Non-Disruptive Growth | Value Research We look at 9 companies that have grown more in 2008’s bear hug as compared to the rising times of 2007
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Non-Disruptive Growth

We look at 9 companies that have grown more in 2008’s bear hug as compared to the rising times of 2007

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 50 per cent in December 2007 and 75 per cent in December 2008. The stock is trading at a discount of almost 40 per cent to its book value.

Rural Electrification Corpn
This public sector enterprise finances and promotes rural electrification projects all over the country. The company has reported a sharp growth. It has one of the lowest costs of funds and highest spread in the industry, working in its favour.

Corporation Bank
This PSU bank has shown robust growth in its business with an increase in its deposits and advances on a y-o-y basis. An increase in the bank’s CASA ratio coupled with a decline in the gross NPA and cost to income ratio also brings to the fore its operating efficiency.

Oracle Fin. Serv. Software
Oracle is another software company on our list. The company’s margins have jumped due to cost control measures, increased off shoring and productivity improvement. However, a reason for the stock trading at a historically low P/E of 9.76 can be the increasing pricing pressure that may stem from its overdependence on the Citigroup which contributes 20 per cent of the company’s revenues.


Earnings Momentum
  Net Sales  YoY  PAT  YoY  Price      
Company Name  Q3  Growth  Q3  Growth  (Rs)  PE  PB  Yield (%)
Infosys Technologies 5,429 35.76 1,598 34.74 1,184 12.74 3.95 3.15
Punjab National Bank 5,295 45.61 1,006 85.76 346 3.94 0.84 3.76
Canara Bank 4,625 30.29 702 52.89 163 3.67 0.69 4.92
Union Bank Of India 3,262 34.65 672 84.03 126 3.68 0.93 3.16
Syndicate Bank 2,566 29.12 356 30.45 52 3.78 0.60 5.34
Central Bank Of India 2,722 36.57 353 75.74 35 2.59 0.39 5.79
Rural Electrification Corpn. 1,247 48.04 319 41.63 78 5.68 1.09 3.87
Corporation Bank 1,624 45.84 256 34.35 165 2.91 0.49 6.37
Oracle Fin. Serv. Software 593 29.84 198 79.07 688 9.76 1.79 0.00
Price related data are as of February 24, 2009





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