.0
Hathway Cable & Datacom Telecom 4,354 75.0 86.6 -11.6 2.0
Newgen Software Tech IT 4,086 55.2 65.7 -10.5 113.1
Coforge IT 28,952 55.7 64.0 -8.3 41.5
Indian Bank Bank 16,371 79.9 88.1 -8.2 22.5
Orchid Pharma Healthcare 1,690 90.0 98.1 -8.1 -64.6
6KUHH*OREDO7UDGHÀQ 7UDGLQJ     
Alicon Castalloy Automobile & Ancillaries 1,294 55.9 62.6 -6.7 35.3
Dynemic Products Chemicals 627 29.7 35.8 -6.1 -10.3
Union Bank Of India Bank 23,922 83.5 89.1 -5.6 10.5
Tilaknagar Industries Alcohol 565 49.2 54.7 -5.5 22.4

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Promoters’ stake (%)
Company name Sector M-cap (` cr) Jun-21 Mar-21 Decrease in promoter holdings (% pt) 3M return (%)

Parag Milk Foods FMCG 1,193 40.8 46.2 -5.4 22.6

Shalby Healthcare 2,039 74.1 79.5 -5.4 69.7
Balu Forge Industries Capital Goods 1,852 64.6 69.9 -5.3 7.4
Capacit’e Infraprojects Realty 1,448 38.6 43.8 -5.2 -4.7
TVS Motor Company Automobile & Ancillaries 25,574 52.3 57.4 -5.1 5.3
HDFC Life Insurance Co Insurance 1,36,194 53.8 58.9 -5.1 -0.6
Dhanuka Agritech Chemicals 4,146 70.0 75.0 -5.0 34.1
Safari Industries Miscellaneous 1,740 50.4 55.3 -4.9 7.0
Dilip Buildcon Realty 7,447 70.2 75.0 -4.8 -3.6
5Paisa Capital Finance 1,430 30.0 34.5 -4.5 60.1
Karda Constructions Realty 1,371 58.2 62.7 -4.5 46.2
Rossari Biotech Chemicals 7,436 68.7 72.7 -4.0 11.0
Brigade Enterprises Realty 7,175 44.1 48.0 -3.9 5.0
Inox Leisure Media & Entertainment 3,948 43.6 47.4 -3.8 10.6
Punjab National Bank Bank 41,236 73.2 76.9 -3.7 10.9
Kellton Tech Solutions IT 503 52.2 55.9 -3.7 -9.1
Kiri Industries Chemicals 1,839 38.0 41.6 -3.6 33.3
Rushil Decor Paper 514 55.0 58.5 -3.5 26.3
Wabco India Automobile & Ancillaries 13,829 77.0 80.4 -3.4 7.2
IDFC First Bank Bank 27,855 36.6 40.0 -3.4 -5.0
Hindustan Copper Non - Ferrous Metals 13,084 72.8 76.1 -3.3 14.9
Paisalo Digital Finance 2,534 40.6 43.8 -3.2 -22.4
Advanced Enzyme Tech Healthcare 4,290 52.3 55.4 -3.1 17.1
Solara Active Pharma Healthcare 6,101 41.1 44.1 -3.0 20.2
M-cap more than `500 crore and as on August 16, 2021. Returns as of June 2021.

Pledging tracker
Companies that have seen a rise or decline in promoter pledging in Q1 FY22

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

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0UJYLHZLPUWSLKNPUN
Companies in which promoter pledging has gone up by 10 percentage points and the minimum promoter stake is 25 per cent
M-cap Pledged stake (%) Increase in Promoter 3M stock Debt to
Company name Sector (` crore) Jun-21 Mar-21 pledging (% pt) stake (%) return (%) Z-Score F-Score equity
Nectar Lifesciences Healthcare 674 100.0 0.0 100.0 55.8 108.8 2.1 6 0.8
Steel Exchange India Iron & Steel 724 82.0 0.0 82.0 49.8 4.4 -0.8 7 1.4
Kuantum Papers Paper 734 78.9 0.0 78.9 70.3 10.7 1.9 4 0.8
Orchid Pharma Healthcare 1,690 32.7 0.0 32.6 90.0 -64.6 3.0 7 0.7
Johnson Controls - Hitachi Consumer Durables 6,015 32.3 0.0 32.3 74.3 -16.6 5.4 7 0.0
Kanoria Chemicals & Ind Chemicals 668 29.6 0.0 29.6 74.4 53.8 1.8 3 0.8
HLV Hospitality 538 20.1 0.0 20.1 47.3 63.0 5.8 8 0.1
Wockhardt Healthcare 5,529 34.4 18.7 15.7 69.7 21.0 2.2 4 0.7
Cigniti Technologies IT 1,494 12.9 0.0 12.9 37.2 85.6 17.5 6 0.0
Patel Engineering Infrastructure 818 99.5 88.1 11.4 56.2 48.9 2.0 5 1.0
JSW Holdings Finance 5,537 17.6 6.5 11.1 61.4 22.5 0.0 0 0.0
Min M-cap `500 crore. For explanation of Z-score and F-score, see the key terms in the ‘Stock Screen’ section of this magazine. M-cap as on August 16, 2021. Returns as of June 2021.

+LJYLHZLPUWSLKNPUN
Companies in which promoter pledging has come down by 10 percentage points and the minimum promoter stake is 25 per cent
M-cap Pledged stake (%) Decrease in Promoter 3M stock Debt to
Company name Sector (` crore) Jun-21 Mar-21 pledging (% pt) stake (%) return (%) Z-Score F-Score equity

India Glycols Chemicals 2,246 0.0 83.6 -83.6 61.0 46.2 1.8 7 0.8
Deepak Fert & Petrochem Chemicals 4,776 31.9 76.9 -45.0 53.1 68.7 2.4 8 0.9
Aditya Vision Retailing 968 0.0 40.9 -40.9 73.7 220.5 6.3 6 1.5
Ravindra Energy Power 606 11.2 44.9 -33.6 74.6 36.1 0.1 7 1.0
Parsvnath Developers Realty 607 35.8 64.1 -28.3 69.1 60.2 0.4 5 13.9
Nath Bio-Genes Agri 654 15.2 41.0 -25.8 41.0 21.3 4.5 5 0.2
Brightcom Group IT 3,229 18.7 31.9 -13.2 36.8 179.0 14.7 6 0.0
Asian Granito Construction Materials 560 0.0 12.3 -12.3 26.1 17.0 2.3 9 0.4
Elecon Engineering Capital Goods 2,002 11.3 23.5 -12.2 59.2 102.0 2.7 8 0.3
Optiemus Infracom Trading 1,257 23.8 33.9 -10.1 74.9 30.0 6.1 4 0.3
Min M-cap `500 crore. For explanation of Z-score and F-score, see the key terms in the ‘Stock Screen’ section of this magazine. M-cap as on August 16, 2021. Returns as of June 2021.

All you need to know to stay

ahead with your mutual
fund investments
https://shop.valueresearchonline.com/

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Tracking IPOs
Here is how the S&P BSE IPO index has performed over the last one year
and how the biggest IPOs have fared

HIGHEST 0760UKL_]Z[OL:LUZL_ HIGHEST

LISTING-DAY GAIN The IPO index has outperformed the Sensex over the last one year. SUBSCRIBED IPO
Chemcon Speciality MTAR Technologies
115% 250 z IPO index z Sensex 200.8 TIMES
HIGHEST 225
LISTING-DAY LOSS LOWEST
SUBSCRIBED IPO
Nuvoco Vistas
200 Macrotech Developers
-17.4% 1.4 TIMES
175 192
HIGHEST
POST-LISTING GAIN 150 143 BIGGEST
Gland Pharma IPO

329.5% 125 Zomato

HIGHEST 100
`9,375 cr
POST-LISTING LOSS
Rebased to 100 TOTAL SUM
Suryoday Small Fin 75 RAISED
-50.0% August 2020 August 2021
`62,109 cr
;VW076ZI`PZZ\LZPaL
Subscription Issue size Issue Listing price Listing Current Change post Sensex Current
Company name ratio (times) (` cr) price (`) Listing date (`) gain (%) price (`) listing (%) change (%) P/E

Zomato 38.3 9,375 76 23-Jul-2021 115 51.3 127 10.4 4.9 -

Sona BLW Precision 2.3 5,667 291 24-Jun-2021 302 3.9 445 47.2 5.4 126.5
Nuvoco Vistas 1.7 5,089 570 23-Aug-2021 471 -17.4 531 12.7 0.0 76.1
IRFC 3.5 4,633 26 29-Jan-2021 25 -3.8 23 -9.0 20.0 0.8*
Gland Pharma 2.1 4,536 1,500 20-Nov-2020 1,701 13.4 3,870 127.5 26.6 65.1
CarTrade Tech 20.3 2,999 1,618 20-Aug-2021 1,600 -1.1 1,579 -1.3 0.4 75.4
Macrotech Developers 1.4 2,500 486 19-Apr-2021 439 -9.7 811 84.7 15.9 950.1
CAMS 47.0 2,244 1,230 01-Oct-2020 1,518 23.4 3,073 102.5 43.6 67.9
Devyani International 116.7 1,858 90 16-Aug-2021 141 56.7 115 -18.7 0.0 -
Glenmark Life Sciences 44.2 1,552 720 06-Aug-2021 751 4.3 677 -9.9 2.4 24.7
UTI AMC 2.3 1,515 554 12-Oct-2020 490 -11.5 1,076 119.5 36.9 25.2
Krsnaa Diagnostics 64.3 1,225 954 16-Aug-2021 1,025 7.4 886 -13.6 0.0 15.7
KIMS 3.9 1,189 825 28-Jun-2021 1,009 22.3 1,253 24.2 5.3 51.4
Indigo Paints 117.0 1,160 1,490 02-Feb-2021 2,608 75.0 2,564 -1.7 11.6 163.2
Home First Finance 26.7 1,156 518 03-Feb-2021 612 18.2 559 -8.6 10.5 3.5*
*P/B value. Price data as on August 23, 2021.

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 ANALYST’S
DIARY

Play the gold rush through

shovel suppliers
With vehicles steadily turning into ‘smartphones on wheels’, the pure-play
software integrator seems to have a long runway for growth

T
he coming decade is likely to witness the blind-spot detection, etc., to avert accidents.
automotive industry undergoing a sea change. Shared: This trend revolves around on-demand
The catalysts for this change will be four services like Ola and Uber driven by consumers’
mutually reinforcing trends – connected, preference for avoiding an outright purchase.
autonomous, shared and electric (CASE). Electric: This trend has emerged on the back of
Connected: Vehicles are starting to communicate with growing environmental concerns, rising fuel costs
each other and other sources while travelling. It and the advancement in energy storage and mix,
enables diagnostics, over-the-air updates, payments, which has significantly lowered the cost of
maps, infotainment and more. renewable energy.
Autonomous: This trend focuses on advanced driver- All these trends have transformed vehicles into
assistance features, such as reverse park assist, ‘smartphones on wheels.’ At the core of the
automobile now lies electronics in the forms of
electronic control units (ECUs), sensors and
(\[VUVTV\ZKYP]PUNSL]LSZ>OLYLHYL^L[VKH`& advanced chipsets that work with millions of lines of
codes. The traditional forte of original equipment
manufacturers (OEMs) has been disrupted.
This basically means embedding software-driven
electric and electronic architecture into the
traditional automotive framework. This megatrend is
being supported by a significant increase in the
speed of data transfer and regulatory
pronouncements with an emphasis on clean energy.
This trend has led to the emergence of pure-play
software (software-only) companies, which specialise
in coding and could integrate these codes into the
hardware. It enables OEMs to implement software
features fast while ensuring high-quality, first-time-
right delivery and keeping costs at the minimum.
The relevance of computer codes to the modern-
day automotive fleet could be gauged from the chart
‘Software in mobility – complexity in code is
Source: Deloitte research, SAE International 2014. growing’:

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DIARY

,SLJ[YVUPJZZ`Z[LTHZWLYJLU[VM[V[HSJHYJVZ[
5% 10% 15% 22% 35% 50%

1970 1980 1990 2000 2010 2030 (forecast)

Chart: Mark Montgomery. Source: Deloitte Touche Tohmatsu Limited.

(RL`ILULÄJPHY` :VM[^HYLPUTVIPSP[`JVTWSL_P[`PUJVKL
KPIT Technologies, a Pune-headquartered pure-play PZNYV^PUN
IT services company, solely focuses on developing
automotive software. KPIT deeply engages with Modern high-end car 100m
automotive manufacturers, understands design
specifications and develops software, which are Facebook 60m
then embedded in the automotive to enhance its Windows Vista 50m
functionalities. Having experience of more than two Large Hadron Collider
decades in embedded software for automotive, the
company came into its present avatar as a pure-play Boeing 787
automotive-focused entity in 2018 by demerging from Android

g
rivin
its parent entity, whose remaining verticals were Google Chrome

us D
merged with Birlasoft.
Linux Kernel 2.6.0

Aut 3 0 0 m
mo
KPIT, which counts 12 out of the top 15 OEMs
Mars Curiosity Rover

ono
globally as its customers, has its codes already
powering more than 10 million vehicles and currently Hubble Space Telescope
the
runs more than 300 vehicle-production programs.
F-22 Raptor
with
Financially, KPIT is on a strong wicket, churning
regular streams of cash from operations and having Space Shuttle
minimal capital-expenditure requirements, low-
Source: Electronicdesign.com
working capital, net cash and the equivalent of `879
crore (9 per cent of market capitalisation). It is all set
to achieve its medium-term goal of doubling its
270;;LJOUVSVNPLZ!2L`MPUHUJPHSZ

`9,899 cr `628 cr
revenue to $500 million, with a 16–18 per cent
operating margin while maintaining a return on
capital of more than 25 per cent.
Giving credibility to its growth trajectory are the Market-cap &DVKÁRZVIURPRSHUDWLRQV
company’s estimates going into this decade. As
compared to the auto sales annualised growth rate of
3 per cent between 2020–2030 (McKinsey & Company),
the automotive software growth is expected to be
13.2% 0
Return on equity Debt-equity ratio
around 14 per cent per annum over the coming

15.9% 26.3%
decade.
As in the California gold rush of 1849, the
maximum money was not made by the gold miners
but by the suppliers of shovels, tents, medicines, Operating margin 1Y TTM earnings growth
food, axes, etc., to those miners. Why not take cues
from history and invest in a manner favourable to
risk-reward through the shovel (focused automotive
software) supplier to an industry which otherwise
357.1% 56.0
1Y stock return P/E
could witness a huge cash burn over the coming
decade. WI Data as on August 18, 2021

September 2021 Wealth Insight 35

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 ANALYST’S
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Feeling low about low margins?

Low operating margins should themselves not be the reason to filter out a
company. Here are some promising companies with low margins.

A
t the outset, a business that earns a low
operating (earnings before interest and tax or
EBIT) margin is considered bad. Well, is that
always correct? Going by this yardstick, you are
eliminating retail (Avenue Supermarts, Trent),
staffing (SIS, TeamLease), contract manufacturers
(Dixon, Amber), logistics (Blue Dart Express, VRL
Logistics) players from your screener, as they fit in
the category of low-margin businesses. More
importantly, you are depriving yourself of the
opportunity to participate in some of the best secular
up-trending sectors in India. Interestingly, many of
n
these stocks have already been multibaggers in the Low operating margin tio
last few years. Competiti
on peti
m
Co
So, where does the disconnect lie? Intuitively, low
EBIT businesses should have less profits left over for
the equity shareholders after accounting for interest Moat/special
and income taxes. But as we will see now, it is this
High ROCE advantage makes High turnover
low EBIT that is the most attractive feature and it possible per unit capital
allows fortunes to be built. To understand how, it is
useful to see the mechanics of the return on capital.
Warren Buffett said, “The ideal business is one
that earns very high returns on capital and that ion
petit
keeps using lots of capital at those high returns. That m
Co Competition
becomes a compounding machine.”
9L[\YUVUJHWP[HS$,)0;JHWP[HSLTWSV`LK
,)0;JHWP[HSLTWSV`LK$,)0;ZHSLZíZHSLZJHWP[HS
LTWSV`LK$6WLYH[PUNTHYNPUíJHWP[HS[\YUV]LY *VTWHUPLZ^P[OSV^VWLYH[PUNTHYNPU
Hence, even if a business earns a low return on HUKOPNOJHWP[HS[\YUV]LY
capital, if somehow it can enhance its capital
M-cap Op Sales/
turnover (sales per unit of capital employed), it could
Company Sector (` cr) ROCE (%) margin (%) capital
create that phenomenon of a high return on capital
TeamLease Services Services 7,111 14.8 2.0 7.5
and in turn emerge as a compounder.
The ability to operate at a thin margin can only be Redington Services 12,854 21.8 2.3 10.6
enjoyed if the company has some special advantage Radico Khaitan FMCG 12,078 18.2 3.6 5.0
(moat). This edge could come from the process, IFB Industries Cons Durables 3,801 14.2 3.8 3.0
technology or people. When done repeatedly, over time, NBCC (India) Construction 7,848 16.4 4.4 3.8
this transforms into a flywheel, gathers momentum
Blue Star Cons Durables 7,871 16.3 4.9 3.2
and forms a self-powered giant wheel. What follows
then is above-normal profits for the successful players ABB Power Products Engineering 7,706 19.0 5.0 3.8
year-after-year and a decimated competition. Mahindra Holidays Services 4,058 57.9 5.4 8.6
The idea then is to spot such companies which could Dixon Tech Engineering 24,037 27.5 5.6 5.0
be inherently earning low margins but possess some Whirlpool of India Cons Durables 26,074 17.2 6.2 2.1
special advantages which are applied to increase
APL Apollo Tubes Metals 20,253 27.8 7.0 3.8
turnover by keeping their capital requirements low. If
Data as of March 2021. For ABB, trailing 12 months numbers are given.
such is the case, you have a winner! WI

36 Wealth Insight September 2021

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 ANALYST’S
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The Street’s daredevils

Retail investors’ high-risk approach over the last two years
<UZHMLIL[Z

T
he pandemic period has seen record retail
participation in the stock market. Over the last Of all the bets by retail investors, 45 per cent were
two years between June 2019 and June 2021, made in companies with inferior balance-sheet
CDSL and NSDL have together added close to two quality (see the chart ‘Unsafe bets’). To assess the
crore new demat accounts, a 50 per cent increase. quality of the balance sheet, we used the Altman
Here we look at retail investors investment Z-Score, which gives a likelihood of a company going
preferences over this period. bankrupt.

>OH[YL[HPSPU]LZ[VYZSPRL =HS\LO\U[PUN&
See the chart ‘Retail investors’ favourites’. YES Bank Looking at the companies where retail investors’
clearly stands out as the favourite bet of retail stake as per cent of the total equity of the company
investors. The number of retail investors in the bank has gone up shows a similar trend. They have
has gone up more than three times despite hovering invested in companies whose share prices have either
NPA issues. It appears that investors have clung to gone down or those that were relatively cheaper. In
this struggling bank in expectation of large gains small caps, retail participation has gone up despite
from the ongoing restructuring. Ditto with Vodafone lenders invoking pledged shares in the companies
Idea, where the stock went down to as low as `3. mentioned in the table. WI

9L[HPSPU]LZ[VYZ»MH]V\YP[LZ 0UJYLHZLPUZ[HRLHZWLYJLU[VM[V[HSLX\P[`
Top 10 companies by new retail shareholders added between June 2019 Retail investors have raised stake in companies that were either cheap
and June 2021 or where the stock price had fallen.
Number of shareholders added (lakh) Change in
Company name Jun-21 Jun-19 Increase share price (%)
Yes Bank 26.1
ITC 17.2 LARGE CAP
Vodafone Idea 13.4 SAIL 11.42 4.07 7.35 157.6
State Bank Of India 12.7 BPCL 7.62 2.67 4.95 19.2
Tata Power Company 10.5
Bandhan Bank 6.42 1.57 4.85 -38.7
Tata Motors 9.7
Punjab National Bank 9.2 ITC 13.97 9.46 4.51 -26.0
Reliance Industries 9.2 Bank Of Baroda 9.85 5.58 4.27 -29.5
HDFC Bank 9.0 MID CAP
Infosys 7.0
Laurus Labs 34.19 14.02 20.17 909.1
Vodafone Idea 17.73 2.09 15.64 -18.2
<UZHML)L[Z
Tata Motors - DVR 33.04 18.60 14.44 95.0
Of all the bets by retail investors, 45 per cent were made in the
Indiabulls Housing 20.09 5.72 14.37 -57.0
companies with inferior balance-sheet quality.
IDFC 37.61 24.22 13.39 55.0
Z-Score red zone SMALL CAP*
26% Z-Score safe zone Parle Industries 89.12 9.57 79.55 -59.7
55% Cox & Kings 79.07 7.65 71.42 -94.2
Ujaas Energy 93.00 31.26 61.74 -45.5
Radhagobind Commercial 83.10 24.24 58.86 -70.0
Z-Score grey zone
19% Reliance Capital 80.28 22.49 57.79 -63.8
*Invoking of the promoters’ pledged stake has resulted in a jump in retail investors’ stake

September 2021 Wealth Insight 37

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 INTERVIEW

‘The current elevated level of

the small-cap index signals a
near-term correction’
W
ith S&P BSE Small Cap Index sporting
one-year returns of over 87 per cent (as
on August 18, 2021), this tricky space
has again attracted investors’ attention.
We speak with Anoop Bhaskar, Head – Equities, IDFC
AMC, about the outlook for small caps, along with
how severely small businesses have been hit by the
pandemic. Bhaskar also shares his assessment of the
economic scenario and his investing philosophy.

Small caps have raced over the last year amid

challenging times due to the pandemic. In your view,
what’s responsible for this?
Post a severe market correction, as we saw in March
2020, it is the segment which is the cheapest or which
has fallen the most that tends to lead in the market
rebound. Whether it was the market rebound in March
2009 post the Global Financial Crisis (GFC) or the
pre-election rally from September 2013 and even
the March 2020 rally, the small-cap segment has
always led the market rebound. On a sobering
note, this segment has also experienced the
deepest fall during the market meltdown
preceding the rally!

Given the steep rally, what’s the

outlook for the market and small-
cap stocks in particular? How do
you see their valuations?
Valuations are trending at an
elevated level across all segments:
large, mid and small as well as
globally. As has been well discussed,
central bankers, combined with
ANOOP BHASKAR governments, across the developed world had
announced strong fiscal stimuli, along with
Head – Equities, IDFC AMC monetary easing. This has been the bedrock of
the current upsurge across most global markets
since April 2020.

38 Wealth Insight September 2021

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 INTERVIEW

While index P/E for the small-cap segment may be such price inflation will manifest itself in wage
high, it is also being estimated to deliver the highest inflation and bring a repeat of 1970s style inflation is
growth in profitability as compared to Nifty or the a concern highlighted by other experts. China, the
mid-cap indices for FY21–23. However, in the past, world’s second-largest economy, is registering slowing
when the small-cap index’s trailing P/E has become demand and the People’s Bank of China (China’s
higher than that of the Nifty, then danger signals of central bank) is softening its liquidity stance to
overheating of the segment have been evident. The support stalling economic growth, in direct contrast
current elevated level of the small-cap index is close to the developed world!
to the December 2017 levels. We believe that it is The developing world, on the other hand, faces the
surely a sign for a near-term correction vis-a-vis the challenge of vaccine availability and a more restricted
large and mid-cap segments. However, for the room for the government to offer a developed-nation-
medium term, a broad-based economic revival is sized fiscal stimuli. India stands somewhere in the
expected to boost the earnings growth of the index middle. With improving vaccine availability, we expect
during FY21–23. The delivery of such high-growth that by January to March 2022, over 70 per cent of the
expectations will be a key pivot for sustaining this population should be vaccinated. Interestingly, the top
segment’s elevated valuations going forward. 15–20 cities could reach such levels of vaccination by
November-December 2021. This
How do you assess the economic could boost a revival in services,
scenario currently? Is it conducive to the segment most impacted by
continued growth in earnings? the pandemic within the country
The current pandemic continues to and also the segment with most
impact economies globally. As a The lure of investing in employment potential.
larger share of the population gets
an acorn that became Coming to earnings growth,
vaccinated and as most of the FY21 has been a watershed,
COVID-related restrictions on travel, the mighty oak tree is driven by strong cost-cutting and
hospitality and sporting events are a convincing and focus on profitability. In FY21
removed, it has shown a much- corporate profits reached all-time
needed respite in death rates despite compelling reason to highs despite negative GDP
the rising number of cases. US, UK spend disproportionate growth! The stand-out factors
and most parts of continental Europe were a sharp improvement in
have opened and are ‘demasking’. time in this [small- margins, strong cash flow
These regions are also being cap] segment. generation and record level of
forecasted to report a better-than- deleveraging. However, a bevy of
expected pace of economic recovery. However, ignoring factors – rising commodity prices,
Boosted by the strong fiscal stimulus, large caps is a wage hikes, normalisation of
household savings across the advertising, sales promotion and
developed world have risen during
mistake most investors inventory build-up could impact
the last 15 months, unlike the GFC make following the margins going forward. Clearly,
when household balance sheets sales growth will assume greater
needed to be repaired. In addition,
above pursuit. significance as life ‘normalises’ as
there has been focus on building / fears of a third wave of the
repairing infrastructure as well as pandemic recede. Corporate-
financing new capacity build-up focused banks, oil and gas, and
across sectors like semiconductors. metals were the sectors that drove
The dual combination of strong consumer-led revival profit growth in FY21. The second wave has impacted
and a resurgent investment cycle is being viewed by individuals and MSME/SME rather than listed
some experts as having the potential to spark a global corporates. We believe that this could pose a temporary
growth resurgence similar to the 2003–09 period. hiccup, though the bulge in NPAs for the banking
However, on the negative side, inflation fears sector could be muted in FY22 and FY23. Going
continue to remain high. Driven by supply-chain forward, banks, metals to be joined by automobiles and
logjams, prices across categories have risen. Whether IT services are sectors that will drive profit growth for

Wealth Insight Septenber 2021 39

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 INTERVIEW

FY21–23 period. The Manufacturing-based

revival in the US and businesses have generally
Europe also bodes well been faster to recover
for a revival in than services-based
manufacturing exports, as companies. Segments like
these regions have been microfinance institutions,
traditional markets for travel, tourism, malls and
such exports. The multiplexes continue to
China+1 underlying be impacted by the
sentiment could also ongoing pandemic.
boost exports. Such an
uplift from exports hasn’t What’s your stock-
been factored in earnings selection criteria?
forecast across most What safeguards do you
sectors and could be a apply to navigate this
source of earnings tricky space?
surprise in the The FY18–20 period has
coming quarters. taught us to be more
circumspect on corporate
What’s your assessment turnarounds and investing
of the impact of the in companies which are
pandemic on mid-size followers with no clear
and small companies? cost advantage. Markets
Which type of companies and investors have
have been worst punished earnings
affected? Which have disappointment in these
been relatively resilient? pockets sharply, while
Despite the pandemic, FY21 rewarding stable segments with
results signalled that corporate- steady earnings growth. Narrative
sector health was robust. Listed building – industry structure, right
companies – large/mid or small – to win, long runway of growth –
have been more effective in
Corporate-focused have become common parlance
navigating the pandemic as banks, automobile and with investors who primarily focus
compared to unlisted MSMEs/ on high-quality/steady earnings
SMEs. Manufacturing-based
ancillaries, metal and (HQ/SE) segment of the market.
MSMEs/SMEs have generally IT services are sectors Valuations, it appears, have become
reported different degrees of
where we have a non-issue. Every public investor
revival, with most working wants to hold such companies
towards normalcy. However, a overweight across forever, with little regard for the
substantial portion of these several funds. overall liquidity of the underlying
MSMEs/SMEs is services-based – portfolio. Given the strong inflows
trading, hospitality, transportation, such funds have received, such a
especially school and passenger stance appears to be correct!
bus services, have reported a much However, for lesser mortals,
lower degree of revival. Segments who try to balance business
like standalone restaurants have been the worst-hit. As prospects with valuations and face uneven fund
per some reports, almost 45–50 per cent of such inflows, a key learning of past three years has been to
eateries have closed or will close down. However, this keep a laser focus on the balance sheet; companies or
could be a temporary phenomenon, as the real estate businesses which are deleveraging have emerged as a
occupied by these will be taken up by new players key criterion. We view the inherent profitability and
post the pandemic. the ensuing return on invested capital (RoIC) in the

40 Wealth Insight September 2021

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 INTERVIEW

context of valuations. According to worldview? What are the lessons to

us, businesses with inherently be drawn to deal with black swans
weaker RoIC (as compared to HQ/ and extreme volatility?
SE) would qualify for investment if Investing in a pandemic, especially
they are available at reasonable The key learning in the early stages, during March-
valuations (below tangible book April 2020 appeared unreal. While
value), provided they meet the across 2008-09 and the fall during February-March
following criteria: improving trend 2020-21 has been that appears overdone, the
of RoIC over the next two years unpredictability of how the
with clearly identifiable drivers for
banking and NBFCs are pandemic would play out kept one
the same, improving corporate the most vulnerable in undecided to make drastic changes
governance, and steady to the underlying portfolio.
de-leveraging with positive cash
any crisis and one There are a few lessons to be
generation over the near term. needs to be ahead of learnt in every crisis. However,
Hence, for us a portfolio should what is learnt during a crisis,
mix and match between high-
the curve to reduce rarely, if ever, works during
quality, stable-sector companies them in one’s portfolio ‘normal’ times. Investing at the
and improving metrics available in
rather than reacting bottom is a skill that few amongst
select cyclical sectors. us possess. For others,
Earnings downgrades have been after they have fallen. safeguarding one’s portfolio by
a key driver for stock deferring selling could itself lead
underperformance. While this is to significant portfolio gains! The
tracked actively, timely action on key learning across 2008-09 and
the same is an area for 2020-21 has been that banking
improvement. and NBFCs are the most
vulnerable in any crisis and one needs to be ahead of
Which sectors are you bullish/bearish on? Please the curve to reduce them in one’s portfolio rather
share with us your rationale. than reacting after they have fallen.
Corporate-focused banks, automobile and ancillaries,
metal and IT services are sectors where we have What would be your advice to a budding investor who
overweight across several funds. The recent wants to build a portfolio of mid/small caps for the
disappointing results of pharmaceutical companies, long term? What would be your list of dos and don’ts?
driven by softness in the US generic business, is a Small-cap outperformance is an urban legend. The lure
near-term worry, while medium to longer term, we of investing in an acorn that became the mighty oak tree
remain positive on the sector. is a convincing and compelling reason to spend
Corporate-focused banks have experienced less disproportionate time in this segment. However, ignoring
stress in their corporate book than was estimated, but large caps is a mistake most investors make following the
exposure to MSME/SME remains an area of concern. above pursuit. Large caps offer more reasonable and
Unsecured retail loans are another area of caution. repeatable returns over the medium to long term. While
However, strong capitalisation and revival in loan- investing in small caps, put more focus on the balance
book growth could boost profitability even after a sheet than on the P&L. This will be the difference for the
strong FY21. stock to sustain outperformance over time. Also,
The automobile sector is going through a regulatory/ identifying businesses with a scale to grow is important.
technology upheaval. As such, the sector is at a Despite growing, some businesses rarely move out of the
crossroads. After two years of sales decline, we expect small-cap segment. Lastly, do not let the size of your bets
consumer demand to be strong, driven by a new cycle increase as the stock market moves up. The most
of product launches over the next 12–15 months. For dangerous ‘influence’ of the stock market – at the highest
ancillaries, exports have become an attractive option valuation/market levels drives the highest level of
and could supplement domestic demand. conviction and vice versa! Remember, the pandemic will
not stay forever, so take precautions. But markets will be
How has the last one year changed your investment there, forever. WI

Wealth Insight Septenber 2021 41

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 COVER STORY

THE ULTIMATE
MEASURE
THE SECRET OF
MULTIBAGGERS
REVEALED!
Subscription copy of [[email protected]]. Redistribution prohibited.
 Hence, investment in a portfolio of high-
SAURABH MUKHERJEA

F
quality stocks requires conviction in the
ree-cash-flow generation, simply ability of these companies to generate
put, is the difference between the strong, positive, and growing free cash
‘profits’ of a company and flows in future (because it is these cash
‘capital investments’ around flows which finance the growth in revenues
working capital and capital in the years to come).
expenditure. These are two distinct However, a simple analysis of historical
dimensions of business execution. Note, free-cash-flow generation of the BSE 500
however, that this definition of free cash universe of stocks highlights some
flows does not apply to lenders or insurers interesting aspects of these businesses.
in the financial-services sector. (Note: In our analysis, we have taken
The ability of a company to deliver on cumulative three-year free cash flows
the first dimension, which is ‘profits’, is since a single year’s free cash flow can be
determined by attributes such as its pricing negative if a company does a large capex
power (i.e., how the firm beats its in a given year.)
competitors to gain market share without There are 422 non-lending and non-
compromising on its profits) and operating insurance businesses in the current BSE
efficiencies (i.e., how the firm achieves the 500 index. Since free cash flows cannot be
same revenues as its competitors but with analysed for lending and insurance
lower expenses). businesses, we will omit them from this
The second dimension of free-cash-flow analysis. Of these, only 65 (i.e., a mere 15
generation is ‘capital investments’, which per cent) delivered positive free cash flows
is dependent on the company’s capital consistently on a three-year rolling basis,
efficiencies (how the existing capital over the past 20 years. Remarkably, even on
resources can be used more optimally to a 20-year cumulative basis, there are 89
generate higher revenues and profits) and companies that have generated negative
capital reinvestment (what the incremental free cash flows.
areas of capital reinvestment are to help Lack of positive free-cash-flow generation
grow the business in the future). is not always a sign of weakness though.
The fair valuation of a company is the During the early stages of a business’
net present value of all its expected future evolution, there is bound to be more capital
cash flows. The higher the quantum, growth investments compared to operating profits
and longevity of these free cash flows, the since the company might be aggressively
greater is the fair value of the business. investing in building capacities and
capabilities.
Similarly, consistent positive free cash
-YLLJHZOMSV^]ZLHYUPUNZNYV^[OTH[YP_ flows are also not always a sign of significant
Different types of businesses based on their free cash
strength. If a business has strong-enough
generation and earnings growth
+LJKUDWHRIHDUQLQJVJURZWK pricing power to generate profits but cannot
Yes No find avenues for capital redeployment, then
the absence of capex will lead to positive
5HOHQWOHVV&DVK
Positive free cash
ÁRZFRQVLVWHQWO\

0DFKLQHV &RQVLVWHQW )DWLJXHG&DVK free cash flows. However, such a business

Yes

&RPSRXQGHUV 0DFKLQHV might not be able to grow over time. Figure

‘Free cash flow vs earnings growth matrix’
(PHUJLQJ&DVK 6WUXJJOHUV shows a 2 × 2 matrix categorising different
No

0DFKLQHV types of businesses based on their free cash

Source: Marcellus Investment Managers generation and earnings growth.

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 COVER STORY

RELENTLESS CASH MACHINES: HIGH already generating healthy and positive free cash flows,
EARNINGS GROWTH AND CONSISTENTLY their share prices are more aligned to their free cash flows
POSITIVE FREE CASH FLOWS rather than to their profits (although for many such
companies, profits and free cash flows might grow at the
These companies sustain high pricing power (and hence same pace). Their free cash flows and hence share prices
high ROCEs) over long periods of time. They also redeploy exhibit a high rate of compounding with low volatility. The
large parts (typically fair valuation of these
40–70 per cent) of their companies is largely
surplus capital back into Thanks to scale dependent on the
their business to help longevity of strong free-
grow revenues, profits
efficiencies and high cash-flow compounding.
and free cash flows. ROCEs, operating profits These companies are a
Thanks to scale very small minority of
efficiencies and high of these companies are the listed universe.
ROCEs, operating profits
of these companies are
higher than the amount of Asian Paints and Page
Industries are good
higher than the amount capital they need to examples of such
of capital they need to companies (see the chart
redeploy into the business
redeploy into the business ‘Relentless Cash
to generate growth. Since to generate growth Machines: Asian Paints
these companies are and Page Industries’).

9LSLU[SLZZ*HZO4HJOPULZ! -YVTHU,TLYNPUN*HZO4HJOPUL[VH
(ZPHU7HPU[ZHUK7HNL0UK\Z[YPLZ 9LSLU[SLZZ6UL!9LSH_V
Asian Paints and Page Industries have shown rising free cash flows as well Until 2012, Relaxo had significant capex, which resulted in negative free
as profits over the last 20 years. This has turned them into multibaggers. cash flows. The company later transformed to a Relentless Cash Machine.
(ZPHU7HPU[Z 9LSH_V-VV[^LHY-@
&XPXODWLYH\HDU)&)( /+6 3$7 5+6  &XPXODWLYH\HDU)&)( /+6 3$7 5+6
79,000 80 )<²3$7&$*5  420

\HDU3$7&$*5  
 
 
20,000
` PQ

240
` PQ

` PQ
` PQ

  

180
10,000 120
19,000 
 60
 0  0
FY02 FY21 FY02 FY12

7HNL0UK\Z[YPLZ 9LSH_V-VV[^LHY-@
&XPXODWLYH\HDU)&)( /+6 3$7 5+6 &XPXODWLYH\HDU)&)( /+6 3$7 5+6
4,200 700 2400
11,900 
)<²3$7&$*5   1800

8,900
2,400
` PQ
` PQ

` PQ
` PQ

 1200
 1,800
1,200 100 600
2,900
600
 0  0
FY06 FY21 )< FY20
FCFE: Free cash flow to equity. PAT: Profit after tax. FCFE: Free cash flow to equity. PAT: Profit after tax.
Source: Marcellus Investment Managers; Ace Equity; X-axis represents the ending year Source: Marcellus Investment Managers; Ace Equity; X-axis represents the ending
of the 3-year period of cumulative free cash flows. year of the 3-year period of cumulative free cash flows.

44 Wealth Insight September 2021

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EMERGING CASH MACHINES: HIGH EARNINGS FATIGUED CASH MACHINES: WEAK EARNINGS
GROWTH BUT INCONSISTENT FREE CASH GROWTH DESPITE CONSISTENTLY POSITIVE
FLOWS FREE CASH FLOWS
These companies typically are relatively early in their Although these companies are profitable in their core
business evolution cycle (i.e., they are younger businesses business (many of them will have high ROCEs as well),
than the Relentless Cash they cannot find enough
Machines) and perhaps avenues for capital
also smaller in size. Their
As a Relentless Cash Machine transi- redeployment to grow their
capex investments are tions into a Fatigued one, its free cash businesses. Their free cash
significant, compared to flows are strong and
their profits and they
flows might continue to grow at a positive due to low rates of
might not have yet healthy pace, capital redeployment.
achieved significant Some of these companies
economies of scale. If temporarily though, might have once belonged
these companies generate because of a sharp to the category of
high ROCEs and have Relentless Cash Machines
tangible high pricing drop in capital but subsequently faced
power even as they scale saturation in their core
up, they are likely to
reinvestment rates businesses.
transition into Relentless It is worth noting that as
Cash Machines in future. For an investor in these a Relentless Cash Machine transitions into a Fatigued
companies, free-cash-flow forecasting and hence Cash Machine, its free cash flows might continue to grow
valuations need to factor in: (a) conviction on when they at a healthy pace, temporarily though, because of a sharp
will start generating consistently positive free cash drop in capital reinvestment rates. Many such companies
flows; and (b) quantum and longevity of free-cash-flow are part of the large-cap universe of listed equities in
generation in future. These companies are also a small India. For investors, it is important to recognise the
minority of the listed universe; most of them belong to lethargy or fatigue in these companies in order to avoid
the small/mid-cap segment rather than the large-cap being attracted by their free cash generation or to avoid
segment. For instance, Relaxo Footwears was an being attracted by their glorious past. We have often seen
Emerging Cash Machine until a decade ago (and has investors dilute the quality of their equity portfolio by
been a Relentless Cash Machine over the last decade). failing to exit from a company which used to be a
See the chart ‘From an Emerging Cash Machine to a Relentless Cash
Relentless one: Relaxo’. Machine but has now
become more like a

-H[PN\LK*HZO4HJOPUL!*HZ[YVS Fatigued Cash

Machine. Castrol is an
While Castrol has increased its free cash flows, its earnings growth has
example of such
dipped as the company has found it challenging to grow its business.
companies which are
*HZ[YVS highly cash-generative
&XPXODWLYH\HDU)&)( /+6 3$7 5+6 9,800 but with very low
28,000 8,400 capital reinvestment
\HDU3$7&$*5  rates and hence
7,000
21,000 relatively weak
` PQ

 earnings growth (see

` PQ

14,000 4,200 the chart ‘Fatigued

Cash Machine:
2,800
7,000 Castrol’).
1,400
0
FY02 FY21
0 STRUGGLERS: WEAK EARNINGS GROWTH AND
FCFE: Free cash flow to equity. PAT: Profit after tax.
NEGATIVE OR ZERO FREE CASH FLOWS
Source: Marcellus Investment Managers; Ace Equity; X-axis represents the ending
These companies form the largest part of the Indian
year of the 3-year period of cumulative free cash flows.
stock market. Their low pricing power results in weak

September 2021 Wealth Insight 45

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COVER STORY

earnings compounding over time. Their capital stock over relatively short holding periods. Investing
misallocation results in poor ROCEs on incremental in these companies is exciting, given the risks around
capital deployed, which in turn ensures weak/negative their fundamentals at any point of time. However,
and inconsistent free cash flows. These companies can investing in these companies can be damaging to an
generate wealth compounding for investors only if the investor’s wealth if the investor is not an expert at
investor correctly times the entry and exit from their playing these timing-related risks well enough. These
companies are part of all segments (large/mid/small
cap) of the stock market. Historical fundamentals of
:[Y\NNSLYZ!;H[H:[LLSHUK)OHY[P(PY[LS firms like Tata Steel and Bharti Airtel are
Tata Steel and Airtel have weak/negative and inconsistent free cash representative of this category (see the chart
flows and fluctuating earnings growth. ‘Strugglers: Tata Steel and Bharti Airtel).
;H[H:[LLS
&XPXODWLYH\HDU)&)( /+6 3$7 5+6
1,60,000
INVESTMENT IMPLICATIONS: THE POWER OF
4,40,000
\HDU3$7&$*5 1$ RELENTLESS CASH MACHINES

80,000 The table ‘Consistent Compounders: Free-cash-flow
2,20,000
growth’ shows the compounding of free cash flows of
1,10,000 the non-financial-services companies in Marcellus’
` PQ

0
` PQ

0 Consistent Compounders Portfolio (CCP) and how

 that compares against their historical share-price

performance. The following are the key conclusions

from it:
  1. Free-cash-flow
FY02 FY21
compounding of these
)OHY[P(PY[LS stocks has been
&XPXODWLYH\HDU)&)( /+6 3$7 5+6 healthy and consistent
1,60,000 1,40,000 at around 25 per cent
\HDU3$7&$*5 1$
80,000 70,000 CAGR over the past 20
0 0 years. The share
prices of these
 
companies have
` PQ
` PQ

  moved in sync with

  their free cash flows,
compounding over
 
the entirety of the last
  20 years, including
FY02 FY21
the last five years.
FCFE: Free cash flow to equity. PAT: Profit after tax.
Source: Marcellus Investment Managers; Ace Equity; X-axis represents the ending 2. The compounding rate of free cash flows has
year of the 3-year period of cumulative free cash flows; *CAGR cannot be calculated accelerated over time, with the more recent five-year
because of losses in several years. and 10-year periods exhibiting faster rates of
compounding vs the preceding periods. This has been
contrary to the notion that the growth of historically
Investing in successful companies should moderate as they grow
bigger and more dominant in their industries. The
Strugglers can be acceleration in growth is reflective of the use of
damaging to an technology by our portfolio companies to compress
their working-capital cycles, increase their asset
investor’s wealth if turnovers and strengthen their competitive advantage
the investor is not through tech investments over the last five and 10 years.
3. Over the last five years, the healthy growth in free
an expert at play- cash flows has come despite several disruptive events
like demonetisation, GST introduction, the IL&FS/
ing timing-related DHFL financial crisis and now COVID. Although these
risks well enough disruptive events have adversely affected the
fundamentals of the industries within which our

46 Wealth Insight September 2021

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portfolio companies operate, the CCP companies have Titan, Divis Labs, Page Industries, Relaxo Footwears, HDFC Life and Dr
benefited from the challenges faced by their competitors. Lal Pathlabs are part of many of Marcellus’ portfolios.
Furthermore, these events have given the CCP companies Saurabh Mukherjea is part of the Investments team at Marcellus
opportunities to disrupt and evolve their business Investment Managers (www.marcellus.in). Marcellus’ latest book
models to deepen their competitive advantages. WI ‘Diamonds in the Dust: Consistent Compounding for Extraordinary
Note: Abbott India, Asian Paints, Berger Paints, Nestle India, Pidilite, Wealth Creation’ has been published in August by Penguin.

*VUZPZ[LU[*VTWV\UKLYZ!-YLLJHZOMSV^NYV^[O
Consistent free-cash-flow growth is a hallmark of companies that give blockbuster returns in the long run.
 )&)(&$*5   6KDUHSULFH&$*5  
6WRFNQDPH )<² )<–11 FY11–16 FY16–21 FY01–06 FY06–11 FY11–16 FY16–21

(IIV[[0UKPH -10 -1 48 24 16 12 29 26

(ZPHU7HPU[Z 19 41 18 19 28 33 27 19

)LYNLY7HPU[Z0UKPH 24 -1 44 10 49 11 41 34

5LZ[SL0UKPH 17 15 10 15 11 32 9 26

7PKPSP[L0UK\Z[YPLZ 42 4 83 1 40 23 32 25

;P[HU*VTWHU` -16 179 -21 62 82 35 12 36

+P]PZ3HIVYH[VYPLZ NA 54 35 9 NA 29 24 30

7HNL0UK\Z[YPLZ NA 36 33 39 NA NA 50 20

9LSH_V-VV[^LHYZ' NA NA -36 293 -7 51 67 37

+Y3HS7H[OSHIZ NA NA 49 22 NA NA NA 24

>LPNO[LKH]N        
These companies belong to Marcellus’ CCP (Consistent Compounders Portfolio) PMS.
Source: Marcellus Investment Managers; Ace Equity; FCFE = Operating cash flow less capex less investment in subsidiaries/strategic investments/acquisitions less net debt repayments less interest
paid less lease liabilities. *In case of Pidilite, high capex on account of Araldite acquisition skews the CAGR % making it incomparable; hence, we have taken FY16-20. **Page’s FCFE is for FY01–06
shows NA since company was not listed prior to FY04. @Relaxo’s FCFE for FY01–06 and FY06–11 shows NA since company had near-zero FCFE during those periods.

Investing
Perspectives
Invest like pros
/HDUQWKHFUDIWRILQYHVWLQJE\UHDGLQJ
DERXWWKHLQYHVWPHQWVW\OHVRI
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 STRAIGHT TALK

Cryptos: How
promising are they?
Cryptocurrencies, like Bitcoin, are the talk of the town.
Here’s an assessment of their viability, usefulness and investment case.

ANAND TANDON
In the second week of August 2021, By design, Bitcoins are limited and
Forbes carried a report titled ‘More Than $600 Million as more are mined, the cost of
Stolen In Ethereum And Other Cryptocurrencies—
Marking One Of Crypto’s Biggest Hacks Ever’ (https://
issuing becomes higher, i.e., the
bit.ly/2XksZWz). computational power needed
Some of the other notable comments in the article increases
are:
z “Soon after the hack, Tether, the company behind Bitcoin
the world’s third-largest cryptocurrency by market Bitcoin works on a distributed ledger, where each
capitalization, froze roughly $33 million in USDT transaction is stored across thousands of nodes. For
tokens associated with the alleged hacker’s wallet adding every transaction, a ‘miner’ has to invest sig-
address…” nificant computational resources (doing what is
z “Blockchain-based security firm SlowMist also known as ‘proof-of-work’) and once this is verified by
issued a statement hours after the attack, saying it others in the network, all separate copies get updated.
had identified the attacker’s email, IP address and This process eliminates the need of any single ‘trust-
device fingerprints, and was working on tracking ed party’ and makes transactions immutable. No sin-
additional identity clues.” gle entity can change the transaction. Satoshi’s paper
Subsequent updates on the event suggest that most identified a potential security issue known as the ‘51%
of the money has come back barring what was blocked attack’ – where, if a single malicious actor were to
by Tether. This breach comes after hacks at Coincheck gain control over 51 per cent of the total computing
in 2018 ($550 million) and Mt. Gox in 2014 ($400 million). power, it could alter Bitcoin blocks. By design, Bitcoins
are limited and as more are mined, the cost of issuing
The origin of cryptocurrencies becomes higher, i.e., the computational power needed
On November 1, 2008, a programmer using a pseud- increases. The network becomes safer as more coins
onym Satoshi Nakamoto sent out an email to a cryp- are issued, and the possibility of a successful attack
tography mailing list claiming that he had produced a becomes more remote.
“new electronic cash system that’s fully peer-to-peer, Satoshi disappeared after a few years of writing his
with no trusted third party”. This led to the formation paper without disclosing his identity. Bitcoin is owner-
of ‘Bitcoin’, which witnessed its first transaction a less and is independent of any individual miner or user
year later, in October 2009. Since, Bitcoin has grown to operating on the network. This was the original promise
over $1 trillion in market capitalisation (before cool- of Bitcoins – they can be sent anywhere without asking
ing off). It has also spawned many copycats – all of for permission of anyone, without exposing the identity
which claim to follow the same principles as Bitcoin. of the sender or receiver, and with perfect trackability.

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 STRAIGHT TALK

One of the issues with using a distributed ledger is

that the number of transactions possible during a day
get limited. For Bitcoin, this may be limited to about
500,000 transactions a day (currently about half this
rate). This limits the practicality of Bitcoin as a
means of payment for regular transactions – paying
for a coffee may take almost 10 minutes for the trans-
action to be committed – besides the not inconsider-
able fee attached to each transaction, which has been
reported at a median of $20 for the past 12 months. As
a consequence, Bitcoin can serve as the ‘reserve cur-
rency’ but actual transactions will require intermedi-
aries who issue tokens based on Bitcoins that are not
transacted on-chain.

Other cryptocurrencies
This has led to the creation of many alternatives to
Bitcoin, Ethereum being the biggest. Ethereum, while
it has its own cryptocurrency Ether (ETH), also offers a in the works) is well worth a read. It explains in terms
platform where other application developers can devel- a layperson can understand the issues related to
op solutions using the backbone that Ethereum has Bitcoin and distributed ledgers. Even as Ammous is
created. It is one such application that was hacked. The fascinated by the technology, he goes on to argue that
point to note is that (a) it was possible for the developer “for any trusted third party carrying on payments,
to lock up the hackers account, and largely reverse the trading or recordkeeping, the blockchain is an
transactions (b) for someone to figure out the identity extremely costly and inefficient technology to uti-
of the hacker. This calls into question the core premise lize”. He goes on, “trustless digital cash has so far
of the distributed ledger ecosystem – the lack of a sin- been the only successful implementation for block-
gle authority, immutability and anonymity. Other chain technology… eliminating the need for trust in
examples also exist where government agencies have third parties is not an unquestionably good thing to do
managed to identify user accounts back to the real indi- in all avenues of business and life”.
vidual owner, and where blockchains have been modi-
fied to eliminate transactions that were approved but Should it part of the portfolio?
not to the liking of some groups of participants. Like most things new and shiny, it will take a while to
Except Bitcoin, most other cryptos are in the control figure out how time will treat cryptocurrencies. If
of a third party and cannot be considered a true cur- Bitcoin becomes a currency that central banks begin to
rency. Would you trust some software-company-created hold in their portfolio, the value will grow exponential-
token as money when you don’t trust what is created by ly even from here. The likelihood that central banks
the central bank? It’s still the wild west out there. will give up their ability to create their own currency
and instead trade in Bitcoins seems far-fetched. The
The theoretical pushback more likely scenario is a digital currency backed by the
In June 2021, Nassim Taleb wrote up a paper available central bank – the e-yuan being an example. For
at this link (https://bit.ly/3sjwjN4) dissing Bitcoins. He non-Bitcoin cryptos that are managed by software
concludes that Bitcoin is not “useful” and its value developers, to become a global standard seems even
could be zero if technology trends were to change in more a stretch, notwithstanding the excitement around
the future. In his view, that would make the current Ethereum and its user applications.
value at zero as well. There are many who disagree With over a decade of trading history, the volatility
with his view. This paper led to Taleb indulging in an of Bitcoin or its knock-offs has not subsided. In a port-
unseemly Twitter name-calling with his earlier col- folio, a highly volatile asset can find a place only in
league Saifedean Ammous – author of a book called small quantum. That effectively means that investors
‘The Bitcoin Standard’, for which Taleb had written the should tread lightly for now. Despite 100 million trader
foreword where he claimed that “Bitcoin is an excellent accounts, cryptos have still a way to go. WI
idea”. Ammous’s book itself (a new updated edition is Anand Tandon is an independent analyst.

September 2021 Wealth Insight 49

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 EVERYDAY
ECONOMICS

Trait or theory?
Prof Kaushik Basu’s memoir ‘Policymaker’s Journal’ is full of
wit and brilliance. Here are a few of his explanations about
the basic traits of people, bureaucracies and societies.

PUJA MEHRA

A few years ago, the multitude of responses their ability to solve this free-rider problem.
to an interview with Prof Kaushik Basu about a rather A couple of days later, on March 30, 2011, he writes
serious, dour subject took me by surprise. These that Karl Marx’s dream of a society in which we work
messages were from his former students at the Delhi and give according to our ability and get according to
School of Economics, all wonderful people, all saying our needs is ideal. Although it has tremendous moral
nothing about the interview, all recalling how charming resonance, many of the policy interventions that
he was in their college days. It had always been obvious communists recommend for reaching that ideal would
that Prof Basu is gracious, a quality rarely seen in not, in his view, take societies to that ideal. They may
economists, but this sea of popularity was terrific: a even make matters worse, something the world has
professor so well liked is awesome. The former chief already been witness to – as happened in the USSR. He
economist in the World Bank and former chief economic writes that some of the means communists recommend
adviser in the Government of India is of course a are much more likely to end up creating a crony-
prolific and easy-to-read writer. His newly published capitalist society than any kind of socialist utopia.
memoir, ‘Policymaker’s Journal’ (Simon & Schuster), In the longish note dated January 5, 2010, he records
lets even lay readers with no background in the subject preliminary-stage discussions with Nandan Nilekani
access his wit and brilliance. The diary notings cover that he had as the chief economic adviser in the UPA
many themes. His observations about people, government to discuss the former Infosys chief ’s unique
bureaucracies and societies and application of economic biometric identification system, the Aadhaar
theory for explaining their basic traits are superbly programme. The entry is very insightful for
funny and illuminating at the same time. I’ve picked out understanding how a thinking economist can see so
a few – humourless I am afraid – entries that are much more than a technology person does. He explains
instructive about stuff that we see all around us all the how the Aadhaar programme is a transformative scheme
time but barely understand. that can help vault India ahead, although much will
An entry on March 27, 2011 – knowing the date of the depend on how much use it is put to.
jottings helps with gauging the general context in which He writes that
the specific point was made – has the answer. Prof Basu
Punctuality or its Nilekani and others
writes about why by overcoming an issue, which is an absence is not a emphasised that it is
example of what economists call free-rider problems, hardwired trait in basically a technology
societies can prosper. If there is a society that is known society but is an “to make sure that you
to consist of trustworthy people, that society will do equilibrium are you”. Then he goes
well. In other words, such societies have evolutionary on to explain why
response to other
strength. They will prosper. Honest individuals seldom according to him that
do well economically but honest societies generally do.
people’s behaviour. is an inadequate way
However, individuals who are not trustworthy but part In other words, of understanding and
of an overall trustworthy society are likely to do even each society has approaching the
better. Therefore, the success of societies depends on multiple equilibria. scheme. He begins by

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 EVERYDAY
ECONOMICS

saying that the right approach would be to Individuals who are sketch”, written originally with
describe this with a little bit of set theory. Jorgen Weibull, shows that
And adds how there are zillions of
not trustworthy but punctuality or its absence is not a
transactions and activities taking place in part of an overall hardwired trait in society but is an
India – people buying goods, cutting deals, trustworthy society equilibrium response to other
boarding trains, joining clubs. The unique are likely to do even people’s behaviour. In other words,
identification system is, to his mind, a better. Therefore, the each society has multiple equilibria.
way of associating each individual with a success of societies It can be unpunctual. In which case
subset of this universal set of transactions. it is rational for individuals to be
So, for instance, if the system throws up a
depends on their unpunctual and that in fact bolsters
case suggesting that a person who ability to solve this the “unpunctual” equilibrium.
withdrew money from a bank in Chennai free-rider problem. Equally, the same society could be in
and the person who bought a train ticket a punctual equilibrium. When a
in Delhi are the same person, then this conclusion can Japanese sociologist directed him to some writings by
be contested or confirmed. Whereas “you are you” is European visitors to Japan on how unpunctual the
tautological. If a transaction or an activity is defined in Japanese were a hundred years ago, his belief
such a way that each of them is performed by one strengthened that theory was “talking” to reality. Japan
person, then the unique identification system helps clearly moved from one equilibrium to another, he writes.
create a partition of the set of all recorded transactions So, there’s nothing cultural about these things. Next
and activities in India. What this means is that time I get a chance, I’ll ask him if a society’s capacity for
biometric identification is basically a platform for and attitude towards cleanliness could be explained
partitioning all the activities occurring in a country. using some such principles. Do squeaky clean and
He’s sensitive to the downsides and writes that while carefully maintained places deter people from littering?
the richness of the information will, of course, have Do people feel less reluctant to litter in a place already
risk but we should be mindful of the inevitability that decrepit and filthy? Why don’t the stiff fines and
all technological advances do come with their own penalties applicable on the Delhi Metro stations and
risks. We simply have to develop safeguards against train premises deter riders from squatting on the floor
them and try to get the benefits, which in this case can and consuming food in the coaches? WI
be very large, according to him.
Puja Mehra is a Delhi-based journalist and author of
Just like honesty, he also explains punctuality in ‘The Lost Decade (2008-18): How India’s Growth Story
terms of economic theory. This “game-theoretic Devolved Into Growth Without A Story’

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 STOCK
SCREEN

Ideas to delve deeper

S
ound investment methods outlast cycles and picking the stock, which over time will help you
fads and generate profits over the long run. develop your own investing rules. As we will be
Value Research presents stock screens based evolving such models and implementing changes to
on time-tested principles. What are stock the methodology to be in line with economic and
screens? These are a listing of attractive stocks based market cycles, the list will be dynamic and updated
on the objective principles of sound investment. We periodically.
apply stock filters carefully crafted by Value Research In the following pages of ‘Stock Screen’, we present
analysts on the universe of Indian stocks to identify three categories that collectively list a number of
these attractive stocks. The filters are devised to stocks. With these, you will be well-equipped to select
identify stocks of the following kinds: stocks to build your own portfolio after doing further
z High dividend-yield stocks research. If you think that stock picking is a lot of
z Growth stocks available at reasonable prices hard work, you can get started with these screens and
z Attractive blue chips with time understand the way the ideas are shaping
We believe that stocks listed in this section are a to make your own judgement on stock selection. For
good starting point to start a close scrutiny before more such screens, you can visit
adding them to your portfolio. However, please note https://www.valueresearchonline.com/stocks/.
that they are not our recommendations. Great investments are not easy to find, but practice,
Each stock screen explains the reason behind patience and sound principles are all that you need.

Key terms
Universe companies In order to arrive at our universe of companies, we checked ICR of more than two implies that it can service more than twice its current
if the companies traded on all the days for the last two quarters. We considered interest charges.
the companies with a market capitalisation of more than `500 crore. Debt-equity ratio The debt-equity ratio is calculated as the ratio of total out-
Price to book value (P/B) Price to book value is the ratio of the price of a stock standing borrowings of the company to its total equity capital. It essentially tells us
to the book value per share of the company. It shows how much premium investors which companies use excessive leverage to achieve growth. Conventionally, the
are willing to pay for the underlying net assets of the company. debt-equity ratio of less than two is considered safe.
Price to earnings (P/E) The price-to-earnings ratio, or the P/E ratio, is simply Return on equity (RoE) This is measured by taking profit after tax as a percent-
the ratio of the price of a stock to its earnings per share. It shows in multiples how age of net worth of the company. It indicates how efficiently the company has been
much investors are willing to pay for the earnings. The thumb rule of valuing a stock able to utilise investors’ money.
is that a high-growth stock will have a high P/E ratio, while a value stock will have Stock return Stock return is calculated by taking the percentage change in the
a relatively lower P/E ratio. price of the stock adjusted for bonus or split.
Earnings per share (EPS) Earnings per share, or EPS, is calculated by dividing Dividend yield This is defined as the percentage of the dividend paid per share
the company’s net profit with the total number of outstanding shares. to the current market price of the stock. Since the denominator in this ratio is the
EPS growth Growth of the EPS over a specified time period – trailing 12 months market price, a stock’s dividend yield changes every day.
(TTM), a quarter or five years. Quarterly comparisons are on a year-on-year basis. Dividend-payout ratio This is the total dividend paid to the shareholders as a
For five years, the figures are annualised. percentage of net profit.
Price-earnings to growth (PEG) This ratio demonstrates how high a price we Altman Z-Score Developed by Edward Altman of New York University, the Z-Score
are paying for the growth that we are purchasing. It is the ratio of price to earnings predicts a company’s financial distress or the possibility of its going bankruptcy
to the EPS growth of the stock. In all our analyses, we have taken five-year historic within two years. A Z-Score of more than three is desirable.
EPS growth. Modified C-Score It tells the probability of financial manipulations. In order to
Earnings yield Earnings before interest and taxes (EBIT) divided by enterprise develop it, we have modified James Montier’s C-Score. A C-Score of less than four
value. Enterprise value is market cap added to total debt and less cash and is desirable.
equivalents. Piotroski F-Score Developed by Joseph Piotroski, the F-Score highlights financial
Dividend per share Total dividend declared during the year divided by the total performance as compared to that in the previous
number of outstanding shares. year. It thus points out to the current outperformer Growth Value
Net sales This is simply the income that a company derives by in terms of profitability and financial improvement.
selling the goods and services that it produces. The downside of taking sales as an An F-Score of seven or above is good. Large
indicator of growth is that it may not be matched by a similarly scintillating bot- Stock style It indicates the style of the stock. It
tom-line (net profit) performance. A company may be earning revenue at a high is derived from a combination of the stock’s valu- Mid
rate. But if it is doing so by incurring a very high cost, the bottom line may not grow ation — growth or value — and its market capital-
in proportion to the growth in the top line (sales). isation — large, mid and small. For example, on the Small
Interest-coverage ratio (ICR) This indicator is generally used to gauge right we have shown the stock style of a large-cap
whether a company has the ability to service its debt. The interest-coverage ratio growth stock.
is calculated as the ratio of operating profit to interest outgo. A company with an

54 Wealth Insight September 2021

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 STOCK
SCREEN

High dividend-yield stocks

Good dividends are not just a bonus in addition to stock returns, they also
accumulate to become sizeable in the long run
No. of companies that
cleared the filters
REASONS TO INVEST THE FILTERS
Cushion against volatility Market cap greater than Stocks with a current dividend 1.154
Higher total return `500 cr yield of more than 3%
957
Generate regular tax-free Dividend payout ratio of less Stocks with sustained per
income than 40% share dividend and amount 19
over the past five years
10

Dear dividend
Company Stock Dividend Dividend Dividend Earnings Market cap Share 52-week
Industry style P/E PEG per share (`) yield (%) pay-out ratio (%) yield (%) (` cr) price (`) high/low (`)

Cochin Shipyard
Ship Building 7.8 0.30 16.6 4.4 34.6 32.2 4,641 353 434-304

Gujarat Industries Power

Electricity Generation 8.1 -2.27 2.9 3.2 17.7 21.0 1,277 85 106-65

Housing & Urban Dev

Housing Finance 4.6 0.17 3.1 3.5 36.3 10.4 8,268 41 58-30

NTPC
Electricity Generation 8.3 2.92 3.2 5.4 26.9 8.1 1,10,687 114 122-78

Phillips Carbon Black

Carbon Black 9.6 0.12 7.0 3.0 38.5 12.7 3,990 232 279-111

PNB Gilts
Investment Services
5.7 0.19 3.0 15.2 29.0 5.0 1,187 66 95-37

Polyplex Corporation
Plastic Films
10.5 0.26 17.0 11.0 19.3 19.6 4,672 1,491 1595-643

Tamil Nadu Newsprint

Paper
- - 6.0 4.4 31.9 2.5 945 136 183-98

The Great Eastern Shipping

Shipping
9.4 -0.67 9.0 3.0 14.4 15.3 4,369 297 477-211

Welspun Corp
Steel Tubes & Pipes
4.3 0.18 5.0 4.5 21.1 35.4 2,880 110 166-96

Data as on August 20, 2021. New entrants.

September 2021 Wealth Insight 55

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 STOCK
SCREEN

Reasonably priced growth stocks

Growth investing is about picking companies that are fast growing their
bottom lines. But make sure that the valuations are not overheated.
No. of companies that
REASONS TO INVEST THE FILTERS cleared the filters

All-weather style Market cap greater than Œ


At least 20% in the trailing 12
1,154
Companies with strong `500 cr months YoY
fundamentals Earnings growth of:  Œ

At least 20% in latest quarter
YoY 210
Greater stability vis-a-vis Œ
At least 20% in the past five Stocks with a P/E of less
value or growth years 86
than 15

On fast track
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)

Adani Power
Power Projects
13.4 21.4 0.37 141 183 34 29,872 77 167-35

Alok Industries
Cloth
2.5 0.2 0.07 100 121 27 10,601 21 36-19

Andhra Petrochemicals
Organic Chemicals
9.0 7.8 0.17 3,344 7,519 53 1,273 150 197-26

Associated Alcohols
Liquors
12.5 13.2 0.43 113 49 29 795 442 516-237

Authum Inv & Infrastructure

Infrastructure
5.7 6.5 0.01 13,727 4,102 394 2,487 1,542 1947-95

Bajaj Healthcare
Drugs & Pharma
13.8 18.9 0.56 26 133 24 1,200 869 1024-342

Balaxi Pharmaceuticals
Investment Services
13.3 19.1 0.10 23 191 81 534 534 1080-301

BCL Industries
Vegetable oils
10.3 7.6 0.34 90 56 23 535 221 290-98

Beekay Steel Industries

Stainless Steel
5.5 7.5 0.15 1,027 129 38 702 371 463-190

Bhansali Engg Polymers 6.9 19.1 0.08 5,686 845 83 2,854 173 210-50
Thermoplastics

Bharat Bijlee 14.9 15.3 0.40 257 85 37 723 1,284 1524-650

Transformers

Birla Corporation 14.3 17.5 0.61 115 64 24 10,107 1,313 1585-575

Cement

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 STOCK
SCREEN
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)

Chambal Fert & Chemicals

Nitrogenous Fertilizer.
8.1 11.4 0.24 28 28 33 14,049 337 349-133

Clariant Chemicals
Dyes & Pigments
5.6 35.3 0.17 434 1,378 34 1,281 551 632-288

Cosmo Films
Plastic Films
8.4 6.8 0.36 97 120 25 2,331 1,283 1484-375

Deccan Cements
Cement
8.7 13.1 0.36 41 112 24 999 711 847-261

Dhunseri Ventures
Plastic Resins
2.9 5.7 0.14 4,346 636 26 937 268 350-51

Dolat Investments
Brokerage Services
10.4 15.3 0.12 111 115 84 1,772 101 128-42

Emami Paper Mills

Paper
11.8 22.1 0.48 539 582 24 1,062 178 215-62

Ester Industries
Plastic Packaging goods
7.8 7.6 0.04 28 43 184 1,134 138 165-62

Everest Kanto Cylinder

Metal Tanks & Fabrications
7.5 7.9 0.27 1,011 8,127 27 1,147 102 162-26

Filatex India
Synthetic Yarn
8.3 13.0 0.16 286 232 41 2,044 92 118-22

Finolex Industries
Plastic tubes & pipes
12.4 20.2 0.27 157 161 47 10,266 165 199-91

Gallantt Ispat
Finished Steel
10.7 12.3 0.40 117 193 21 1,525 54 70-26

Geojit Financial Services

Brokerage Services
13.2 20.7 0.55 57 102 28 1,808 76 103-35

Globus Spirits
Liquors
14.9 15.9 0.30 197 189 58 2,651 921 988-155

Godawari Power and Ispat 4.3 5.1 0.08 835 546 57 4,383 1,230 1848-266
Sponge Iron

Gujarat Ambuja Exports 9.3 11.1 0.35 205 282 32 3,849 168 202-91
Other Agri.prod.

Gujarat Narmada Valley Fert 5.5 7.4 0.22 8,041 112 26 5,192 334 425-171
Nitrogenous Fertilizer.

Gulshan Polyols 13.3 12.6 0.57 405 352 23 1,109 237 293-49
Organic Chemicals

HIL 13.1 11.7 0.36 98 167 36 4,037 5,388 6758-1536

Cement & Asbestos prod.

September 2021 Wealth Insight 57

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 STOCK
SCREEN
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)

Hindalco Industries
Aluminium
13.0 31.9 0.30 491 249 71 90,707 404 474-154

IG Petrochemicals
Organic Chemicals
7.0 11.5 0.28 2,213 1,591 26 1,673 543 738-219

India Glycols
Organic Chemicals
6.3 10.6 0.23 4,864 300 27 2,130 688 769-263

Indian Metals & Ferro Alloys

Metal Tanks & Fabrications
8.0 7.5 0.19 301 525 41 1,923 716 997-212

INEOS Styrolution India

Thermoplastics
5.7 17.5 0.11 530 1,095 50 2,198 1,260 1570-484

Jindal Poly Films

Misc.Chem.
4.7 6.7 0.26 78 64 27 4,225 965 1169-411

JSW Steel
Finished Steel
11.5 13.7 0.13 1,148 487 80 1,65,495 685 777-258

Kalpataru Power Trans

Infrastructure
8.5 16.1 0.19 84 118 44 5,967 399 496-231

Kama Holdings
Synthetic Yarn
9.9 50.9 0.37 118 37 21 6,000 9,307 11085-4588

Khaitan Chem & Fertilizers

Phosphatic Fertilisers
14.8 13.5 0.16 178 90 92 550 57 81-18

Kirloskar Ferrous Industries

Pig Iron
7.3 13.8 0.18 913 495 42 3,367 243 314-81

Kriti Industries
Plastic Packaging goods
13.0 14.4 0.24 80 125 55 538 109 135-25

Maithan Alloys
Ferro Alloys
9.4 7.1 0.28 219 50 33 2,873 987 1255-472

Mangalam Cement
Cement
9.2 16.4 0.20 190 139 46 1,239 464 544-171

Marksans Pharma 11.1 16.2 0.32 27 71 37 2,794 68 98-44

Health Services

Motilal Oswal Fin Services 8.9 27.3 0.21 34 491 42 11,522 784 1188-538
Misc. Fin.services

Nahar Poly films 7.6 7.5 0.14 46 64 27 518 211 320-56

Textile Processing

Nahar Spinning Mills 8.2 9.4 0.23 495 305 35 1,364 377 477-35
Cotton & Blended Yarn

Nitin Spinners 8.3 8.6 0.33 756 3,438 20 1,153 205 295-35
Cotton & Blended Yarn

58 Wealth Insight September 2021

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 STOCK
SCREEN
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)

Orient Cement
Cement & Asbestos prod.
11.1 21.4 0.18 249 394 61 3,094 152 174-56

Panama Petrochem
Lubricants, etc.
8.4 13.2 0.17 1,436 662 49 1,591 263 310-45

Phillips Carbon Black

Carbon Black
9.6 12.7 0.12 4,092 87 81 3,990 232 279-111

Pix Transmissions
Rubber & Rubber Prod.
12.9 9.0 0.25 223 160 51 982 721 930-126

Prakash Industries
Diversified
9.0 8.1 0.30 1,121 53 23 1,194 67 105-36

Precision Wires
Wires & cables
9.9 13.5 0.42 1,259 128 23 515 226 245-110

Prestige Estates Projects

Real Estate
8.8 27.0 0.38 3,482 391 21 13,307 332 378-222

Rain Industries
Cement & Asbestos prod.
8.0 9.6 0.18 787 163 38 6,951 207 273-94

Rama Phosphates
Diversified
14.2 9.2 0.31 203 197 46 596 336 505-54

Sahyadri Industries
Cement & Asbestos prod.
8.7 5.9 0.16 38 102 54 617 654 885-180

Sandur Manganese
Minerals
5.7 6.7 0.06 538 138 87 1,588 1,764 2260-650

Savita Oil Technologies

Lubricants, etc.
7.3 12.6 0.16 638 275 48 2,128 1,549 1830-650

SH Kelkar and Company

Personal Care
9.6 30.6 0.45 433 548 22 2,015 143 190-76

Shreyas Shipping
Shipping
6.0 11.7 0.37 578 239 21 606 276 276-46

Southern Petrochem Ind 9.6 11.6 0.26 634 95 45 1,014 50 68-17

Other Fertilisers

Sportking 9.1 6.5 0.10 21,845 2,277 172 1,488 4,481 4925-257
Textile Machinery

Steel Exchange 4.7 5.5 0.06 743 253 81 696 79 86-30

Trading

Sunflag Iron and Steel Co 6.5 9.9 0.21 532 210 30 1,463 81 97-39
Finished Steel

Supreme Petrochem 9.7 20.9 0.22 1,332 1,219 45 6,149 655 820-197
Crude Oil & Natural Gas

September 2021 Wealth Insight 59

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 STOCK
SCREEN
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)

Suumaya Industries
Textile Processing
2.1 29.7 0.01 7,182 1,32,866 173 1,499 534 737-62

SVP Global Ventures

Trading
15.0 9.0 0.07 168 828 207 1,817 144 155-101

Tamilnadu Petroproducts
Organic Chemicals
6.2 6.1 0.20 313 196 28 1,036 115 151-33

Tata Metaliks
Pig Iron
11.0 10.7 0.43 792 116 20 3,590 1,137 1374-480

Tata Steel Long Products

Sponge Iron
4.2 13.5 0.04 353 280 64 4,379 970 1175-291

Tata Steel
Finished Steel
8.0 8.3 0.15 292 662 49 1,65,663 1,376 1535-343

TD Power Systems
Electronic Equipts.
11.3 19.3 0.18 206 205 66 741 238 264-102

Thirumalai Chemicals
Organic Chemicals
8.8 12.3 0.20 424 2,349 42 1,781 174 211-62

Tinplate Company
Stainless Steel
13.8 23.2 0.51 1,094 119 27 2,402 230 275-118

TV18 Broadcast
Media & Entertainment
10.7 37.4 0.19 10,473 147 26 5,949 35 49-26

UFLEX
Plastic Packaging goods
3.7 5.6 0.16 34 91 23 3,329 460 594-298

Universal Cables
Wires & cables
6.0 9.6 0.19 7,504 56 27 536 154 218-125

Usha Martin
Other Metal prod.
10.1 11.3 0.50 606 349 20 2,005 66 75-20

Vardhman Special Steels

Stainless Steel
11.6 18.0 0.25 317 872 34 981 242 309-65

Vedanta 6.8 8.5 0.26 309 312 25 1,00,085 269 341-91

Minerals

VLS Finance 2.7 8.9 0.07 508 426 37 759 196 265-51
Equipt.Leasing

WPIL 8.8 10.9 0.38 69 48 25 784 802 1122-400

Pumps & Compressors

Data as on August 20, 2021. New entrants.

60 Wealth Insight September 2021

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 STOCK
SCREEN

Attractive blue chips

Investing in blue chips at reasonable valuations is one of the simplest
methods of wealth creation with limited pain
No. of companies that
REASONS TO INVEST THE FILTERS cleared the filters
Liquidity Mcap more than 6145
325
Large companies in respective businesses D/E 0 to 2
277
Strong balance sheets Interest coverage ratio more than 2
Liked by institutions ROE 5 year average more than 20% 224
EPS 5 year growth more than 20% 97
PEG (5 Yr) 0 to 1.5
31
5 year ROE consistency without losing
20% year on year 20

Solid foundation 12

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 (`)

Alkyl Amines Chemicals

Organic Chemicals 65.2 1.43 0.1 64.3 33 46 20,932 4,099 4749-1138
APL Apollo Tubes
Steel Tubes & Pipes
40.9 1.16 0.3 9.3 22 30 20,060 1,606 1850-445
Balkrishna Industries
Tyres & Tubes
31.4 1.46 0.2 133.2 20 21 43,230 2,236 2559-1238
Coromandel International
Other Fertilisers
17.3 0.54 0.0 17.9 24 32 24,487 821 956-682
Galaxy Surfactants 32.8 1.35 0.2 28.7 25 24 10,576 2,987 3350-1600
Personal Care

Gujarat Gas 29.0 1.32 0.6 6.9 21 21 49,175 714 787-281

Natural Gas Utilities

Gujarat State Petronet 11.1 0.27 0.7 7.6 30 29 21,085 374 379-177
Natural Gas Utilities

KEC International 19.0 0.71 0.6 3.1 22 27 10,008 389 486-299

Power Projects

K.P.R. Mill 19.3 0.85 0.3 22.0 22 25 12,054 1,754 2086-536

Cotton & Blended Yarn

Petronet LNG 11.6 0.48 0.0 8.7 21 24 34,020 227 275-207

Natural Gas Utilities

Supreme Industries 22.7 0.86 0.0 49.2 24 27 25,144 1,979 2340-1279

Other Plastic Prod.

Vaibhav Global 37.8 0.77 0.1 75.3 25 49 11,996 738 1058-326

Gems & Jewellery

Data as on August 20, 2021. New entrants.

September 2021 Wealth Insight 61

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 WORDS WORTH
NOW

It is with a sense of duty towards 27 crore Indians

connected by VIL [Vodafone Idea], I am more than willing
to hand over my stake in the company to any entity - public
sector/government/domestic financial entity or any other
that the government may consider worth of keeping the
company as a going concern.
Kumar Mangalam Birla Chairman, Aditya Birla Group, Business Standard, August 3, 2021

The industry requires It is time Indian industry comes out in a very

long overdue support big way because today is the time to show
to maintain its current the risk-taking abilities and take decisions
3+1 industry structure to expand...I invite you all to take the bull
(3 private players and by the horns and help the government. The
1 public-sector player) stock market is showing you the way.
and allow players to earn Nirmala Sitharaman Finance minister, Business Standard,
a respectable return August 13, 2021
on their investments.
I am hopeful that the
government and the With the lifting of the restriction on [credit]
regulators will step in to cards acquisition, all the preparations and
ensure there is adequate strategising that we have put in place to ‘come
balance in the industry back with a bang’ will now be rolled out. In the
and it remains a viable coming months, we will aggressively go to the
place for continued market, with not just our existing suite of credit
investments. cards but also new offerings in the form of
Sunil Bharti Mittal Chairman, co-brands and partnerships.
Bharti Airtel, The Economic Times, Sashidhar Jagdishan MD, HDFC Bank, The Economic Times,
August 11, 2021 August 19, 2021

There have been 14.2 lakh trademark

registrations in four years between
2016-2020. Compare this to the 11 lakh
trademark registrations during 75 years from
1940-2015. This is the transformational
journey of trademark registrations in India.
Piyush Goyal Minister of Commerce and Industry, Financial
Express, August 18, 2021

India cannot become the next factory of the world by copying China...
We have always got into sunset areas of growth; this is the time to get
into sunrise areas of growth.
Amitabh Kant CEO, Niti Aayog, Financial Express, August 13, 2021

62 Wealth Insight September 2021

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