The article first appeared in the November issue of Wealth Insight magazine and tracks those companies’ stock that made the most of the meltdown
After the panic of 2008 leading up to early 2009, the doomsayers became so abundant that they were unable to realize the potential of the rally that started on March 9. It made them miss the stocks that got off to a great start and which remained ahead. While some of these stocks may not keep up, the fact is that investors who had invested in them recovered losses, or made good profits and are eyeing further gains.
Mphasis is a leading IT and BPO services provider boasting of a top Fortune 500 link. Ever since it became a subsidiary of HP, its income generation capacity has improved and it plans further expansions. It is going to takeover AIG Systems Solutions, an India-based provider of IT services to AIG companies worldwide, which will add the insurance sector to the services it provides and will contribute to revenue streams. Still, the company trades at a discount to its rivals.
For both Shree Cements and ACC, the slowdown seems never to have happened. Both managed to improve performances across the entire chain to emerge with stellar numbers. Lending a helping hand are strong entry barriers to the Indian market, but more than that, the humming demand had them dispatching their products like never before. They look good for more as this gives them the opportunity to improve margins by raising prices.
The tyre industry is too dependant on oil as raw material and suffers every time prices spurt. Over the last few years, raw material costs, as a percentage of net sales, jumped 600-1,000 basis points to over 70 per cent currently. But for MRF, these were mere impediments, hurdled majestically as it cruised towards ever better sales and net profit numbers.
Allied Digital, IT infrastructure management services provider, has chosen to grow through acquisitions. It acquired Digicomp CSL and also has 80.5 per cent interest in En Point GS. It also acquired 100 per cent interest in En Pointe (India). However, short of funds, the company has raised Rs 231 crore via qualified institutional placements (QIPs), which carries the prospect of equity dilution of 15.96%-21.25%.
Two-wheeler giant, Hero Honda’s performance has improved so much that it has driven the competition virtually into the dust. Even as raw material costs rose, the operating margin amount jumped ever higher. Looking to cement its lead the company splashed money on advertising in the June quarter on high-profile cricket tournaments such as Indian Premier League (IPL) that surely had an impact on the September quarter.
Cadila Healthcare, a pharma major, has a stellar range of healthcare products. Operations span the US, Europe, Japan, Brazil, and South Africa. It has also received the US Food and Drug Administration’s approval for Topiramate, a generic version of Ortho McNeil’s anti-migraine drug Topamax. It is expected to snatch a sizeable marketshare.
Apollo Hospitals is an integrated healthcare company. It owns and operates a hospitals and clinics chain across India, making it the largest healthcare provider here. The sector is competitive and it has looked to expand with a Rs 1,500 crore plan. It also made an aborted takeover attempt on Wockhardt Hospitals.
Pantaloon Retail has multiple retail formats in both the value and lifestyle segment of the Indian consumer market. It is looking to spin-off its retail business, that includes Big Bazaar and Food Bazaar, into a subsidiary to unlock value. This will be done by offloading a stake and let it grow on its own. But its stock price has lagged the Sensex.
Aban Offshore is India’s largest private offshore drilling contractor. After a bumper result in June quarter it, on a standalone basis, posted a positive net profit despite dwindling sales and increase in interest payments. The price of crude has recovered from its sub-$50 levels to around $80 and humming economic activity promises to galvanise business.
Bharti Airtel’s plan to merge with MTN may have failed, india’s biggest telecom operator, is still committed to acquisitions, but potential targets will be much smaller than MTN. Its intent to pursue pending auction of licenses for third generation, or 3G, radio bandwidth at home promises much. The telecom price wars may be pinching, but it is still a great long-term story, provided it implements a new model of profitability.
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