Non-Disruptive Growth

Till the end of 2007, when everything, the Indian stock markets, companies’ profits, employee salaries and the overall economy seemed to be on a never-ending upward trend, we investors were making merry. But the rude shock that came in the beginning of 2008 left most gasping for air. However, despite the current dismal scenario, the fact remains that equity is still the most ideal long-term wealth accumulator. And if there ever was an ideal time to invest in equity, it’s now. Hence, to answer the ‘where to invest’ question, we set out to look for companies that have not only emerged unscathed but have also been able to better their performance. These are the companies that have stood sturdy in the turbulent times. Of the nine companies that made it to our list, seven are PSUs and two are software companies. What became apparent from this exercise is that the credit crunch has had little impact on PSUs, mostly banks, as six of the seven PSUs are banks. Following are the companies that have come out as the final selection after executing a set of criteria. Infosys Technologies This IT major is geared to handle the bad times better than its peers. During the previous downturn, it grew at a rate higher than its peers in FY03. In the current crisis too, it has been able to increase its growth on a y-o-y basis, both in terms of sales and profit. What has aided it in maintaining its margins is its financial model of variable cost structure. Punjab National Bank The country’s second largest public sector lender has grown its profits by a whopping 86 per cent in Q3, FY09 driven by higher asset growth and controlled operating expenses. Advances also grew at a y-o-y rate of 39.52 per cent, much above the loan growth for the sector. Canara Bank Here’s another public sector bank that seems to be insulated from the turbulent market conditions. With growth in advances and capital adequacy ratio comfortably above the regulatory minimum, the company’s fundamentals are in place. Union Bank of India Even in the crumbling economy, Union Bank of India has been having a good time with particularly widening margins and trimmed provisions. But on the flip side, its non-interest income and demand deposits have witnessed lack of growth. Syndicate Bank This state-owned bank has reported an increase in its global as well as domestic business. It has organized door-to-door campaigns to secure HNI accounts. The stock is trading at nearly four times its trailing one year earning and has a dividend yield of 5.34 per cent. Central Bank of India Central Bank of India is a part of the government’s recapitalisation package with an allocation of Rs 1,400 crore. It has grown its profit after tax at the rate of 5

This article was originally published on March 27, 2009.