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Downturn's Power Players

Some companies raised their performances when markets were contracting

Survival in difficult times prepares companies for faster growth in future — they emerge leaner, but meaner. So, when markets throw up new opportunities, those who came out stronger are the ones to grab a major share. The same happened with some corporates flexing muscles to gain marketshare and power to a position of strength.

We identified 7 companies that were able to increase their sales on a quarter-on-quarter (QoQ) basis without much stress on costs. This also helped them to increase net profits.

In 2008, when the global meltdown was at its heights, Indian the companies felt the heat of the worsening scenario in the later part of that year. Sales across industries saw huge drops, with only a few companies maintaining a steady level of sales. On top of this, as the liquidity crisis struck and business confidence deteriorated, companies found it hard to secure cheap finance. It was a vicious cycle, but as the story shows, winners emerged from the heat and dust .

Alok Industries
Primarily a textile company, it has presence in apparel fabrics, home textiles and cotton yarn. Its apparel fabrics division contributed more than half of the revenue in Q4FY09. Net sales grew at an annulized rate of 28 per cent for the last 3 years. It also reported an increase of 45 per cent and 13 per cent in net sales and net profit respectively in Q1FY10 year-on-year (YoY). Rising debt over the past 3 years is, however, a concern.

KS Oils
One of the leading integrated edible oil companies in India, it is going for expansion through its subsidiary, KS Natural Resources. KS Oil saw its net profit increase at a compounded rate of 73 per cent over the past 3 years. For Q1FY10, its net sales and net profits have increased by 31 per cent and 20 per cent respectively YoY.

Reliance Ind. Infrastructure
As can be gauged from the name, Reliance Industrial Infrastructure’s (RIIL) primary business is to set up industrial infrastructure projects.  The company ended FY09 with net sales and net profit of Rs 71 crore and Rs 22 crore respectively, which grew at a compounded rate of 4 per cent and 7 per cent respectively over the past 3 years. The company’s profits for Q1FY10 have however, risen 2 per cent, despite sales falling 20 per cent YoY.

Educomp Solutions
This company saw compounded  growth of more than 100 per cent in its net sales and net profits over the past 3 years. In Q1FY10, net sales increased by 113 per cent while profits increased by 116 per cent. It finished FY09 with a profit of Rs 128 crore. With government intent on spending more on education, Educomp will be a beneficiary of any moves made in this segment.

ACC Limited
One of the biggest cement manufacturers with a reach across India, saw  an annualized growth in its net sales and net profit of 31 per cent each in the past 3 years. This company finished FY09 with Rs 1,213 crore of profits. For Q2CY10, profits were Rs 485.62 crore, up 79 per cent YoY.

BGR Energy Systems
Compounded growth of 106 per cent in net profits over the last 3 years puts it in an advantageous position. Net sales registered a growth of 88 per cent. In Q1FY10, it reported a growth of 17.47 per cent YoY.

Earlier known as GEA Energy Systems, it has its business split in two — supply of systems and equipment for power, oil & gas industries and turnkey engineering project  contracting. 86 per cent of its revenues of Rs 1,922 crore in FY09 accrued from power projects and it had an order backlog of Rs 9,230 crore at the end of June 2009.

Bharat Heavy Electricals (BHEL)
BHEL is India’s largest public sector undertaking (PSU) engineering company catering to the power sector. It’s operations are organised around two major business segments — power (75%) and industry (25%). The largest company by revenues in our set, it has managed a growth in its net sales (28%) and net profits (22%) in Q1FY10 YoY.

Sun TV Networks
This media company has 22 TV channels and 43 radio stations spread across news and entertainment spectrum. With profit growing at an annualized rate of 50 per cent over the past 3 years, it finished FY09 with profits of Rs 437 crore. For Q1FY10, it reported profits of Rs 119.8 crore, up 16.83 per cent YoY.

This article appeared in the August 2009 issue of Wealth Insight.