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Midcap Stocks to Invest
We evaluated four funds that have done well over market cycles to unearth 28 mid-cap stocks for you to invest in
By Research Desk | Jul 28, 2014
Would you like to eat a set thali, or do you like to choose from an à la carte menu? Or even just a quick bite from a fast food joint? You could do any of these for dining out, but when it comes to investments, our readers would probably like to observe the great chefs at work and learn from their recipes. And that's exactly what we have for you in this innovative feature.
At Value Research, our expertise lies in evaluating mutual funds and that's something we have been doing for over two decades. Since picking mid-cap stocks can be a challenge, we decided to observe what mix of ingredients and spices four select fund managers use to cook up their portfolios.
To arrive upon our selection of mid-cap stocks, we created a mix of quantitative and qualitative parameters. We narrowed the hunt down to four funds that have come out unscathed through the years across different markets cycles. These are Axis Midcap managed by Pankaj Murarka, HDFC Equity managed by Prashant Jain, IDFC Premier managed by Kenneth Andrade, and ICICI Prudential Value Discovery is managed by Mrinal Singh, giving the necessary variety.
In the first step, the combined unique universe of stocks that these funds invest in added up to 170 unique stocks. Of these, we excluded the large-cap stocks, which brought the list down to 132 mid-cap stocks with market cap ranging from R230 crore in case of Career Point to R20,000 crore for ABB.
We next excluded stocks that were highly over valued. We also excluded stocks where these funds were reducing their holdings as well as those where the holdings were insignificant. Finally, we also excluded companies with consistently falling RoE. This left us with a universe of 28 companies-our final list that we present here for you.
Amara Raja Batteries
The second largest lead-acid battery manufacturer in India has challenged old war horse Exide. Amara Raja has almost gained 46 per cent of the market share in the past 5-6 years. Brand Amaron has been developed with technology support from Johnson Control USA, which also has a stake in Amara Raja.
This off-road tyre maker is widely used in tractors, cranes and heavy farming equipment. Preferred for its ruggedness, quality and cost effectiveness, it has also made a reputation for itself in international markets. Balkrishna has been giving giant players like Michelin and Goodyear a tough competition.
Bata India is the largest retailer and manufacturer of footwear in India and has been an active player in the market for the past 80 years. In a fragmented footwear market that has several players and fast changing fashion trends, Bata India continues to find loyal buyers, especially among women.
A subsidiary of TCS, has its roots from maintaining IBM installations and maintenance of computers supplied by other foreign players since 1978. It continues to play a role in systems engineering, offering application design, development, testing services and asset-based solutions.
Coromandel is India's second largest phosphatic fertilizer and the subsidiary of the Murugappa Group and EID Parry. Through its 12 subsidiaries, including Sabero, the company has a worldwide presence and has also ventured into the retail markets by setting up more than 425 rural retail centres.
This Mumbai-based KPO provides data analytics and customised process solutions. The company specialises in back office services in financial and cable & telecom services. eClerx has consistently delivered a high growth with an average return on equity of 50 per cent in the past five years.
India's largest lead-acid battery manufacturer, was once the most preferred OEM suppler and a monopoly. Today, the company faces stiff competition from Amara Raja. Moreover, diversification into insurance business has partially strained its margins, but things are looking up for now.
FAG Bearings India
FAG is an OEM supplier to the automotive and engineering industry, with Indian Railways being its major client. The company has technologically capitalised on its German parent, FAG Kugelfischer and has positioned itself as a niche player making it the second largest player with 15 per cent market share.
Godfrey Phillips India
The second largest tobacco player in India, has also a significant share in the tea business. With Philip Morris, the world's largest tobacco company as one of the promoter, the company has access to new products. From focusing mostly on North and West India, it has recently entered South India and West Bengal.
Greaves Cotton manufactures industrial products specialising in diesel and petrol engines, gensets, pumpsets and construction equipments for a long time. Around 60 per cent of the revenue comes from the engine supply to the auto sector and the company is banking on the upcoming quadricycle segment.
Gujarat State Petronet
GSPL is in the natural gas transportation business through its wide network of pipelines in Gujarat. The company has planned to increase LNG capacities on a large scale by FY16 and will leverage upon the natural gas demand which is picking up through its parent company GSPC.
ING Vysya Bank
This private sector bank is expanding across the country from its earlier south-only focus. The bank has maintained its asset quality below 0.20 and has a high net interest margin of more than 3.7 and has a healthy average growth of 30 per cent in its book value in the last five years.
Karur Vysya Bank
Based in Tamil Nadu, this private sector bank will be celebrating its centenary in 2016. The bank has major operations in Tamil Nadu, Andhra Pradesh and Karnataka but in the past few years it has started expanding aggressively to other parts of the country, especially North India.
Kaveri Seed Company
This seeds company is known for its hybrid cotton seeds and its much sought after 'Jadoo' and 'Jackpot' brands that were launched in 2008. These two brands have a 40 per cent market share in Andhra Pradesh and 17 per cent nationally through its 15,000 strong network of distributors.
Kirloskar Pneumatic Company
A subsidiary of Kirloskar Brothers, this company is in to manufacturing and selling of compression systems and transmission products. It is the largest player in packaging and distribution of CNG with 40-45 per cent market share. It also manufactures rail traction gears for Indian Railways.
Mcleod Russel India
This company along with its subsidiaries, is the largest tea producing company in the world. Mcleod Russel exports 30 per cent of its production to 22 countries, which accounts for 2 per cent of the world's tea production; the rest is marketed in India accounting for 8 per cent of India's tea production.
Founded in 1999 by industry veterans, Mindtree, unlike traditional Indian IT firms, does not overly depend on its revenues from the banking, insurance and financial institution segment (BFSI). Its focus areas are well-diversified into product engineering services, travel and transportation and manufacturing sectors.
This IT company focuses on cloud computing, mobility, analytics and collaboration for telecommunications, life sciences, consumer packaged goods, banking & financial services and healthcare verticals. Persistent recently hired Sunder Sarangan from Infosys as its CMO to improve its sales.
India's largest liquefied natural gas importer has various terminals across the country. Incorporated in 1998 as a joint venture between Gas Authority of India, ONGC, Bharat Petroleum and Indian Oil, its revenues are sourced from re-gasification of LNG through long-term contracts and spot deals.
This agri input, custom synthesis and manufacturing company currently operates three formulation and two manufacturing facilities as well as five multi product plants under its three business units across Gujarat and J&K. Its bullish on the launch of its two new in-licensed products in FY15.
P&G Hygiene & Health Care
One of the largest consumer goods companies in India, it has brands like Whisper, Pampers, Head & Shoulders, Tide, Olay and Vicks. The company operates in a highly competitive environment and market that is as big as R1,50,000 crore and has yet achieved remarkable growth.
This company specialises in end-to-end supply chain management of IT and non-IT products and is present in several countries in South Asia, Middle East and Africa. It is an authorised pre- and post-sale support partner for some of the leading global brands, operating through its multi-layered subsidiaries.
Savita Oil Technologies
Incorporated in 1961, it manufactures petroleum speciality products which includes liquid paraffin petroleum sulphonates, transformer oils or white oils and petroleum jellies. The company has tied up with Japanese oil major, Idemitsu, which supplies technical know-how.
This liquor major has Mansion House, the second-largest selling brandy in India, accounting for more than 50 per cent of the brandy market in south India. Tilaknagar manufactures and markets more than 40 brands across price points and exports to Western Africa, the Middle East, Far East and the Caribbean.
Subsidiary of The Timken Company, a global manufacturer of bearings, alloy steel and related components with a presence in more than 30 countries. Timken India has strong presence across the country and has a clean balance sheet with zero debt.
The flagship company of Torrent Group manufactures and sells branded as well as unbranded, generic pharmaceutical products. It is a prominent player in therapeutic areas such as cardiovascular and central nervous system. The company's current international operations are well spread over the world.
The company is into Yarn, Greige and Processed fabric, Sewing thread, Acrylic fibre. The group has 25 production plants with a total capacity of over 10 lakh spindles. Vardhman is also one of the largest exporters of yarn from India, with yarn accounting for more than 50 per cent of the revenue.
VST Tillers Tractors
VST has a venture with Mitsubishi Heavy Industries and Mitsubishi Corporation to manufacture Power Tillers and Diesel Engines. It has a niche space in the smaller and lower horse-power tiller space with 40 per cent market share. Gujarat and Maharashtra contributing over 80 per cent of its tractor sales.
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