Wealth-Insight - Apr 2021 PDF

Subscription copy of [kullarkargaurav@gmail.com]. Redistribution prohibited.
@
A SIP of ` 10,000
in HDFC Flexi Cap Fund
(Erstwhile HDFC Equity Fund)
would be `8.85 Cr. today ^
@since inception
Call your Mutual Fund Distributor / Registered Investment Adviser Today.

A. SIP Performance - Regular Plan - Growth Option
SIP Investments Since Inception 15 year SIP 10 year SIP 5 year SIP
Total Amount Invested (` ‘000) 3,140.00 1,800.00 1,200.00 600.00
Market Value as on February 26, 2021 (`‘000) 88,544.96 5,362.79 2,393.91 848.98
Returns (Annualised) (%) 20.75 13.40 13.26 13.90
Market Value of SIP in Benchmark# (` ‘000) 31,399.97 4,933.99 2,472.91 877.64
Benchmark Returns (Annualised) (%)# 14.78 12.43 13.87 15.25
Past performance may or may not be sustained in the future. Âssuming `10,000 invested systematically on the first Business Day of every month over a period of time. CAGR
returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return) for Regular Plan -Growth Option. The above investment simulation
is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital.
B. Performance - Regular Plan - Growth Option NAV as at February 26, 2021 ` 810.555 (per unit)
Scheme Benchmark Additional Benchmark Value of investment of (`) 10,000
Period Scheme Returns (%)
Returns (%)# Returns (%)## Scheme (`) Benchmark (`)# Additional Benchmark (`)##
Last 1 Year 33.50 33.37 31.27 13,339 13,326 13,117
Last 3 Years 8.91 10.86 12.88 12,914 13,621 14,378
Last 5 Years 17.57 17.31 17.29 22,456 22,207 22,189
Since Inception 18.29 11.79 11.31 810,555 185,049 165,074
#NIFTY 500 (Total Returns Index) ##NIFTY 50 (Total Returns Index). Inception Date: January 01, 1995. The scheme is managed by Mr. Prashant Jain since June 20, 2003.
Common note for Table A & B: Since Inception Date = Date of First allotment in the Scheme / Plan.
C. Performance of Other Funds Managed by Mr. Prashant Jain, Fund Manager of HDFC Flexi Cap Fund (Erstwhile HDFC Equity Fund)
(who manages total 4 schemes which have completed one year)
Managing Returns (%) as on February 26, 2021
Scheme
Scheme since Last 1 year (%) Last 3 years (%) Last 5 years (%)
HDFC Top 100 Fund June 20, 2003 30.59 8.98 16.72
NIFTY 100 (Total Returns Index) $ 31.10 11.91 17.19
HDFC Balanced Advantage Fund June 20, 2003 28.53 8.53 15.35
NIFTY 50 Hybrid Composite Debt 65:35 Index $ 24.79 12.46 14.80
HDFC Hybrid Debt Fund @ December 26, 2003 13.12 7.49 9.74
NIFTY 50 Hybrid Composite Debt 15:85 Index $ 12.18 10.30 10.25
$ Benchmark. @ The scheme is co-managed by Mr. Shobhit Mehrotra (Debt) (since September 1, 2007) and Mr. Prashant Jain (Equities) (since December 26, 2003).
Common notes for Table B & C: Past performance may or may not be sustained in the future. Returns greater than 1 year period are Compounded Annualised (CAGR). Load
is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have different expense structure. The expenses of the
Direct Plan under the scheme will be lower to the extent of the distribution expenses/commission charged in the Regular Plan. Returns as on February 26, 2021.
D. Performance of Permitted Category FPI Portfolio managed by the Fund Manager (Mr. Prashant Jain)
Managing Returns (%) as on February 28, 2021
Scheme
Scheme since Last 1 year (%) Last 3 years (%) Last 5 years (%)
Permitted Category FPI Portfolio (managed under a bilateral agreement under
Regulation 24(b) and subject to applicable laws) March 22, 2016 33.50 11.86 N.A.
Benchmark - MSCI India (Total Returns) 32.09 11.76 N.A.

Past performance may or may not be sustained in the future. Returns greater than 1 year period are compounded annualised (CAGR). The above returns are computed using
the Time Weighted Rate of Return (TWRR) methodology, to make them more comparable with the mutual fund scheme’s returns. FPI Portfolio: Inception date is March 22, 2016.
The performance is not comparable with the performance of the aforementioned scheme(s) of HDFC Mutual Fund managed by Mr. Prashant Jain due to differing investment
objective/s and fundamental differences in asset allocation, investment strategy and the regulatory environment. The said disclosure is pursuant to SEBI Circular no.
Cir/IMD/DF/7/2012 dated February 28, 2012 pertaining to Regulation 24(b) of SEBI (Mutual Funds) Regulations, 1996. FPI -Foreign Portfolio Investor. N.A.: Not Available.
HDFC Flexi Cap Fund (Erstwhile HDFC Equity Fund)
(An Open-ended Dynamic Equity Scheme Investing Across
Large Cap, Mid Cap & Small Cap Stocks) is suitable for
investors who are seeking*:
y To generate long-term capital appreciation/income

y Investments predominantly in equity
INVESTORS UNDERSTAND THAT THEIR
& equity-related instruments PRINCIPAL WILL BE AT VERY HIGH RISK
*Investors should consult their financial advisers, if in doubt about whether the product is suitable for them.
For latest riskometers, please refer to www.hdfcfund.com
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
Focused on the
right selection.
ICICI Prudential
Focused Equity Fund
To invest, contact your Mutual Fund Distributor
Download Visit
IPRUTOUCH App www.iciciprumf.com
ICICI Prudential Focused Equity Fund (An open ended equity scheme investing in maximum 30 stocks
Mode
across market capitalisation i.e. focus on multicap) is suitable for investor who are seeking*: Mode
rate ra
High tely
de to
e
Hi
rat
Mo Low
• Long term wealth creation

gh
• An open ended equity scheme investing in maximum 30 stocks across market-capitalisation Investors understand that
Very
High
Low
their principal will be at

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them. very high risk
The Risk-o-meter(s) specified above will be evaluated and updated on a monthly basis. Please refer https://www.icicipruamc.com/news-and-updates/all-news for more details.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
APRIL 2021
Volume XIV, Number 10
27 COVER STORY
EDITORIAL POLICY
The goal of Wealth Insight, as with
all publications from Value
Research, is not just limited to
generating profitable ideas for its
IPO
readers; but to also help them in
generating a few of their own. We
aim to bring independent, unbiased
and meticulously- researched
stories that will help you in taking
better-informed investment
decisions, encouraging you to
indulge in a bit of research on your
own as well.
All our stories are backed by
quantitative data. To this, we add
BOOM
rigorous qualitative research
obtained by speaking to a wide
variety of stakeholders. We firmly
stick to our belief of fundamental
research and value-oriented
approach as the best way to earn
wealth in the stock market. Equally
important to us is our unwaveringly
focus on long term planning.
Simplicity is the hallmark of
our style. Our writing style is
simple and so is the presentation
of ideas, but that should not be
construed to mean that we
over-simplify.
Read, learn and earn – and let’s
grow and evolve as we undertake
this voyage together.
WHAT’S IN IT FOR YOU?

Editor
Dhirendra Kumar
Senior Editor
Vibhu Vats
Copyediting
18 STOCK ADVISOR 42 INTERVIEW
Debjani Chattopadhyay,
Gautam Gupta Stocks + ‘Value is what you derive
Research & Analysis
Arul Selvan, Danish Khanna
and Rajan Gulati
Asset Allocation from businesses over time
Design
Worried about investing at market and not just bridging of
Mukul Ojha and Sneha Verma highs? The solution is
Production straightforward. undervaluation’
Hira Lal
Data source for stocks
VENUGOPAL MANGHAT, Head - Equities,
AceEquity L&T Mutual Fund
9DOXH5HVHDUFK,QGLD3YW/WG
Wealth Insight is owned by Value
Research India Pvt. Ltd., 5, Commercial
Complex, Chitra Vihar,
Delhi 110 092.
Editor: Dhirendra Kumar.

Printed and published by Dhirendra
Kumar on behalf of Value Research India
Pvt. Ltd. Published at 5, Commercial
Complex, Chitra Vihar, Delhi 110 092.
Printed at Option Printofast, 46,
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Advertising Contact:
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Total pages 64, including cover
4 Wealth Insight April 2021

Columns
7 17
EDIT
by DHIRENDRA KUMAR
Introduction
An old issue to ETFs
The IPO process has transformed ETFs are a low-cost way
with time, yet IPOs continue to to invest in a basket of
present unique challenges. Getting stocks that tracks an
back to the basics can help. index. Here’s what you
need to know about
them.
45
MAIN STREET
by SAURABH MUKHERJEA 20 WORDS WORTH WISDOM
The Khatris’ reinvention

The Khatri business community
has a long and distinguished Insights from Buffett’s
history of remarkable enterprise and
outstanding success punctuated by latest annual letter
politically motivated loot of their wealth Saturated with wit and wisdom,
Warren Buffett’s annual letters
are both an insightful and
delightful read. We bring to you the
most insightful excerpts
from his 2020
annual letter.
48 8 MARKET MOVES 54 STOCK SCREEN

EVERYDAY ECONOMICS
Newsmakers of the Quality stocks
by PUJA MEHRA
month available cheap
Understanding
basic income The PSU comeback High dividend-yield
The idea of universal basic Stock moves stocks
income looks promising but there are
challenges to its implementation in India The gas-industry Discount to book value
champion Reasonably priced
50 Index moves growth stocks
STRAIGHT TALK S&P BSE Basic Attractive blue chips
by ANAND TANDON Materials
Big markets 62 WORDS WORTH NOW
and valuations
Valuing a company on the 24 MARKET COMPASS
basis of its market size is
fraught with pitfalls
Market barometer
',6&/$,0(5
The contents of Wealth Insight published by Value Research India Private Limited (the ‘Magazine’) are not intended to serve as professional advice or guidance and the Magazine takes no responsibility or liability, express or implied, whatsoever for any investment
decisions made or taken by the readers of this Magazine based on its contents thereof. You are strongly advised to verify the contents before taking any investment or other decision based on the contents of this Magazine. The Magazine is meant for general reading
purposes only and is not meant to serve as a professional guide for investors. The readers of this Magazine should exercise due caution and/or seek independent professional advice before entering into any commercial or business relationship or making any
investment decision or entering into any financial obligation based on any information, statement or opinion which is contained, provided or expressed in this Magazine.
The Magazine contains information, statements, opinions, statistics and materials that have been obtained from sources believed to be reliable and the publishers of the Magazine have made best efforts to avoid any errors and omissions, however the
publishers of this Magazine make no guarantees and warranties whatsoever, express or implied, regarding the timeliness, completeness, accuracy, adequacy, fullness, functionality and/or reliability of the information, statistics, statements, opinions and
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to the jurisdiction of Delhi courts only. ALL RIGHTS RESERVED
April 2021 Wealth Insight 5

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EDIT
An old issue
The IPO process has transformed with time, yet IPOs continue to present
unique challenges. Getting back to the basics can help.
DHIRENDRA KUMAR
Old fellow-travellers of Value Research out the absolute duds and fill the application forms for
know it well that I have always looked at IPOs with a all IPOs. The allotment ratios were not great but you
jaundiced eye. From the sad old days of the 1980s and could be certain that most of the shares you were
1990s, when people would queue up outside banks actually allotted could be sold off at a reasonable profit.
clutching their ‘issue’ forms and cheques, to the However, the information asymmetry is only lessened
current completely digital avatar that ‘issues’ have but can never disappear. The balance of power (in the
acquired, few investors have managed to get sustained, sense of information being power) lies with the seller.
meaningful returns out of this activity. The companies have not been in the public eye at all.
It is true that things have changed somewhat from Invariably, the promoter has spent the preceding
those bad old days, mostly because regulations have months carefully building up an image to ensure that
meant that only a company of higher quality can now the investing public has a positive image. Unlike listed
go for an IPO. In the bad old days, businesses with zero stocks, the financials haven’t been scrutinised closely
track record and just some sketchy promises were able for years and years. And of course, the price is the
to bring in IPOs. This cannot happen now. In those promoter’s gambit, rather than one that has been found
days, the new-issue investor was generally no more out by the price-discovery mechanism of the markets.
than a lottery buyer. Nowadays, it’s still a lottery, There are good businesses that have come up with
except that the odds are somewhat different. IPOs. Indigo or HDFC Mutual Fund are examples
However, that is still tempered by the same old from recent years that come to mind, and there are
basic problem that, unlike secondary-market others we have discussed in our cover story. However,
investing, there’s a huge information asymmetry in no investment is done in a vacuum. Whatever money
IPOs between the seller and the buyer. We have you invest in one company is always an opportunity
always said that it doesn’t make sense for individual lost for you to invest in another. Money is fungible,
investors to invest in IPOs at all. In India, we have even more than normally so in equity investing.
long entertained this idea that IPOs are somehow Therefore, the question an investor needs to ask is
specially suited for retail investors. In the days of the not whether an X IPO is a good IPO but whether it’s
Controller of Capital Issues (the regulatory body better than all the other investment alternatives that
before SEBI) and administered-price IPOs, that may exist at the moment. When you ask that particular
well have been true, but not anymore. question, the equation often changes. This is the
The market regulator SEBI, as well as other bodies, same question that you ask – or should ask – while
have frequently tried to encourage the small investors’ making any equity investment, so why not for IPOs?
interest in IPOs. Parts of the IPO process have also been Still, all said and done, today’s IPOs are sometimes
tailored to suit this purpose. ASBA is actually quite an worth a careful look. That’s what the cover story is
interesting and successful innovation. Once upon a aimed at. Investors should understand all parts of the
time, retail investors used to await IPOs eagerly. All one process thoroughly, learn from the performance of
had to do was to do a few rudimentary checks to filter recent IPOs, and then take an informed call.

MARKET
MOVES
Newsmakers of the month

Key business, economic and market events over the last one month
Equity funds see outflows for the vehicles, a 5 per cent discount on years to fund long-term
eighth consecutive month new vehicles, and the waiver of infrastructure projects.
Open-end equity mutual funds saw the registration fee.
net outflows for the eighth month Jio bids highest in spectrum
in a row. As per data from AMFI, RBI removes PCA restrictions on auctions
net outflows from open-end equity IDBI Bank Reliance Jio emerged as the
schemes were at `4,534 crore for After nearly four years, the RBI highest bidder in the two-day 4G
February 2021. removed IDBI Bank from the PCA telecom spectrum auction, in
framework. This has paved way for which the government would get
4VU[OSÙL[MSV^ZPULX\P[`M\UKZ the lender to expand its business `77,815 crore. Of the 855.6
2021 2020 and set the stage for strategic megahertz (MHz) of spectrum
3000 Feb Jan Dec Nov Oct Sep Aug Jul Jun
divestment by the government. sold, Jio spent `57,123 crore to get
0 488 MHz, while Bharti Airtel
SEBI tweaks valuation norms for bought `18,699 crore worth of
-3000
perpetual bonds spectrum, with the bulk of its
-6000 After directing that the maturity purchase in the 2,300 Mhz band.
` cr of perpetual bonds should be
-9000
treated as 100 years from the date Vi finally adds subscribers
-12000 of issuance of the bond for After 15 months of losing streak,
valuation, SEBI relented after the Vodafone Idea added 1.7 million
-15000
finance ministry’s intervention. subscribers in January, as per
The transport minister unveils the Perpetual bonds will now be TRAI. Airtel led with an addition
new vehicle-scrappage policy treated as 10-year bonds until of 5.9 million subscribers, while Jio
The road and transport minister March 2022, after which their came second at 1.95 million. See the
Nitin Gadkari unveiled the vehicle- deemed maturity will be chart ‘Month-on-month change in
scrappage policy. As per it, private lengthened in a phased manner. telcos’ subscribers’.
vehicles of more than 20 years are
to be de-registered if they are Cabinet clears the DFI bill Wipro to buy London-based Capco
found unfit or fail to get a renewed The bill to set up a government- Wipro is all set to acquire London-
registration certificate. Vehicle owned development-finance based global management and
owners willing to scrap their old institution (DFI) was cleared by technology consultancy firm
vehicles will enjoy incentives like the government. With an initial Capco for $1.45 billion. This
a road-tax rebate of up to 25 per capital of `20,0000 crore, the DFI is acquisition will make Wipro one
cent for passenger vehicles and up all set to leverage around `3 of the largest end-to-end global
to 15 per cent for commercial trillion from the markets in a few consulting, technology and
4VU[OVUTVU[OJOHUNLPU[LSJVZ»Z\IZJYPILYZ
12% Bharti Airtel Reliance Jio Vodafone Idea Net wireless subcriber additions
-3
-6
Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21

MARKET
MOVES
The PSU comeback

transformation service providers
to the banking and financial
services industry.
New acquisition by Adani Ports As PSU stocks witness a revival, we look at

Adani Ports will acquire the
Warburg Pincus’ stake of roughly some long-term data related to them
31.5 per cent in Gangavaram Port,
Andhra Pradesh, for `1,954 crore. It
4JHWVMHSSSPZ[LK7:<ZV]LY[OLSHZ[`LHYZ`JY
is also in talks with DVS Raju and
family (promoters) for their 58.1
per cent stake in the port. With the
acquisition, its market share is
expected to increase to 30 per cent
across 12 locations.

2021 2020 2019 2018 2017
.YV^[OPUJHYNV]VS\TLOHUKSLK
I`(KHUP7VY[Z
In million metric tonnes 208 223
169 180
144 152

2016 2015 2014 2013 2012
Year-end data. 2021 data as on March 15, 2021

FY15 FY16 FY17 FY18 FY19 FY20
;VWNHPULYZHUKSVZLYZV]LY[OLSHZ[`LHYZ
Future–Reliance tug of war goes on
After a single bench of the Delhi .HPULYZ 3VZLYZ
High Court had stayed the Future– BPCL 355% MMTC -93%
Reliance deal, the division bench
stayed the single bench’s order. In
ITI 290% Union Bank of India -89%
August 2020, Future Group had Bharat Immunologicals Indian Overseas
& Biologicals Corp 268% Bank -88%
struck an asset-sale deal of $3.4
billion with Reliance Industries.
Alleging a breach of contract, 4VZ[L_WLUZP]LHUKJOLHWLZ[7:<Z
Amazon, an investor in the In terms of premium/discount to 10Y median price-to-book
promoter entity of Future Retail,
sent Future to arbitration and got Hindustan Copper MMTC Bank of Maharashtra
the deal on hold. Future then
moved to the Delhi High Court.
Premium 345% 128% 122%
Vedanta revises the open offer
P/B 18.4 9.1 1.3
Vedanta’s promoters increased the
price and the size of the open
10Y median
P/B 4.1 4.0 0.6
offer to `235 per share and 17.5 per GIC Re New India Assurance GMDC
cent of the total equity base from
`160 per share and 10 per cent of Discount -94% -73% -59%
the equity base. In October 2020,
the company’s delisting efforts P/B 1.5 1.5 0.4
had failed. LIC, the largest
shareholder in Vedanta after the
10Y median
P/B 24.0 5.5 1.0
promoters, had wanted `320/share Data as on March 15, 2021
for its stake. WI

MARKET
MOVES
Stock moves
Significant stock movements in BSE 500 over the last one month
(KHUP7V^LYPower M-cap (` cr) 35,580 )HURVM0UKPHBank M-cap (` cr) 21,873
`92
1M return (%) 1M return (%)
`84
1Y return (%) 1Y return (%)
`56 P/E `67 P/B
The company has made a `2,600 crore offer to buy Essar Power MP under After a rally, PSU banking stocks saw some correction, with the S&P BSE
the Insolvency and Bankruptcy Code. Bankex down by over 6.6 per cent in the last one month.
+LLWHR-LY[PSPZLYZChemicals M-cap (` cr) 2,428 -\[\YL*VUZ\TLYTrading M-cap (` cr) 1,276
`235
1M return (%) `8 1M return (%)
`156
P/E `6
P/E
Fertiliser stocks have gained focus post the Union Budget. Also, the Its shares were under stress after Delhi High Court upheld the order
company’s promoter has recently increased its stake. restraining Future Retail from selling its business to Reliance Retail.
(KHUP;V[HS.HZTrading M-cap (` cr) 81,089 *LU[YHS)HURVM0UKPHBank M-cap (` cr) 9,607

`22
`737 1M return (%) 1M return (%)
`499 P/E P/B
`16
Adani Group’s stocks have been in focus for the last one year, thereby RBI found divergence to the tune of `519 crore in provisioning by the bank
resulting in the biggest wealth surge for its promoter, Gautam Adani. for FY20, which widened its loss to `1,640 crore.
/PUK\Z[HU*VWWLYNon-Ferrous Metals M-cap (` cr) 11,639 -\[\YL9L[HPSRetailing M-cap (` cr) 3,029

`76
`126
1M return (%) 1M return (%)
`86
P/E ¶ P/E
`56
This copper stock has gained focus owing to the rising copper price in the Its shares were under stress after Delhi High Court upheld the order
global market. The resumption of industrial activities led to this price hike. restraining Future Retail from selling its business to Reliance Retail.
1\Z[+PHSMiscellaneous M-cap (` cr) 5,606 )SPZZ.=:7OHYTHHealthcare M-cap (` cr) 1,075

`906
1M return (%) `178 1M return (%)
`637 `104
P/E P/E
The company announced its entry into the B2B segment with the launch of its After a spectacular rally in the pharma sector in the last one year, the
platform Jd Mart. company has started to see profit booking in the last one month.
Data as on March 19, 2021

MARKET
MOVES
The gas-industry champion

ADANI TOTAL GAS Having run up over seven times in the last one year, the
stock has been on steroids. Here is all you need to know about the company.
A
dani Total, which got
incorporated in 2005 and
got listed separately from
Adani Enterprises in 2018, is the
largest private city-gas distributor
in India. Like shares of other
Adani group companies, the Adani
Total Gas (named changed from
Adani Gas recently) stock has been
on steroids. In spite of the COVID-
led slowdown in the economic
activity, the stock has risen over
seven times in just one year.
equipment, along with value-
Business: The company currently .H\ÀQDQFLDOV added services relating to the
has 14 operational geographical CGD business.
Market cap `82,398 cr
areas (GAs), 151 CNG stations and Financials and valuations: The
a pipeline network of more than 5Y sales growth 7% company, in the past three years
7,800 km. Gas-distribution till FY20, managed to grow its gas
<SURÀWJURZWK 32.6%
companies typically supply natural supply by 12.5 per cent YoY, while
gas in either compressed form 5Y median operating margin 29.7% its sales improved by 19.7 per cent
(CNG for vehicles) or piped form YoY. Moreover, lowering of debt
5Y median ROE 18.9%
(PNG for domestic and industrial and controlled depreciation by the
use). Adani Total derives an equal Debt-to-equity 0.3 company led its net profit to rise
amount of sales volume from both by 62.8 per cent. Recovery in
P/E 183
of them. industrial PNG led its gas volume
FY20 data. Price data as on March 15, 2021
With the France-based energy to fully recover in September last
major Total SE now being an equal year from the COVID-induced
owner of the company (both Adani shot in the arm for the company. slowdown.
and Total have around 37 per cent However, the group faces criticism Currently, just four GAs
ownership), Adani Total will of political linkages as well as account for 90 per cent of the gas
benefit from long-term LNG concerns around its high group- supplied by the company. However,
(liquified natural gas) sourcing tie- level debt (more than three times the operationalisation of new
ups for its operations. debt-to-equity as of FY20). areas soon will lead to long-term
Management: Adani Total is a part Outlook: Adani Total has volume growth. But the company
of the ports-to-power Adani aggressive plans for the future. It would be vulnerable to project-
conglomerate. The group started plans to raise around `3,000 crore execution risks. Since its listing in
with humble beginnings in the in US-denominated bonds to fund 2018, its stock price has risen by
1990s by acquiring the rights to its capital-expenditure 156 per cent YoY, taking its
operate the Mundra port in requirements for the next two valuations to a rich corridor of
Gujarat. Today, its companies are years. Further, it also plans to P/E (184). For comparison,
the big players in airports, ports, enter new businesses of biogas, Indraprastha Gas (32.9) and
thermal-power plants and biofuel, biomass, LCNG (liquid to Gujarat Gas (30.5) trade at much
renewable energy. The coming in compressed natural gas), HCNG lower valuations. Surprisingly,
of France-based Total SE, a $126 (high compressed natural gas), despite the rally in the stock price,
billion oil-and-gas company, as a electric vehicles, hydrogen and the overall mutual funds holding
co-promoter, has further been a manufacturing of various in this stock is negligible. WI

MARKET
MOVES
Index moves
Significant index movements over the last three months
: 7):,4L[HS Top 5 constituents 3M return (%) 1Y return (%)
3M return (%) 1Y return (%) With rising prices of

various
JSW Steel
commodities Tata Steel
following the
13,879 resumption of Hindalco Industries
economic activities, Hindustan Zinc
metal stocks have
10,683 gained favour. Vedanta
: 7):,)HZPJ4H[LYPHSZ Top 5 constituents 3M return (%) 1Y return (%)
3M return (%) 1Y return (%) This index

comprises
Ultratech Cement
economy-sensitive JSW Steel
stocks. Following
4,172
the resumption of Tata Steel
economic activity, Grasim Industries
the index has
3,238 shown a spurt. Hindalco Industries
: 7):,0UMYH Top 5 constituents 3M return (%) 1Y return (%)
3M return (%) 1Y return (%) Infrastructure stocks

have gained focus
L&T
following the Union Power Grid
Budget. The Budget
223 has increased ONGC
capital expenditure NTPC
for infrastructure
173 development. Adani Ports
: 7):,7V^LY Top 5 constituents 3M return (%) 1Y return (%)
3M return (%) 1Y return (%) Power stocks have

been trading higher,
Power Grid
owing to an NTPC
improved economic
2,530 outlook and rising Adani Green
1,986
power demand due Adani Transmission
to increased
industrial activity. Tata Power
: 7):,7:< Top 5 constituents 3M return (%) 1Y return (%)
3M return (%) 1Y return (%) After being out of

favour for many years,
SBI
PSU stocks finally Power Grid
caught investors’
6,889 attention post ONGC
5,491
Budget, owing to the NTPC
government’s push
for privatisation. Indian Oil

MARKET
MOVES
S&P BSE Basic Materials

The S&P BSE Basic Materials index has started to outperform the Sensex after a brief period of
underperformance. The index’s price-to-book ratio is at a 22.2 per cent premium to its five-year median
and its price-to-earnings ratio is at a 66.6 per cent premium. The index’s dividend yield is at a discount of
0.29 percentage point to its five-year median.
2LÙ\TILYZ 0UKL_TV]LTLU[ )HZPJ4H[LYPHSZ:LUZL_4LKPHU

4500
31.5
Price to earnings
2.1
Price to book
3800
3100
2400
1.20
Dividend yield (%) Market cap
17.6 (` lakh cr)
1700
1000
Mar ’16 Mar ’17 Mar ’18
Sensex rebased to index
Mar ’19 Mar ’20 Mar ’21
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Mar ’16 Mar ’17 Mar ’18 Mar ’19 Mar ’20 Mar ’21
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=HS\H[PVUZKP]PKLUKZHUKYL[\YUZ 18.9
Dividend 18
Company name P/B P/E yield (%) 1Y return (%)
10
Hindalco Industries 1.2 33.9 0.30 236.5 Jun ’17 Mar ’21
Note that the five-year P/E chart was not possible as the companies constituting the
Vedanta 1.4 0.0 1.76 220.6 Basic Materials Index had net losses or very low profits previously.
Grasim Industries 1.5 22.9 0.28 187.3
JSW Steel 2.6 27.0 0.45 170.9
+P]PKLUK`PLSK
2.5%
Tata Steel 1.3 0.0 1.36 169.5
2.1
Hindustan Zinc 3.1 17.5 5.82 123.7
UPL 2.4 19.7 0.96 111.1 1.7 1.49%
Ultratech Cement 4.5 28.1 0.19 110.5 1.3
Shree Cement 6.7 48.1 0.41 52.8 0.9
Pidilite Industries 16.9 90.6 0.40 21.0 0.5
Data as on March 21, 2021 Mar ’16 Mar ’17 Mar ’18 Mar ’19 Mar ’20 Mar ’21

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An Investors Education Initiative by
Introduction to ETFs
ETFs are a low-cost way to invest in a basket of stocks that tracks an index.
Here’s what you need to know about them.
I
f you are interested in investing, it’s likely that you
have come across the term ‘ETF’. Exchange-traded
funds (ETFs) are a basket of stocks that trades just
like an individual company’s stock. An ETF usually
tracks an index, such as the Nifty or the Sensex. Thus,
ETFs combine the features of a stock and a fund.
The first ETF was launched in India in 2001, but it
was not until 2015 that ETFs started gaining traction.
Over the last five years, the assets managed by them
has grown at an annual rate of 75 per cent, from over
`17,600 crore in February 2016 to over `2.87 lakh crore
in February 2021. In August last year, assets managed
.HPUPUNWYVTPULUJL
by the ETFs tracking the Nifty 50 Index crossed the The assets managed by ETFs have been steadily increasing over
the last five years.
milestone of `1 lakh crore.
The Indian mutual fund industry today has 100 ETFs ` 3.50 lakh crore
across three different asset classes – equity, debt and 2.80
gold. Equity ETFs are the most popular and manage
assets worth over `2.40 lakh crore across 78 schemes. 2.10
These are followed by 12 debt ETFs that manage assets 1.40
of over `33,700 crore and gold ETFs with an AUM of
`14,000 crore across 10 ETFs. 0.70
0
Benefits of an ETF February 2016 February 2021
Investing through ETFs has a number of advantages:
z Simplicity: Since ETFs track an index, they are a
have a certain scale to reach that level of
simple way to get market-like returns. If you are
diversification.
positive about the Indian economy and want to profit
z Transparency: ETF prices are available in real time
from its potential, buying a Sensex or Nifty ETF is the
and their portfolios are the same as the underlying
simplest way to realise this goal.
index. That helps you know what you are getting and
z Low cost: One of the major advantages of ETFs is
how your investment is doing.
their cost efficiency vis-à-vis actively managed funds.
Since ETFs just mimic an underlying index, they don’t Who should invest in an ETF?
involve any active decision-making by a fund manager. Anyone who wants to profit from the potential of
Also, transactions in an ETF are much less as Indian equities over the long term can invest in an ETF.
compared to an actively managed fund. Hence, this ETFs are a simple, hands-off way to grow your capital.
greatly reduces their cost. So, if you don’t have enough time to manage your
z Diversification: If you invest in individual stocks, you portfolio, ETFs could be a possible solution. Also, if you
will have to buy a sufficient number of companies to are a new investor who has little idea about stocks or
achieve optimum diversification. When you invest in mutual funds, ETFs can be your starting point. If you
an ETF, you instantly get diversification. What’s more, are a seasoned investor, parking a part of your corpus
you get this diversification irrespective of the amount in ETFs can help you diversify and limit the impact of
you invest. With individual stocks, you will need to a bad investing decision. WI
All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF).
For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the
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Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.

www.valueresearchstocks.com
Stocks +
Asset Allocation
Worried about investing at market highs? The solution is straightforward.
Dhirendra Kumar many of them, the stock prices have tion’, along with its close relative
I
touched amazing highs. It’s the kind ‘booking profits’ is the source of
’m writing this on the first of time that has been a strong much trouble for investors.
anniversary of the ‘Janata learning moment for those who like Curiously, more knowledgeable
Curfew’ of March 22, 2020, to draw obvious conclusions about and more involved investors face
which paved the way a few days the likely movements of the mar- these dilemmas a lot more often
later for the full-fledged lock- kets. ‘Crisis Bear Market’ turned than those who invest more casually.
down from which we have still not out to be too simplistic an equation The reason is those of us who are
recovered fully. Except, of course, the for real life. active and involved in our invest-
equity markets. One of the strangest During this year, we have had a ments always have an urge to do
phenomena of the last 12 months has low point in the equity markets, something. Such investors generally
been the course of the equity mar- when most stock prices were rough- do well because they learn, analyse
kets. Back in March 2020, I was actu- ly half of the current highs of the and act more than others. Therefore,
ally looking forward to a prolonged markets. Such a quick roller coast- they start equating being good
period when I could pick and choose er of prices also creates a similar investors with doing something,
great stocks and buy them at exceed- roller coaster of emotions in the often anything. Unfortunately, along
ingly attractive valuations. However, minds of savers. As prices have with everything else, in practice,
as it turned out, that period was sur- marched towards new highs, inves- this also translates into reading too
prisingly brief. tors have started asking whether much into this high or that low and
In fact, the reverse happened. they should stay out of the markets trying to act upon all of them.
Businesses did badly and most hav- and wait for a low to re-enter it. In a sense, this is justifiable. To
en’t recovered completely, while for This concept, ‘waiting for a correc- the equity investor who is dedicated

to buying stocks at a good value, In the phrase ‘all-time high’, we a funny bit (bit.ly/jerry-helmet)
there is nothing so worrying as mar- from a Jerry Seinfeld comedy show
kets at or near all-time highs. are making a comparison to that demonstrated this very point.
Somewhat unexpectedly, the last few the past whereas in the phrase Here’s what he said, “Sky diving
months have turned out to be a peri- was definitely the scariest thing that
od with a great concentration of all- ‘buy low. sell high’, we are I’ve ever done. Let me ask this ques-
time highs. Therefore, to some making a comparison to the tion from the people who do sky-div-
extent, the investor’s shock and awe ing. What is the point of the helmet
is justifiable. There’s a whole new
future. Today’s high can very in sky-diving? So if you dive from
generation of investors who have not well be a low of the future, and the plane and the parachute does
seen such a surge as we have had and not open, how exactly does the hel-
many older investors have forgotten
indeed it has always been so. met help?” Your fixed-income asset
that such things used to happen. allocation must not be just the hel-
The problem with markets being gain another big chunk beyond this. met, it must be the parachute.
near or at all-time highs is that the Still, it is reasonable to be scared The second part is the second-old-
reflex action of investors is to not of investing when the markets are est principle in investing, which is
invest. After all, the central goal of high, but the solution to that is not that you must diversify. Along with
all investing is to buy low and sell to wait it out but something else. that comes the idea of quality. There
high, so why should one buy when There are two parts of this solution: will be ups and downs but over some
stock prices are at an all-time high? The first part is the oldest princi- years, if you have well-chosen
This reflex ignores the fact that in ple in investing, which is asset allo- stocks and at least 10–15 of them in
the phrase ‘all-time high’, we are cation. No matter how committed good proportion, then you will win.
making a comparison to the past you are as an equity investor, you Nothing more is required. Once you
whereas in the phrase ‘buy low, sell simply must allocate a decent chunk have taken care of these basics, suc-
high’, we are making a comparison of your total financial investments cess can’t avoid you.
to the future. Today’s high can very to safe, fixed-income investments. And how are you to do this? That’s
well be a low of the future, and This must be large enough to be a the easiest question to answer. Just
indeed it has always been so. You meaningful buffer against volatility head over to www.valueresearch-
could wait and keep waiting for a in the equity part. How large? Here’s stocks.com and your quality diversi-
couple of years while stock prices the answer: Some months ago, I saw fication problems are over. WI
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WORDS WORTH
WISDOM
Insights from
Buffett’s latest annual letter
Saturated with wit and wisdom, Warren Buffett’s annual letters are both
an insightful and delightful read. Here are the most insightful excerpts
from his 2020 annual letter.
‘‘
The magic of retained earnings
Charlie and I view Berkshire’s holdings of marketable
stocks – at yearend worth $281 billion – as a collection of
businesses. We don’t control the operations of those
companies, but we do share proportionately in their long-
term prosperity. From an accounting standpoint, however,
our portion of their earnings is not included in
Berkshire’s income. Instead, only what these investees
pay us in dividends is recorded on our books. Under
GAAP, the huge sums that investees retain on our
behalf become invisible.
What’s out of sight, however, should not be out of
mind: Those unrecorded retained earnings are usually
building value – lots of value – for Berkshire. Investees
use the withheld funds to expand their business, make
acquisitions, pay off debt and, often, to repurchase their
stock (an act that increases our share of their future
earnings). …retained earnings have propelled American
business throughout our country’s history. What worked
for Carnegie and Rockefeller has, over the years, worked
its magic for millions of shareholders as well.
Of course, some of our investees will disappoint, adding
little, if anything, to the value of their company by
retaining earnings. But others will over-deliver, a
few spectacularly. In aggregate, we
expect our share of the huge pile
of earnings retained by
Berkshire’s non-controlled
businesses (what others
would label our equity
portfolio) to eventually
deliver us an equal or
greater amount of
capital gains. Over
our 56-year tenure,
that expectation
has been met.

WORDS WORTH
WISDOM
Financial history is replete with the names of famous

conglomerateurs who were initially lionized as business geniuses
by journalists, analysts and investment bankers, but whose
creations ended up as business junkyards.
was unsolvable: Most of the truly great businesses had
no interest in having anyone take them over.
Consequently, deal-hungry conglomerateurs had to
focus on so-so companies that lacked important and
durable competitive strengths. That was not a great
pond in which to fish.
Beyond that, as conglomerateurs dipped into this
universe of mediocre businesses, they often found
themselves required to pay staggering “control”
premiums to snare their quarry. Aspiring
conglomerateurs knew the answer to this “overpayment”
‘‘
Buffett’s mistake problem: They simply needed to manufacture a vastly
The final component in our GAAP figure – that ugly $11 overvalued stock of their own that could be used as a
billion write-down – is almost entirely the quantification “currency” for pricey acquisitions. (“I’ll pay you $10,000
of a mistake I made in 2016. That year, Berkshire for your dog by giving you two of my $5,000 cats.”)
purchased Precision Castparts (“PCC”), and I paid too Often, the tools for fostering the overvaluation of a
much for the company. conglomerate’s stock involved promotional techniques
No one misled me in any way – I was simply too and “imaginative” accounting maneuvers that were, at
optimistic about PCC’s normalized profit potential. Last best, deceptive and that sometimes crossed the line into
year, my miscalculation was laid bare by adverse fraud. When these tricks were “successful,” the
developments throughout the aerospace industry, PCC’s conglomerate pushed its own stock to, say, 3x its business
most important source of customers. value in order to offer the target 2x its value.
In purchasing PCC, Berkshire bought a fine company – Investing illusions can continue for a surprisingly
the best in its business. Mark Donegan, PCC’s CEO, is a long time. Wall Street loves the fees that deal-making
passionate manager who consistently pours the same generates, and the press loves the stories that colorful
energy into the business that he did before we purchased it. promoters provide. At a point, also, the soaring price
We are lucky to have him running things. of a promoted stock can itself become the “proof ”
I believe I was right in concluding that PCC would, that an illusion is reality.
over time, earn good returns on the net tangible assets Eventually, of course, the party ends, and many
deployed in its operations. I was wrong, however, in business “emperors” are found to have no clothes.
judging the average amount of future earnings and, Financial history is replete with the names of famous
consequently, wrong in my calculation of the proper conglomerateurs who were initially lionized as
price to pay for the business. business geniuses by journalists, analysts and
PCC is far from my first error of that sort. But it’s a big one. investment bankers, but whose creations ended up as
business junkyards.
‘‘
The trickery of conglomerates
Berkshire is often labeled a conglomerate, a negative
term applied to holding companies that own a hodge-
podge of unrelated businesses. And, yes, that
describes Berkshire – but only in part. To understand
how and why we differ from the prototype
conglomerate, let’s review a little history.
Over time, conglomerates have generally limited
themselves to buying businesses in their entirety. That
strategy, however, came with two major problems. One

WORDS WORTH
WISDOM
Conglomerates earned their terrible reputation. Some insurers, as well as other bond investors, may
Charlie and I want our conglomerate to own all or try to juice the pathetic returns now available by
part of a diverse group of businesses with good economic shifting their purchases to obligations backed by shaky
characteristics and good managers. Whether Berkshire borrowers. Risky loans, however, are not the answer to
controls these businesses, however, is unimportant to us. inadequate interest rates. Three decades ago, the once-
It took me a while to wise up. But Charlie – and also mighty savings and loan industry destroyed itself, partly
my 20-year struggle with the textile operation I inherited by ignoring that maxim.
at Berkshire – finally convinced me that owning a non-
controlling portion of a wonderful business is more
‘‘
profitable, more enjoyable and far less work than The float muscle
struggling with 100% of a marginal enterprise. Berkshire now enjoys $138 billion of insurance “float”
For those reasons, our conglomerate will remain a – funds that do not belong to us, but are nevertheless
collection of controlled and non-controlled businesses. ours to deploy, whether in bonds, stocks or cash
Charlie and I will simply deploy your capital into equivalents such as U.S. Treasury bills. Float has some
whatever we believe makes the most sense, based on a similarities to bank deposits: cash flows in and out daily
company’s durable competitive strengths, the to insurers, with the total they hold changing very little.
capabilities and character of its management, and price. The massive sum held by Berkshire is likely to remain
If that strategy requires little or no effort on our near its present level for many years and, on a cumulative
part, so much the better. In contrast to the scoring basis, has been costless to us. That happy result, of
system utilized in diving competitions, you are course, could change – but, over time, I like our odds.
awarded no points in business endeavors for “degree
‘‘
of difficulty.” Furthermore, as Ronald Reagan
cautioned: “It’s said that hard work never killed
How stock repurchase
anyone, but I say why take the chance?” benefits shareholders
Last year we demonstrated our enthusiasm for
Berkshire’s spread of properties by repurchasing the
equivalent of 80,998 “A” shares, spending $24.7 billion in
the process. That action increased your ownership in
all of Berkshire’s businesses by 5.2% without requiring
you to so much as touch your wallet.
Following criteria Charlie and I have long
recommended, we made those purchases because we
believed they would both enhance the intrinsic value
per share for continuing shareholders and would leave
Berkshire with more than ample funds for any
opportunities or problems it might encounter.
‘‘
Falling returns on bonds In no way do we think that Berkshire shares should
And bonds are not the place to be these days. Can you be repurchased at simply any price. I emphasize that
believe that the income recently available from a point because American CEOs have an embarrassing
10-year U.S. Treasury bond – the yield was 0.93% at record of devoting more company funds to repurchases
yearend – had fallen 94% from the 15.8% yield when prices have risen than when they have tanked.
available in September 1981? In certain large and Our approach is exactly the reverse.
important countries, such as Germany and Japan, Berkshire’s investment in Apple vividly illustrates
investors earn a negative return on trillions of the power of repurchases. We began buying Apple
dollars of sovereign debt. Fixed-income investors stock late in 2016 and by early July 2018, owned slightly
worldwide – whether pension funds, insurance more than one billion Apple shares (split-adjusted)…
companies or retirees – face a bleak future. When we finished our purchases in mid-2018,
American CEOs have an embarrassing record of devoting more

company funds to repurchases when prices have risen than when
they have tanked. Our approach is exactly the reverse.
WORDS WORTH
WISDOM
The math of repurchases grinds away slowly, but can be powerful

over time. The process offers a simple way for investors to own an
ever-expanding portion of exceptional businesses.
message to potential customers must be consistent with

what they will find upon entering your premises.
At Berkshire, we have been serving hamburgers
and Coke for 56 years. We cherish the clientele this
fare has attracted.
The tens of millions of other investors and speculators
in the United States and elsewhere have a wide variety
of equity choices to fit their tastes. They will find CEOs
and market gurus with enticing ideas. If they want price
targets, managed earnings and “stories,” they will not
Berkshire’s general account owned 5.2% of Apple. lack suitors. “Technicians” will confidently instruct
Our cost for that stake was $36 billion. Since then, them as to what some wiggles on a chart portend for a
we have both enjoyed regular dividends, averaging stock’s next move. The calls for action will never stop.
about $775 million annually, and have also – in 2020 – Many of those investors, I should add, will do quite
pocketed an additional $11 billion by selling a small well. After all, ownership of stocks is very much a
portion of our position. “positive-sum” game. Indeed, a patient and level-headed
Despite that sale – voila! – Berkshire now owns 5.4% monkey, who constructs a portfolio by throwing 50 darts
of Apple. That increase was costless to us, coming at a board listing all of the S&P 500, will – over time –
about because Apple has continuously repurchased enjoy dividends and capital gains, just as long as it never
its shares, thereby substantially shrinking the number gets tempted to make changes in its original “selections.”
it now has outstanding. Productive assets such as farms, real estate and, yes,
But that’s far from all of the good news. Because we business ownership produce wealth – lots of it. Most
also repurchased Berkshire shares during the 21 2 years, owners of such properties will be rewarded. All that’s
you now indirectly own a full 10% more of Apple’s assets required is the passage of time, an inner calm, ample
and future earnings than you did in July 2018. diversification and a minimization of transactions and
This agreeable dynamic continues. Berkshire has fees. Still, investors must never forget that their expenses
repurchased more shares since yearend and is likely to are Wall Street’s income. And, unlike my monkey, Wall
further reduce its share count in the future. Apple has Streeters do not work for peanuts.
publicly stated an intention to repurchase its shares as
well. As these reductions occur, Berkshire
shareholders… will also find their indirect ownership
of Apple increasing as well.
The math of repurchases grinds away slowly, but can
be powerful over time. The process offers a simple way
for investors to own an ever-expanding portion of
exceptional businesses.
And as a sultry Mae West assured us: “Too much of a
good thing can be . . . wonderful.”
‘‘ ‘‘
Learning from Phillip Fisher What surprised Buffett
In 1958, Phil Fisher wrote a superb book on investing. In Berkshire owns American-based property, plant and
it, he analogized running a public company to managing equipment – the sort of assets that make up the “business
a restaurant. If you are seeking diners, he said, you can infrastructure” of our country – with a GAAP valuation
attract a clientele and prosper featuring either exceeding the amount owned by any other U.S. company.
hamburgers served with a Coke or a French cuisine Berkshire’s depreciated cost of these domestic “fixed
accompanied by exotic wines. But you must not, Fisher assets” is $154 billion. Next in line on this list is AT&T,
warned, capriciously switch from one to the other: Your with property, plant and equipment of $127 billion. WI

MARKET
C MPASS
Market barometer
Here are some charts that will help you make sense of the current market
in terms of valuations and return potential
Sensex’s movement
In ’000
60 Max 52,154 The Sensex is the most convenient
indicator to tell the state of the Indian
market. The 10-year graph presented
50
Current alongside shows the secular run in the
49,858 markets. However, this rally was
40 punctuated by several bearish phases.
The most prominent ones include the
30 following: a bear market driven by
weakening economic fundamentals in
2011, Chinese growth concerns in
20
2015, demonetisation blues in 2016,
and the sell-off in 2018 due to US–
10 China trade war and rise in US interest
Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Min
rates. Lately, the markets have sharply
’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21
15,175 recovered from the COVID-19 shock.
Sensex’s price to earnings

40 Max 35.1 The price-to-earnings ratio of the Sensex
is a simple market-valuation ratio. A
Current 34.7 general guideline to help understand the
35
valuation is:
P/E > 24 = Dangerously
30
overvalued
P/E > 20 < 24 = Overvalued
25 P/E > 16 < 20 = Fairly valued
P/E > 12 < 16 = Undervalued
20 P/E < 12 = Highly underval-
ued (mouthwater-
Median 20.3 ing valuations)
15
Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar This graph is based on standalone data of Sensex companies. If one
’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 Min 16.4 takes the consolidated data, the P/E will be lower. The sudden jump
in the P/E is due to a dip in profitability caused by COVID-19.
Sensex’s price to book value

4.0 Max 3.65 The price-to-book-value ratio tells us how
many times an investor is ready to pay
for a rupee of net assets.
3.6
Current 3.36 Since book value is stable and less
volatile than earnings, some consider it
3.2
better than the P/E as a measure of
valuation.
2.8
Median 2.95
If
P/B > Median P/B = Overvalued
2.4
P/B < Median P/B = Undervalued
2.0
Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar
’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 Min 2.36

MARKET
C MPASS
Sensex’s dividend yield

2.0% Max 1.80 Dividend yield is nothing but the return
an investor gets in the form of dividend
on his investment. It is measured as
1.7 dividend per share divided by price
per share.
1.4 Generally speaking, when stocks are
cheap, dividend yields are high.
Median 1.34
If
1.1
Dividend yield >
Median dividend yield = Undervalued
0.8 Dividend yield <
Median dividend yield = Overvalued
Current0.72
0.5 Min 0.72
Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar
’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21
Market cap to GDP

110% Max 105 This measure is Buffett’s personal
Current 105 favourite. He said, “It is probably the
single best measure of where valuations
100 stand at any given moment.”
Here we have considered the market
90 capitalisation of all the listed companies
on the BSE.
If
80 Median 77 Market cap > GDP = Market
overvalued
70 Market cap < GDP = Market
undervalued
The GDP fell by 23.9 per cent YoY in Q1 FY21 and 7.5 per
60 Min 65 cent YoY in Q2 FY21 due to COVID-19.
2013 2014 2015 2016 2017 2018 2019 2020 2021
10Y G-sec yield vs Sensex’s earnings yield

4.0% Max 3.87 The spread between G-sec yield and
Sensex’s earnings yield is another
valuation measure. G-sec yield is the
3.2 Current 3.31 yield of the 10-year government bond.
Sensex’s earnings yield is the inverse of
Median 2.78 the Sensex’s P/E ratio. The greater the
2.4 deviation from the median in either
direction, the greater the degree of
overvaluation or the undervaluation of
1.6
the Sensex.
If
0.8 Spread > Median = Overvaluation
Spread < Median = Undervaluation
0 Min 0.79
Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar All data as on March 19, 2021.
’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 GDP data as of December 2020.

COVER STORY
IPO
BOOM
What’s in it for you?

COVER STORY
By Arul Selvan, Danish Khanna

out then. However, when the fulfilled before a company can list
and Rajan Gulati
company again came up with its on stock exchanges. The first route
T
IPO in December 2020, it was to list is the profitability route,
he IPO boom is back. So successful in raising the required where a company must meet
far in FY21 (as of March amount. Similarly, the IPO of SBI certain profit-related parameters.
19, 2021), 24 new Cards fell flat in March last year in If it doesn’t fulfil any of the
companies have listed on spite of high investor interest and parameters, it can still list through
the stock exchange. They robust business fundamentals. the QIB (qualified institutional
have together raised about `37,110 Given the probability of high buyer) route. However, through the
crore. As of this writing, as many listing gains, it’s only natural for QIB route, it can raise only 10 per
as six companies have come up investors to get attracted towards cent of the offer amount through
with their IPOs but haven’t listed IPOs. However, profiting from the retail segment. As much as 75
yet. These include Anupam them is not easy. For the retail per cent has to be raised through
Rasayan, Craftsman Automation, segment, the IPO allotment institutions. This provision is
Laxmi Organic Industries, Kalyan happens through a lottery. So, in meant to safeguard the interest of
Jewellers, Suryoday Small Finance case of hot IPOs that are small investors, who may not have
Bank and Nazara Technologies. oversubscribed, most investors the sophistication to analyse a
Together, these IPOs are worth don’t get an allotment. For comparatively riskier business.
another `4,500 crore. The chart instance, MTAR Technologies saw See the box ‘Steps involved in an
‘No. of IPOs and the amount oversubscription of 201 times. The IPO’ for the rest of the IPO
raised’ mentions the number of stock listed at a gain of 85 per cent. process.
IPOs in each of the last 10 But most investors who applied in
financial years, along with the its IPO didn’t get any allotment. Categories of investors and allotment
amounts raised. The amount This often results in IPOs being a criteria
raised in this financial year is the wild goose chase. Qualified institutional buyers (QIB): These
second-largest in the last 10 years. include institutions such as
And this is at a time when the The IPO process mutual funds, venture-capital
economic uncertainty is high due IPOs are a way to raise capital funds, foreign institutional
to COVID-19, which seems to be from the stock market and list on a investors, commercial banks,
making a comeback. stock exchange. When a company insurance companies, provident
comes up with an IPO, it may issue funds and pensions funds.
The IPO craze fresh shares or the existing Under this category, there could
Buoyant market conditions, such promoters may sell part of their also be a sub-category of ‘anchor’
as the ongoing bull run, are a existing stake. The latter is called investors. These are investors who
fertile ground for IPOs. After all, offer for sale (OFS). IPOs also take part in the IPO before the
market optimism makes it easier serve as an exit route for strategic issue opens for the public. Their
to raise money at high valuations. investors, who will find it easier to applications should be for more
For instance, when Antony Waste monetise their holdings if the than `10 crore and a maximum of
Handling first came up with its company is listed. 60 per cent of the QIB portion can
IPO in March 2020, it couldn’t The market regulator SEBI has be allocated to anchor investors.
generate enough investor interest laid down several eligibility While allotment to QIBs is on a
as the pandemic had just broken requirements which need to be proportionate basis, for anchor
investors, it is discretionary and
5VVM076ZHUK[OLHTV\U[YHPZLKPU[OLSHZ[MPUHUJPHS`LHYZ on a case-to-case basis. They both
`75,000 cr 40 are subject to a lock-in period of 30
Amount raised No. of IPOs
days from the listing of the IPO.
60,000 Retail investors: Individual investors
who bid for securities worth not
45,000
more than `2 lakh come under this
24
category. They are not subject to
30,000
25 any lock-in and the allotment is
18 14 through a lottery.
15,000 24
32 10 Non-institutional investors (NII): Investors
2 6 who do not fall under the above
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 two categories, for instance, those

COVER STORY
:\IZJYPW[PVUYH[PVZ!
:[LWZPU]VS]LKPUHU076 9L[HPS]Z500
APPOINTMENT OF INVESTMENT FILLING OF RHP AND IPO Non-institutional investors (NIIs) tend to be
1 BANKERS/LEAD MANAGERS/
UNDERWRITERS: These are financial
experts who carry out various IPO
4 PRICING: The company is
further required to file an
updated red-herring prospectus,
more aggressive than retail investors due to
assured allotment and availability of external
funding, as seen in the case of IPOs of the
processes and formalities on behalf of the which includes all the latest financial last one year.
company and act as intermediaries between the information and details of the IPO pricing 0 200 400 600 800
company and investors. and process. There are two types of IPO
pricing process: SBI Cards
Rossari Biotech
FILLING OF PROSPECTUS AND Fixed-price issue: The issuer itself
2 GETTING SEBI’S NOD: The

company then has to file an
application for an IPO with SEBI,
decides the issue price of shares and
mentions it on the offer document if all the
Mindspace Buss. Parks
Happiest Minds
Route Mobile
requirements are met under the
along with the draft prospectus of the issue, profitability route. CAMS
details of the promoter and company’s annual Chemcon Speciality
Book-building process: When certain
reports, along with the relevant listing fees. Angel Broking
eligibility requirements are not met,
After getting approval from SEBI, the company Mazagon Dock
companies are mandatorily required to
files applications with the stock exchanges UTI AMC
go through this process, which involves
where it plans to list its securities. price discovery. Under this, the company Equitas Small Finance
discloses a price band for the issue and Gland Pharma
Burger King India
3
ROAD SHOWS: These include the ‘cut-off’ price for the issue is
marketing, advertising and creating discovered on the basis of bids received Mrs. Bectors
the buzz around the IPO. from prospective investors. Antony Waste Handling
IRFC
5
ALLOTMENT: After completion of the Indigo Paints
6
LISTING OF SECURITIES: After bidding, the next step is the allotment Home First Finance
the allotment process, the of securities by the issue registrar. In Stove Kraft
NII Retail
securities of the company are case of oversubscription, the shares %URRNÀHOG,QGLD5(,7
listed on the stock exchanges. are allotted on the basis of different criteria, Nureca
However, certain shareholders such as depending on the investor categories. Usually, Railtel Corp
anchor investors and QIBs are subject to a bidding is open for three days. However, in case Heranba Industries
lock-in period, which restricts them from of undersubscription, the time period could be MTAR Technologies
immediately selling their shares after listing. further increased up to a maximum of 10 days. Easy Trip Planners
who bid for more than `2 lakh and availability of external funding. pay interest on the amount
are not institutional investors fall While for an oversubscribed borrowed for the IPO application
under this category. They are IPO, retail investors are allotted till the time shares are allotted and
allotted shares on a proportional shares through a lottery such that sold. An IPO which may list at
basis and are not subject to any one applicant gets one lot of moderate gains may even result in
lock-in period. shares, the allotment for NII is losses for the investor due to the
Apart from these, there could be done on a proportional basis. For fixed interest cost on the leveraged
other categories for whom instance, if an NII applies for 1,000 position. Thus, making use of IPO
reservation can be made and shares and the NII portion is funding can both increase the
discounts given. These include oversubscribed by 20 times, then magnitude of losses and gains for
employees and shareholders of the he would receive 50 shares NIIs. Still, NIIs seem to better
parent in the case of listing of a (1,000/20). placed than retail investors to
subsidiary. This surety of allotment attracts profit from IPOs. The NII
NIIs to make use of IPO funding, mechanism for IPOs helps the rich
NIIs vs retail investors i.e., leverage to apply for a higher get richer.
If you observe the subscription number of shares to increase
ratios in the retail and NII allotment. High allotment inflates Wealth-creating potential of IPOs
categories for the IPOs of the last the profits from high listing gains The listing-day gains of IPOs are
one year (see the chart ‘Subscription and thereafter many NIIs exit their the main charm of investing in
ratios: Retail vs NII’), you will positions. This IPO-financing them. However, as we saw, it’s
observe that the NII segment bids facility is offered by NBFCs and nearly impossible to profit from
rather aggressively. That’s because brokers, such as Bajaj Finserv, JM IPOs on a consistent basis as there
of two factors: assured Financial and ICICI Securities. is a healthy factor of luck
proportionate allocation and For this leverage, an NII has to involved. But let’s assume you had

COVER STORY
What is ASBA? What if you had invested in all

the IPOs post their listing (a
unleash the potential of stocks,
stay invested in them for the long
ASBA stands for ‘application supported by
possible event)? Well, you would term. Do assess the fundamentals
blocked amount’. It is a mode of IPO
application where the amount is earmarked in have underperformed the Sensex. of the companies in your portfolio
your bank account and is not debited at the This suggests that there is from time to time. If everything is
time of application. If you are later allotted nothing magical about IPOs per fine, don’t do anything. This buy-
shares, the amount is debited. Earlier one se. Of course, past data doesn’t assess-hold approach can generate
had to pay the entire amount at the time of
guarantee future returns, but still much better returns over the long
IPO application and in case of non-allotment,
a refund was issued. The convenience of this is indicative. term than any other quick-fix
ASBA is one of the reasons behind the method, such as IPOs.
popularity of IPOs. How to really profit from IPOs Also, don’t consider IPOs as
The charm of listing-day gains can some different beast. At the very
got allotment in all the IPOs over attract even the staidest investors. basic level, they are just new
the last five years. You would have While there is nothing companies in the market. Like any
also held on to them. See the chart fundamentally wrong with making other company, they have certain
‘Wealth creation with IPOs’. It listing-day gains, the problem is fundamentals, valuations,
suggests that you sure would have that investors start equating those prospects, etc. Assess those if you
beaten the Sensex if that had as ‘investing’ itself. That’s a want to bet on IPOs. The listing-day
happened. But then, it’s a big ‘if ’. mistake. Investing in IPOs isn’t gains shouldn’t be the end in
It’s only a pipe dream to expect some reliable, more profitable themselves but a welcome bonus of
this to happen in real life. form of investing. In order to investing in a good company that
3PZ[PUNHUKMPUHUJPHSKL[HPSZVM[OL076ZVM[OLSHZ[VUL`LHY
Subscription Issue Issue Listing Listing Current
Company ratio (times) size (` cr) price (`) Listing date price (`) gain (%) price (`)
SBI Cards 26.5 7571 755 16-Mar-2020 658 -12.8 1,016

Rossari Biotech 79.4 496 425 23-Jul-2020 670 57.6 975
Mindspace Business Parks 13.0 1,863 275 07-Aug-2020 304 10.5 300
Happiest Minds 151.0 386 166 17-Sep-2020 351 111.4 533
Route Mobile 73.3 609 350 21-Sep-2020 708 102.3 1,617
CAMS 46.9 2,244 1,230 01-Oct-2020 1,518 23.4 1,865
Chemcon Speciality 149.3 318 340 01-Oct-2020 731 115.0 430
Angel Broking 3.9 600 306 05-Oct-2020 275 -10.1 328
Mazagon Dock 157.4 444 145 12-Oct-2020 216 49.1 219
UTI AMC 2.3 1,515 554 12-Oct-2020 490 -11.5 584
Equitas Small Finance 2.0 382 33 02-Nov-2020 31 -11.5 59
Gland Pharma 2.1 4,536 1500 20-Nov-2020 1,701 13.4 2,542
Burger King India 156.7 810 60 14-Dec-2020 115 92.3 138
Mrs. Bectors 198.0 544 288 24-Dec-2020 501 74.0 375
Antony Waste Handling 15.0 210 315 01-Jan-2021 430 36.5 286
IRFC 3.5 4,633 26 29-Jan-2021 25 -3.8 25
Indigo Paints 117.0 1,160 1490 02-Feb-2021 2,608 75.0 2,464
Home First Finance 26.7 1,156 518 03-Feb-2021 612 18.2 502
Stove Kraft 18.0 227 385 05-Feb-2021 467 21.3 470
Brookfield India REIT 7.9 2,098 275 16-Feb-2021 275 0.0 235
Nureca 22.0 56 400 25-Feb-2021 635 58.7 576
Railtel Corp 42.4 575 94 26-Feb-2021 105 11.3 142
Heranba Industries 50.2 625 627 05-Mar-2021 900 43.5 707
MTAR Technologies 200.8 417 575 15-Mar-2021 1,064 85.0 1,082
Easy Trip Planners 159.3 282 187 19-Mar-2021 206 10.2 208
Price data as March on 15, 2021. For Easy Trip Planners, it’s for March 19, 2021. Finance companies

COVER STORY
>LHS[OJYLH[PVU^P[O076Z peers. This expands your

Average Good
company have also done
Poor Very
If you got allotment in all the IPOs over the investment pool and gives good so. The tapering of
last five years and held on to them, you would you a rich basket to choose frenzy often results in
have beaten the Sensex. But if you invested in 05=,:;64,;,9 the company settling
from. Perhaps the
them post their listing, you would have
underperformed the Sensex. regulator needs to discourage the around its fundamentals.
short-termism and frenzy that IPOs We discuss 14 companies here.
`30 lakh 66.4 Worth of investment
have created. Also, the treatment of For each company, we have given
Total return (%)
28 lakh non-institutional investors and an ‘invest-o-meter’ which
48.6 retail investors should be indicates its business strength. Do
26 lakh 42.9 equivalent. That will also help curb note that the companies discussed
24 lakh the IPO mania. are not our recommendations.
Next, we take a look at some These are simply ideas in which
22 lakh IPOs of the last one year that have you should delve deeper. Assess if
got somewhat old now and have it makes sense to invest in these
20 lakh
fallen off investors’ radar. It may companies at the prevailing
If you got If you invested If you invested
allotment post listing in the Sensex be a good idea to start looking for valuations. Only after you have
good companies from this subset. done your due diligence should
would still be a good investment As an IPO gets old, the buzz you invest in them.
even if it were not an IPO. around it also fizzles out and The table ‘Listing and financial
IPOs bring new businesses in the institutional and anchor investors details of the IPOs of the last one
market that may or may not have who were looking to exit from the year’ lists all older and recent IPOs.
Metrics for finance companies
Post-listing Sensex M-cap 2Y sales 2Y profit 3Y median op 3Y median Debt-to-

return (%) return (%) (` cr) growth (%) growth (%) margin (%) ROE (%) equity P/E
2Y income growth (%) 2Y NII growth (%) 3Y median NIM (%) 2Y loan growth (%) 3Y median GNPA (%) P/B
54.5 60.5 95,586 34.8 34.6 16.5 27.4 2.4 15.7
45.6 32.1 5,064 43.4 49.2 15.4 36.3 0.2 77.6
-1.5 32.5 - - - - - - -
51.9 29.3 7,831 22.2 107.2 8.1 11.8 0.3 109.2
128.4 32.5 9,331 37.6 21.1 11.8 28.2 0.2 160.3
22.8 30.2 9,097 4.4 4.0 39.7 34.6 0.0 52.4
-41.1 30.2 1,576 28.7 26.5 28.3 57.1 0.3 32.3
19.1 29.3 2,680 -2.3 -14.9 28.1 15.9 0.8 32.5
1.4 24.1 4,424 5.3 7.3 16.7 13.4 0.0 9.3
19.1 24.1 7,402 -14.1 -20.4 47.2 14.1 0.0 27.3
90.2 26.8 6,715 28.5 31.8 9.0 33.6 2.7 1.9
49.4 14.8 41,561 27.5 40.7 38.7 17.1 0.0 53.8
19.9 9.0 5,295 49.2 -6.3 13.0 -25.3 0.8 -
-25.2 7.3 2,200 5.0 -14.2 12.6 11.8 0.4 72.4
-33.5 5.3 809 28.9 35.8 31.0 65.1 0.9 29.6
-1.4 8.9 32,214 20.7 12.4 1.6 31.2 0.0 0.9
-5.5 1.2 11,719 23.3 334.1 10.4 23.7 0.3 245.1
-18.0 0.3 4,389 76.8 55.3 5.3 63.4 0.7 2.0
0.7 -0.7 1,532 13.1 48.4 4.9 0.0 -5.6 483.1
-14.5 -0.8 - - - - - - -
-9.2 -1.3 576 125.2 41.3 14.3 162.0 0.6 89.9
35.4 2.6 4,546 6.9 9.2 33.0 10.6 0.0 32.2
-21.4 0.0 2,829 13.3 29.9 13.8 35.6 0.1 28.9
1.7 0.0 3,329 16.8 62.9 29.2 13.6 0.1 106.3
1.1 - 2,263 18.8 241.1 18.0 32.6 0.1 68.6
NII: Net interest income, NIM: Net interest margin, GNPA: Gross non-performing assets

COVER STORY
:)0*HYKZ 7H`TLU[
:[YVUNWHYLU[HNL
Average Good
Poor Very
good
S
BI Cards is the only pure-play credit-card issuer that company’s strong parentage (State Bank of India) gives it
is currently listed. With SBI as its promoter, the access to the country’s largest retail network (for sourcing
company is the second-largest credit-card issuer in new customers) and funding at a reasonable cost.
the country. It has a market share of 18.8 per cent based on But its gross non-performing assets are quite high at 4.5
the number of cards in force and 20.1 per cent in terms of per cent and the pandemic-induced lockdown resulted in
overall spends. its profits declining by more than half during the current
The company is operating in a structurally attractive nine months of this fiscal. Also, new payment methods,
industry, which has witnessed high credit growth in the such as UPI, prepaid wallets, etc., pose a serious threat to
past and is still largely underpenetrated. Also, the the company’s revenue streams.
Factors such as low credit-card penetration in India
(less than 5 per cent as compared to over 65 per cent of
debit cards), a rise in discretionary spending, and
improvements in e-commerce volumes and payment
infrastructure are expected to benefit the industry in
the long term.
The company is adequately funded (capital adequacy
ratio of 23.7 per cent) and has seen a decline in both its
costs of funds (by 150 bps) and its leverage (from 5.6 to 4.3)
in the last 12 months. The stock has run up broadly along
with the market and is currently trading at a P/E of 107
times. The company has no other listed peers.
9VZZHYP)PV[LJO
-PYPUNVUHSSJ`SPUKLYZ
Average Good
Poor Very
good
T
he products of Rossari Biotech, a specialty- There are a set of headwinds as well. Rossari’s
chemical manufacturer, find their use in the primary raw material prices are linked with crude-oil
textile (43.7 per cent of FY20 revenue), home and prices. With crude prices jumping, the company’s input
personal care (46.8 per cent), and animal health. The cost can increase and hence affect its margins. Further,
company sells its range of 2,030 different products to the company suffers from customer concentration as it
B2B players such as HUL, Arvind, IFB and others, derives a substantial portion of its revenue (44 per cent
manufacturing these at its 1.2 lakh MTPA Silvassa in FY20) from its top five customers.
facility. In 2021, the company’s manufacturing capacity Rossari’s products are not manufacturing-intensive,
will more than double to 2.5 lakh MTPA, thanks to its leading to a higher fixed-asset turnover and lower
upcoming facility at Dahej. working-capital needs. This leads to a higher
The company is looking forward ROE
R for the company (31.8 per
to firing on all cylinders. Rising cent
c as of FY20), even though
consumer awareness is resulting its
it margin profile isn’t
in its growth in the home and industry-leading.
in The growth
personal-care segment. It has prospects
p of the company are
already set overseas offices for its very
v well captured in the
textile business and is further valuations
v as it trades at a P/E
exploring export possibilities. To of
o around 70 compared to its
enable new product launches, it peers such as Galaxy
has also set up its second R&D Surfactants (29.6) and Fine
centre at IIT, Mumbai. Organics (57.5).

COVER STORY
4PUKZWHJL)\ZPULZZ7HYRZ
*VTWL[P[P]LLKNL
Average Good
Poor Very
good
A
real-estate investment trust (REIT), Mindspace faltered due to the lockdown, which resulted in a
Business Parks owns and operates five IT parks delay in realising incremental rental income.
in Mumbai, Chennai, Hyderabad and Pune, with Besides, the risks of companies continuing the work-
a leasable area of almost 30 million square feet. The from-home (WFH) policy could affect the REIT’s long-
REIT is promoted by K Raheja Corporation (a large term attractiveness.
realty player) and Blackstone (a private-equity firm). The long-term outlook for office space is quite
SEBI regulations mandate that 90 per cent of the net- uncertain at this point. While many western
distributable cash must be returned to unitholders companies have announced long-term WFH policies, it
every quarter. remains to be seen whether Indian companies will
The REIT has a diversified client base across follow suit. The trust has office space in micro markets,
various sectors, such as financial services,
se ces, media,
ed a, unlike
u its listed peer Embassy
healthcare, etc. It has been able Office
O Parks REIT, which has
to maintain occupancy ratios at office
o spaces in prime areas.
about 90 per cent and did not This
T allows it to offer lower
have any problems collecting its rates
r and is, therefore, better
rent during the COVID-19 placed
p than the peer. The units
lockdown. Also, it was able to of
o Mindspace REIT are
achieve annual rent escalations available
a at an indicative
of 4–5 per cent. dividend
d yield of 6.3 per cent
But the REIT’s progress in compared to the 5.3 per cent
constructing office spaces of Embassy.
/HWWPLZ[4PUKZ;LJOUVSVNPLZ
;OLUL_[NLUWSH`LY
Average Good
Poor Very
good
F
ounded in 2011 by the ex-co-founder of Mindtree, stronger financial muscle, bench strength and ability
Ashok Soota, Happiest Minds is a small-tier to attract and train talent could give them an edge
Bengaluru-based IT firm. Unlike legacy Indian over a relative newbie such as Happiest Minds.
IT firms, Happiest Minds is a play on digital services Additionally, the company has a high client
(like big data/analytics, robotics, machine learning), concentration, with its top client accounting for 15 per
which accounted for 97 per cent of its FY20 revenue. cent of its revenue.
The company derives the majority (77.5 per cent) of Happiest Minds’ stock price has been euphoric,
its revenue from the US. skyrocketing by more than three times from its issue
Uptake of digital services is set to accelerate in the price of `166. Based on the annualised last 12-month
post-COVID world. Happiest Minds has a lead over earnings, it trades at a P/E of around 59. That’s steep
legacy Indian IT firms, which derive around 30–50 per compared to Mindtree (33), Mphasis (26) or even TCS
cent of their revenue from digital services. Further, (37). In its prospectus, the company
the company is well-positioned in lists
li global digital players
the start-up sectors of ed-tech such
su as Endava (211), EPAM
and hi-tech. Systems
S (66) and Globant
However, competition is fast Systems
S (162) as its
catching up. The legacy IT competitors.
c Given the
players have long-standing valuations,
v the Street has
relationships with their clients, set
s high expectations from
which would help them bag their the company, and now it’s
digital mandate. Also, their time to deliver.

COVER STORY
9V\[L4VIPSL
>LSSJVUULJ[LK[VNYV^[O
Average Good
Poor Very
good
A
tech company in the communication space, a major concern. The company’s plans to search for
Route Mobile provides cloud-communication, inorganic growth avenues could be a tacit indication
rich-communication, voice, email and SMS that its future growth is not very likely in its current
analytics services to enterprise clients. These segment. Also, concentration risk exists for the
services help companies communicate with their company, since its top five clients contributed more
clients through SMS, IVR calls or OTT platforms than 60 per cent to the revenues.
(example, Whatsapp). The company derives more The growing adoption of digital communication
than 80 per cent of its revenue from overseas methods by businesses to communicate with their
markets. customers is expected to benefit the company in the
Route Mobile charges for each transaction and its long run. Route Mobile had a debt-to- equity ratio of
revenues have grown at 37 per cent per annum in the just 0.2 and has not needed any capital infusion prior
last three fiscals on the back of a to
t its IPO. The company’s
surge in the number of billable net
n profit has grown at a
transactions on its platform. Its CAGR of 20 per cent for the
working-capital needs are low three fiscals and the
owing to the prepaid payment company has an operating
options, which are opted by margin of about 12 per
many clients. cent. The stock currently
However, the lack of pricing trades at a TTM P/E of 160
power (margins have contracted and does not have any
by almost 10 percentage points) is listed peers.
*VTW\[LY(NL4HUHNLTLU[:LY]PJLZ
:R`PZ[OLSPTP[
Average Good
Poor Very
good
I
ndia’s largest registrar and transfer agent (RTA), presence and a vast portfolio of services are strong
Computer Age Management Services (CAMS) selling points. Its dominant market share, coupled with
provides financial infrastructure and services to long-standing relationships with clients (owing to high
mutual funds, insurance providers and alternative costs associated with the switching of RTAs), is also a big
investments funds. It derives a majority of its revenue advantage. However, since the prices it can charge are
from mutual fund services, with its clientele including capped by SEBI, any adverse regulatory changes can
four of the five largest fund houses. affect its profitability. Also, the flip side to its dominant
With its revenue based on the quantum of average position is that there isn’t too much space to grow and its
AUM (assets under management) of its mutual fund future growth is likely to be driven by the growth of the
cclients,
e ts, tthee co
company’s pan-India
pa y s pa da industry’s overall AUM.
The Indian mutual fund industry is on a strong
footing. Factors such as the growing awareness of
mutual funds, increasing participation of retail investors
and higher disposable incomes are expected to increase
the penetration of mutual funds in the country. The
company sports high profitability (operating and net
profit margins) and return ratios. Its low reinvestment
requirements support its policy of paying at least 65 per
cent of its profits as dividends. The company does not
have many competitors and is currently trading at a
TTM P/E of 52 times.

COVER STORY
*OLTJVU:WLJPHSP[`*OLTPJHSZ
*V\U[LYPUN*OPUH
Average Good
Poor Very
good
C
hemcon is a niche specialty-chemicals player competes with imports from China – the largest player
that manufactures pharmaceutical chemicals for HMDS and CMIC – which accounts for 40–60 per
(HMDS and CMIC) and oil-well completion cent of India’s imports of such chemicals. Though
chemicals across its seven plants having a 21,600 Chemcon can benefit from the supply-chain shifts
MTPA capacity. Along with catering to domestic away from China, it still remains vulnerable to
pharma companies such as Aurobindo, Laurus Labs, Chinese price fluctuations. Poor free-cash generation
etc., it also exports to various countries, which make due to high working-capital needs also remains a key
for around 40 per cent of its revenue. monitorable for the company.
The company is the only domestic manufacturer of Though the company had a bumper listing, the
the chemical HMDS (over 10 per cent of global market stock is down almost 25 per cent since and currently
share), while it is the largest domestic manufacturer trades at a P/E of around 30. In a market where
of the chemical CMIC (over 17 per cent). Its speciality-chemical
sp companies
products are in a sweet spot as are
ar commanding the
they are too big for a small-scale valuations
v of FMCG
industry and too small for a large companies
c (Vinati Organics
one. Complex chemistry, a long 52.8,
5 Fine Organics 56.3, SRF
client gestation period and niche 32.1),
3 Chemcon valuations
product segmentation provide aren’t
a out of line. However,
Chemcon with a moderate degree earnings
e growth needs to be
of competitive advantages. closely
c watched for long-term
However, the company directly wealth creation.
(UNLS)YVRPUN
(UV[ZVWYVTPZPUNM\[\YL
Average Good
Poor Very
good
S
tock-broking is one of the few industries that Contemporary players like ICICI Securities have thus
have actually benefitted from the pandemic. been forced to change their business models and rely
While the world was closed, the markets were more on their business segments other than broking.
still open. Over one crore demat accounts were Angel Broking, with its high dependence on the
opened in 2020 alone. Angel Broking, the fourth- broking business, looks especially vulnerable. In the
largest broking firm in India as per active client ongoing bull market, when every other stock is
accounts on the NSE, listed in October last year. commanding rich valuations, Angel Broking is up only
Broking is the bread and butter for this company, by 6 per cent from its issue price. Trading at a P/E of
contributing around 75 per cent of its revenue, while just 11.5 based on TTM earnings, the stock might look
the rest comes from margin funding and providing undervalued (P/E of ICICI Securities is 14.6 but the
loan against shares. Like other discount brokers, the future of the broking industry is anyone’s guess.
company follows a flat-fee-based model.
During the first nine months of FY21, its profits
have risen by more than 260 per cent. But the rosy
profit story is hiding the disruption in the broking
industry. In just the past five to six years, Zerodha has
disrupted the discount-brokerage industry and
become the leader, with over 26 lakh active clients
currently. Other nimble players like Upstox, Groww
have also gained substantial ground and competition
from the likes of Paytm Money is increasing.

COVER STORY
4HaHNVU+VJR:OPWI\PSKLYZ
*SVZLKLMLUJLSPURHNLZ
Average Good
Poor Very
good
O
perating in the defence segment, Mazagon Dock, company’s growth is heavily dependent on the central
a PSU, is involved in constructing and repairing government’s defence budget. And with private
submarines, destroyers, and other warships and players pushing the government to abandon giving
supplying them to the Indian Navy and Indian Coast contracts on a nomination basis, the PSU may find it
Guard. The company also constructs cargo, passenger difficult to compete with the private sector.
ships, water tankers, fishing trawlers, etc., for Owing to various geopolitical issues, India’s
commercial clients in India and abroad. defence requirements are expected to remain elevated.
The company is the only PSU that has built Factors like India’s long coastline and a strategic
submarines and destroyers (a particular type of location along key trade routes are expected to benefit
warship) and has been the preferred partner for the company in the long term. The company had an
technology-transfer agreements. Since the company order book of around 55,000 crore and a cash balance
is operating in a highly strategic sector with of around 5,800 crore as of
high entry barriers, it is September
S 2020. At a TTM
shielded from the competition P/E
P of nine times, the
and has been making profits for company
c suffers from low
the last few years. valuations
v owing to its PSU
But the company’s profitability tag.
t It is cheaper than Cochin
level is very low and despite Shipyard
S (TTM P/E 9.7) and
growth in the top line, its profits Garden
G Reach Shipbuilders
have declined. Since it primarily (TTM
( P/E 16.2), which are
supplies to the government, the two other PSU peers.
<;0(ZZL[4HUHNLTLU[
;OLT\[\HSM\UKWPVULLY
Average Good
Poor Very
good
H
aving the distinction of establishing the first tier-3 towns and UTI has the highest concentration in B30
mutual fund in India, UTI AMC today is the eighth- cities (beyond top 30 cities) amongst the top 10 AMCs, with
largest asset-management company in the country 24 per cent of its overall AUM in B30 geographies. UTI is
based on quarterly-average AUM, with a market share of an established player with a strong distribution network,
5.6 per cent as of December 2020. It manages 172 domestic which comprises around 55,000 advisors.
mutual fund schemes across equity, debt, hybrid, liquid However, the company has low presence in the
and money-market funds. equity segment, which accounts for around 30 per cent
The AUM of mutual fund industry in India accounts of its AUM compared to the industry average of
for 12.5 per cent of GDP (compared to around 46 per cent around 39 per cent. The equity segment benefits from a
in other emerging countries). The next level of growth is high expense ratio, thereby leading to high
expected to come from tier
tier-2,
2, management fees, which ultimately improves
profitability. Additionally, competition in the mutual
fund industry is fast catching up, with several entities
in the recent past applying for licences.
Since listing in October last year, the stock hasn’t
gained much traction. However, the earning profile has
improved with FY21 nine-month profit growing by 21 per
cent YoY. Based on last 12 months’ annualised earnings,
the stock is trading at a valuation of 15.6, which is at a
steep discount to its listed peers Nippon Life AMC (39.5)
and HDFC AMC (49.6).

COVER STORY
,X\P[HZ:THSS-PUHUJL)HUR
(SVUNNYV^[OY\U^H`
Average Good
Poor Very
good
E
quitas Small Finance Bank (Equitas SFB) is a because of the disproportionate economic impact of
type of differentiated bank that focuses on COVID-19 on the informal economy. Besides,
providing financial services to MSMEs, farmers geographical-concentration risk is also there, as more
and other entities in the priority sector. The bank is than half of its loan book is in Tamil Nadu.
allowed to accept deposits from the public and is When it comes to lending to the unbanked and
mandated to ensure that at least 50 per cent of its rural sections, the potential is huge. The overall
loans are below a ticket size of `25 lakh. demand for such financial services is expected to
Equitas has a diversified portfolio and reduced its grow significantly in the future. The bank is well
exposure to microfinance loans to below 25 per cent. capitalised, with around 21 per cent capital adequacy
Its loan book has grown by almost around 40 per cent ratio and better placed than its peers, owing to a
in the last three fiscals on the back of its large much lower share of microfinance loans. The bank
distribution network. A CASA (current
rrent account has
h a provision-coverage ratio
and savings account) ratio at 25 of around 60 per cent and has
per cent has helped it maintain increased
in its disbursement in
a net interest margin of almost 9 the
th housing-finance segment.
per cent. It
I is attractively valued at 1.9
The pandemic-induced times
t its book value, which is
lockdown has affected the lower
l than the Ujjivan’s two
company’s asset quality and its times
t and Suryoday Small
collection efficiency. The company Finance’s
F 2.3 times.
has been particularly affected
.SHUK7OHYTH
(OLHS[O`M\[\YL
Average Good
Poor Very
good
G
land Pharma, a manufacturer of generic industry and the company is well-positioned to make
injectables, focuses on complex injectables and use of this growth opportunity. Its seven facilities are
follows a B2B model, wherein it enters into all USFDA (the US drugs regulator) compliant and
contracts with pharmaceutical companies to have not received any warning letter since inception.
manufacture their products. The company derives Moreover, vertically integrated operations, along with
around 66 per cent of its revenue from the US market the Chinese promoters of the company, provide it with
and as of December 2020 had 282 new-drug filings in a good control over the supply chain.
the US, of which 226 were approved. Though the tensions along the border in between
The injectable formulations segment is the fastest- India and China are receding, the situation still
growing segment in the global pharmaceutical remains uncertain. The company is majority-owned
by China’s Fosun Pharma and remains substantially
dependent on China for its raw-material imports.
Hence, it remains vulnerable to geopolitical risks.
After having a not-so-enthusiastic listing, investors
have since taken the stock price to an 80 per cent
premium to the issue price. Based on the last 12
months’ annualised earnings, the P/E is around 42.
Though the company does not have any direct listed
peers, other pharma companies having similar
margin profiles trade at varied valuations (Syngene
International P/E 57, Natco Pharma P/E 31).

COVER STORY
)\YNLY2PUN0UKPH
0U[OLZSV^SHUL
Average Good
Poor Very
good
B
urger King India is the franchisee of the famous margin business and a growing awareness of the
Burger King brand and is the operator of 261 negative health consequences of fast food can
outlets serving burgers, french fries and other adversely affect the company.
fast-food items. It is one of India’s fastest-growing QSRs are expected to grow at a rate of 19 per cent
international quick-service restaurant (QSR) chains over the next five years, owing to the proliferation of
and has a market share of 5 per cent. online food-delivery apps on the back of growing
The company is well poised to benefit from the shift smartphone penetration. But COVID-19 has played
from unorganised smaller joints to organised branded spoilsport and the recovery to the pre-COVID levels is
restaurants. Rising income levels, a growing expected to be delayed. Despite having positive cash
awareness of foreign brands and d flows
flo from operations for the
increasing urbanisation are last
la three fiscals, the company
expected to be key growth has
h very little cash on its hands.
drivers for the company. When
W compared to its peer,
The fact that the company Jubilant
J FoodWorks (which
has reported losses for the operates
o the ‘Dominos’ pizza
previous four financial years chain),
c the company incurs a
despite a threefold increase in higher
h amount of royalty and
its turnover raises doubts raw-material
r costs. The stock
about the viability of its trades
t at a P/B of 4.6, while
business. The restaurant Jubilant trades at P/B of 31
industry is generally a low- and a P/E of 260.
4YZ)LJ[VYZ-VVK:WLJPHSP[PLZ
P SP P
>OH[»ZJVVRPUN&
Average Good
Poor Very
good
M
rs Bectors is the largest supplier of buns to quick-
service restaurants. The company belongs to the
Punjab-based Cremica group and is involved in
manufacturing premium and mid-premium biscuits under
the brand Mrs Bectors as well as premium bakery under
the brand English Oven. The company also exports
biscuits to around 64 countries, which accounted for 22
per cent of its FY20 revenue.
Though the company has a strong presence in North
India, with a network of 737 distributors and a reach of
more than 5.57 lakh retail outlets, its market share is just
4.5 per cent in biscuits and 5 per cent in bakery. Though last year, the stock has given up
the company is aiming to boost its biscuits exports to gains and now trades at just 23 per cent premium to issue
western countries, in the past it has faced trade issues like price. Stay-at-home culture has boosted the consumption
delayed payment and even non-payment from certain of biscuits and bakery, leading to a 180 per cent YoY rise
African countries. Overall, the company operates in the in net profits for the first nine months of FY21.
highly competitive markets of biscuits and bakery and Annualised earnings result in a P/E of around 27 for the
will need continued high marketing spends, new product company, which is lower than that of Britannia (44), DFM
developments and heightened distribution network to Foods (71) and Prataap Snacks (55.9). However, as the
form an enduring competitive advantage. demand for biscuits normalises, so will the earnings. Mrs
After almost doubling on the listing day in December Bectors still has some time to prove its mettle.

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COVER STORY
IPO tidbits
Insights into the IPOs of the last five years
10 biggest hits and flops in terms of their HOT IPOS THAT TURNED COLD
total returns (listing and post-listing gains) Companies that gave over 50 per cent return on listing
but whose post-listing gains are below 10 per cent pa
Listing Returns since
Company Listing date gain (%) listing (% pa)
Astron Paper 29-Dec-2017 128.0 -26.5
Chemcon Speciality 01-Oct-2020 115.0 -41.1
MTAR Technologies 15-Mar-2021 85.0 1.7
Indigo Paints 02-Feb-2021 75.0 -5.5
Mrs. Bectors 24-Dec-2020 74.0 -25.1
Apollo Micro Systems 22-Jan-2018 73.8 -37.4
Capacite Infraprojects 25-Sep-2017 59.6 -17.2
Nureca 25-Feb-2021 58.7 -9.0
Company Listing date Total return (%)
Quess Corp 12-Jul-2016 57.4 7.6
HITS Ujjivan Small Finance 12-Dec-2019 56.8 -34.8
Indiamart Intermesh 04-Jul-2019 607.1
Affle 08-Aug-2019 532.2
Avenue Supermarts 21-Mar-2017 414.4
Xelpmoc Design 04-Feb-2019 383.8
Laurus Labs 19-Dec-2016 264.2
Varun Beverages 08-Nov-2016 235.9
Neogen Chemicals 08-May-2019 231.7
L&T Tech 23-Sep-2016 203.9
IRCTC 14-Oct-2019 202.3
Amber Enterprises 30-Jan-2018 191.8
FLOPS
Music Broadcast 17-Mar-2017 -94.2
Future Supply Chain 18-Dec-2017 -86.6 COLD IPOS THAT TURNED HOT
Bharat Road Network 18-Sep-2017 -84.1 Companies that listed at a loss but whose post-listing
S Chand 09-May-2017 -82.4 gains are above 20 per cent pa
Ircon International 28-Sep-2018 -79.3 Listing Returns since
Company Listing date gain (%) listing (% pa)
New India Assurance 13-Nov-2017 -78.2
Laurus Labs 19-Dec-2016 -77.1 35.7
Apollo Micro Systems 22-Jan-2018 -77.1
Varun Beverages 08-Nov-2016 -35.6 32.1
IEX 23-Oct-2017 -77.1
Xelpmoc Design 04-Feb-2019 -15.2 111.1
Khadim India 14-Nov-2017 -77.0
SBI Cards 16-Mar-2020 -12.8 54.4
GIC 25-Oct-2017 -75.4
Garden Reach Shipbuilders 10-Oct-2018 -11.9 32.2
Prince Pipes 30-Dec-2019 -10.1 129.4
CreditAccess Grameen 23-Aug-2018 -7.9 27.0
Aavas Financiers 08-Oct-2018 -7.7 54.9
MSTC 29-Mar-2019 -7.5 71.2
Equitas Small Finance 02-Nov-2020 -6.1 90.5
PSP Projects 29-May-2017 -5.2 25.6
Mishra Dhatu Nigam 04-Apr-2018 -3.3 31.0
ICICI Lombard 27-Sep-2017 -1.7 26.4
Data as on March 15, 2021. Absolute post-listing returns for IPOs less than one-year-old.

COVER STORY
10 most/least subscribed IPOs over the last five years

and their post-listing gains
Listing Subscription Absolute
Company Date ratio returns (%)
MOST SUBSCRIBED
Apollo Micro Systems 22-Jan-2018 248.5 -77.1
Astron Paper 29-Dec-2017 243.3 -62.8
MTAR Technologies 15-Mar-2021 200.8 1.7
Mrs. Bectors 24-Dec-2020 198.0 -25.1
Capacite Infraprojects 25-Sep-2017 183.0 -48.2
CDSL 30-Jun-2017 170.2 143.0
Ujjivan Small Finance 12-Dec-2019 165.7 -41.6
Amber Enterprises 30-Jan-2018 165.4 191.8
Mazagon Dock 12-Oct-2020 157.4 1.4
Burger King 14-Dec-2020 156.7 19.8
LEAST SUBSCRIBED
Bharat Dynamics 23-Mar-2018 0.3 -0.1
Aavas Financiers 08-Oct-2018 0.4 190.1
Garden Reach Shipbuilders 10-Oct-2018 0.6 97.0
ICICI Securities 04-Apr-2018 0.7 -4.6
Sterling and Wilson Solar 20-Aug-2019 0.9 -60.4
Hindustan Aeronautics 28-Mar-2018 1.0 -13.1
Spandana Sphoorty 19-Aug-2019 1.1 -25.6
Infibeam Avenues 04-Apr-2016 1.1 112.1
Vishwaraj Sugar 15-Oct-2019 1.1 96.4
Lemon Tree Hotels 09-Apr-2018 1.2 -35.0
THE STATE OF PSU IPOs

PSU IPOs tend to see low subscription ratios and low listing-day gains
Subscription Listing Returns since
Company Listing date ratio gain (%) listing (% pa)
IRFC 29-Jan-2021 3.5 -3.8 -1.4
Mazagon Dock 12-Oct-2020 157.4 49.1 1.4
MSTC 29-Mar-2019 1.5 -7.5 71.2
IRCTC 14-Oct-2019 112.0 101.3 118.0
Railtel Corp 26-Feb-2021 42.4 11.3 35.4
Garden Reach Shipbuilders 10-Oct-2018 0.6 -11.9 32.5
Ircon International 28-Sep-2018 9.9 -13.6 -47.2
Mishra Dhatu Nigam 04-Apr-2018 1.2 -3.3 31.0
Rites 02-Jul-2018 67.2 2.7 11.9
Rail Vikas Nigam 11-Apr-2019 1.8 0.0 28.4
Hindustan Aeronautics 28-Mar-2018 1.0 -3.8 -4.6
Bharat Dynamics 23-Mar-2018 0.3 -15.9 0.0
New India Assurance 13-Nov-2017 1.2 -6.4 -36.7
GIC Re 25-Oct-2017 1.4 -6.8 -33.9
Cochin Shipyard 11-Aug-2017 76.2 0.7 -4.0
HUDCO 19-May-2017 79.5 22.4 -9.6
Data as on March 15, 2021. Absolute post-listing returns for IPOs less than one-year-old.

INTERVIEW VENUGOPAL MANGHAT Head - Equities, L&T Mutual Fund
‘Value is what you derive from

businesses over time and
not just bridging of undervaluation’
A
fter a dream run since April last
year, investors are worried that the
markets may have peaked out. That
also means a correction may just be
around the corner. Lately, spiking bond
yields and a revival in COVID cases have
emerged as newer concerns.
Amid this, we speak to Venugopal
Manghat, who manages L&T India Value
Fund, a valuation-conscious scheme. He
shares with us his thoughts on the current
market valuations, where he is betting
currently, the rally in cyclicals, among other
things. His philosophy of value investing will
act as a bonus for the readers of this
interview.
On all metrics, be it P/E, P/B or market cap to GDP, the

market appears overpriced. How worried are you about
that? Is a deep correction imminent?
Yes, the market appears overpriced.
However, earnings growth in the last
few years has been subdued and
this seems to be the first year of a
recovery and given the global and
domestic tailwinds, the earnings-
growth trend could continue in
the foreseeable future. Also,
valuation is a function of cost
of capital, growth etc. COVID-
19 has resulted in developed
and emerging countries
adopting convergent, easy
fiscal and monetary
policies, resulting in a

INTERVIEW
lower cost of capital. This partly explains the higher do you exit a stock?
valuations prevailing currently, apart from the higher For L&T India Value Fund, we focus on identifying
liquidity in the markets and better-than-expected stocks which have the potential to unlock value over
economic recovery. In the near term, the market time while being at a relatively lower valuation vs
could see some correction, especially with the bond their history or within the sector. As mentioned
yields spiking and expectation of higher interest earlier, growth is one of the key parameters and we
rates, but the positive trend in earnings should try to pick stocks where there is a mismatch in
support it in a correction. On a bottom-up basis, there growth expectation between our analysis and the
are still good opportunities to invest. market view. The market tries to project future
growth as an extension of historical performance,
Which pockets in the market currently appear overvalued? while we continuously scan for changing business
Which offer valuation comfort? dynamics, including tailwinds, change of
Within the market, high-quality, consumer franchises, management, etc., while assessing potential value.
apart from high-growth stocks, appear most Apart from growth, we also look at the free-cash-flow
expensive. These include a segment of high-quality yield, dividend yield, valuation of subsidiaries, etc.
midcaps as well, especially where free float is limited. While we enter a stock, we try and ensure that it
Some of the economy-related sectors, including ticks our boxes for value. Stocks are bought with a
metals, real estate, banking, capital goods, view to remain invested in these for as long as
etc., could spring surprises in earnings possible and hence we are always
and may appear relatively better in looking for opportunities to buy great
valuation. Some of these sectors
are cyclically at their low points
High-quality, compounding stocks at bargain
levels. However, all the stocks in
in terms of profitability and consumer franchises, the portfolio are continuously
return ratios. With better apart from high-growth evaluated and we size our
growth expectation, parts of stocks, appear most positions depending on the
the IT and pharmaceutical
sectors also look reasonable.
expensive... Some of the valuation comfort. Stocks
are reduced/exited if
Overall, valuation comfort is economy-related sectors, including valuations are unjustified or
higher in small and mid metals, real estate, banking, when there are much better
caps vs large caps. Having capital goods, etc., could spring bargains available.
said this, post the sharp rise
in the markets, one needs to
surprises in earnings and may After a long period of lull, stocks
follow a stock-specific, bottom- appear relatively better in in sectors such as PSU banking,
up approach. valuation. metals and mining, real estate,
capital goods, and infrastructure have
What changes have you made to your started racing. How do you see the current
portfolio against the backdrop of the rally over valuations of these sectors vis-à-vis their
the last one year? What are you bullish and bearish on historical averages? Does the rally have legs?
and why? Many of these sectors are cyclical in nature and
In the market meltdown in March last year, we were economy-dependent. Hence, their growth,
able to buy into some of the stocks which were profitability, balance-sheet parameters, etc., may
expensive till then. Over the last one year, the market depend on the stage of the cycle. I believe some of
witnessed a severe sector rotation. During the these sectors are coming out of deep cyclical
correction, we increased exposure to sectors like IT downturns and therefore may be interesting.
and pharmaceuticals, which we believe hit a cyclical However, the pace of recovery and unfolding of the
bottom with respect to growth and are likely to cycle depends on several factors and needs to be
recover. During the last few months, we have monitored. On a medium-term basis, I believe
balanced the portfolio by increasing weights in real valuations are reasonable, given the potential for
estate, capital goods, metals, etc. We are not as bullish higher earnings growth. Some of these sectors have
on consumer staples and discretionary consumption significant under-ownership as well, given the
on account of high valuations and commodity scepticism on earnings recovery. With improvement
inflation impacting margins. in demand and government push, we could see
meaningful recovery in both earnings and multiples
How do you pick stocks for L&T India Value Fund? When over time.

INTERVIEW
Theoretically speaking, valuation is a tricky business as understanding of cycles and letting recent-past data
you can look at the same stock through multiple lenses. influence future estimation significantly.
What are your favourite valuation tools/methods? What
would be the pitfalls to watch out for? How important is value investing in a growth market like
We follow both the intrinsic and relative- India? When you have growth built into an economy,
valuation methods. Discounted cash flows all you need to do is avoid mistakes and the
are used where intrinsic valuation is upside is automatically taken care of.
more suitable, while in other cases, The market Value is what you derive from
stocks are valued using different
tools and relative-valuation
tries to project businesses or stocks over time and
not just bridging of
methods. While there are no future growth as an undervaluation. The basic
favourites, cash-flow extension of historical philosophy of value investing
generation is key focus for us. performance, while we is to identify good-quality
What a bargain valuation is,
that varies from sector to
continuously scan for changing companies which offer value
and are available at bargain
sector and hence we are not in business dynamics, including prices, which offer relatively
favour of looking at only low tailwinds, change of higher margin of safety. In a
P/E or low P/B stocks. Also, we management, etc., while growing economy like India,
look at historic valuations and
relative valuations within the
assessing potential faster growth or tailwinds for
growth could be one of the most
sector and the market. Purely going value. important aspects to look for stocks
by a low valuation can result in even for a value investor, provided the
value traps. Other stock is available at a bargain price.
pitfalls could be a Higher returns are made when investments are
lack of made at bargain levels. Investing in the highest-
growth companies at exorbitant valuations often ends
up in sub-optimal return in the foreseeable future
and does not assure an upside. Hence, I would argue
that value investing is a great approach in all
markets.
First a crash and then a massive rally – the last one year
has really tested investors’ nerves. The uncertainty hasn’t
abated yet. What are your key takeaways from the last
one year’s roller coaster? What would be your advice to
investors?
COVID-19 has been one of the rare black-swan events
which impacted economies and markets globally.
While in the midst of a crisis, one would not have
visibility of the recovery, so it makes immense sense
to be clear in your mind and focus on the objective,
which is to look for good-quality companies run by
capable managements, in strong businesses with long
runways and remain invested. Such panic situations
may lead to great investment opportunities.
Having said that, we are living in a
world which is changing, with
several disrupting forces, and
one needs to be mindful of
that. I would reiterate that
times of uncertainty and
panic are the best times to
invest money. WI
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MAIN STREET
The Khatris’ reinvention

The Khatri business community has a long and distinguished history of
remarkable enterprise and outstanding success punctuated by politically
motivated loot of their wealth
SAURABH MUKHERJEA
It is oft noted these days that the Indian reading of two really interesting books on India’s
economy is being altered by resets around reduced use business communities – Scott C. Levi’s ‘Caravans:
of cash, a crackdown on tax evasion, GST and, more Punjabi Khatri Merchants on the Silk Road’ (2015) and
generally, the creation of a more integrated, more Harish Damodaran’s ‘India’s New Capitalists: Caste,
networked economy. As better roads and communication Business & Industry in a Modern Nation’ (2008) – and
networks create a more-integrated economy, the rewards from my discussions with Khatri businessmen, it would
for being a broker, trader or intermediary are falling appear that the Khatris are predominantly Punjabis
sharply in India. To take an extreme example, in the and, to a lesser extent, Sindhis, with roots in two cities
early 1990s, stockbrokers in Mumbai used to earn – Multan and Shikarpur, which lie on the borders of
commissions in excess of 2 per cent. Now, the same Sindh and Punjab in the present-day Pakistan. The
profession struggles to get commissions of 0.10 per cent. community seems to be of Kshatriya (warrior) descent
Why? Because the rise of modern communication and all 10 of Sikhism’s gurus appear to be of Khatri
networks and low barriers to entry have crushed the descent. Interestingly, in contemporary Pakistan, there
returns to being a stock-market intermediary in India. A are also Muslim Khatris who trace their origins to the
similar fate seems likely to befall tens of millions of two cities mentioned earlier in this paragraph.
Indians who currently earn a living as retailers,
distributors, wholesalers or traders, either of daily From traders and bankers to Bollywood royalty
essentials or of commodities. The earliest records we can find of the Khatri
ascendancy are in the two hundred years either side of
Khatris: Dealing with dislocation the sixteenth century. In this 400-year period, the
As Indian businesses grapple with Khatris became the spine of India’s
economic disruption, they can draw Khatris are trade with what is today Afghanistan,
inspiration from North India’s
remarkable Khatri community, which
predominantly Turkmenistan, Iran and Russia.
Through the passes in the Hindu Kush
over the past 800 years has suffered Punjabis and, to a mountains (Khyber, Bolan, Sangar and
brutal reverses and reinvented itself lesser extent, Sarwand), the Khatris would take tens
repeatedly. Their ability to respond Sindhis, with roots of thousands of camels loaded with
successfully to setbacks and grasp a
wide variety of economic opportunities
Multan and cotton, spices, weapons and sugar and
sell these products in the great bazaars
– from manufacturing to trading and Shikarpur, which of Iran, Central Asia and Russia (all
banking, to being entertainers and lie on the borders the way up to Moscow). They would
even civil servants – sets them apart of Sindh and then finance the local harvest in the
from India’s other great business
communities like the Marwaris, the
Punjab in the hinterland around market cities like
Isfahan, Kandahar, Samarkand,
Gujaratis or the Parsis. present-day Astrakhan, etc. Then on the way back,
So, who are the Khatris? From my Pakistan the Khatris would import to India

MAIN STREET
Some prominent Khatri personalities in Bollywood
hundreds of thoroughbred horses from Central Asia community took place in the middle of the eighteenth
along with dry fruits, fresh fruits, carpets and furs. century. The Ghilzai Afghans, who occupied the Safavid
As Scott Levi says in his book: “We have seen that, capital of Isfahan in 1722, came down hard on the Indian
from the middle of the sixteenth century, the Multanis merchants by looting and extorting from them. They
not only mediated India’s trade with Central Asia, they were overthrown by Nadir Shah in 1736 and he in turn
established settlements in key locations beyond the retained policies hostile to the Indians. This gave his
Hindu Kush and laid the foundation for an extensive supporters a ready excuse to confiscate the Indians’
commercial network that would endure even into the wealth and properties.
twentieth century. A circulating population of tens of The Indian merchants regrouped under the
thousands of Multanis, and then Shikarpuris, moved patronage of Ahmed Shah Durrani (who ruled from
merchandise, wealth and information between north- 1747 to 1722) and shifted base from Multan to Shikarpur
western India and distant markets of Afghanistan, (with the latter city being a Durrani protectorate). The
Central Asia, Iran and Russia, eventually reaching as next blow to the Indian merchants came with the rise
far as Moscow and St. Petersburg…From their time as of Imperial Russia (1865–1918) – during the 1870s the
young apprentices, agents of these family firms were Russians implemented a series of policies designed to
instructed in complicated legal codes, accounting undermine the Indians’ business interests in Central
techniques, various methods to calculate interest, and Asia. And then when the Bolsheviks took charge in
other skills that they would need to utilize the Moscow in 1918, it was game over for the Indian
commercial techniques available to them…The agents businessmen in Central Asia.
would then be loaned a large amount of capital, usually The Khatris then reinvented themselves as regional
in the form of cotton textiles, before they would travel merchants, moneylenders and officials in pre-Partition
by caravan to a distant market. On arriving at these Punjab. As Harish Damodaran says in his book, “The
markets…as they gradually sold their merchandise, the majority were merchants, moneylenders and
agents would reinvest the cash retrieved in other shopkeepers, if not employed as lawyers, teachers,
profitable activities, most notably short-term high munshis (clerks) or kanungos (revenue officials…).
interest moneylending ventures. Following this model, Moreover, the land to which the Khatris belonged had
agents could realise a 200 to 300 per cent annual very little industry or rail infrastructure till well into
increase in their total wealth. After several years – the the twentieth century…industry in Punjab was nothing
Multanis’ average tenure abroad was seven or eight more than an assortment of flour mills, iron foundries,
years – the agents would return home…” cotton ginneries and shawl-making and carpet-weaving
The sheer skill and success of the Multani and units. The scope for emergence of big indigenous
Shikarpuri merchants made them obvious targets for capital in a primarily agriculture-based, landlocked
envious local elites. The first major attack on the province was limited.”

MAIN STREET
Some businesses
founded by the Khatris
The Partition of India resulted in the Khatris being community. However, since the Marwaris were not
dislocated again from their heartland in an undivided dislocated as profoundly as the Khatris by Partition, the
Punjab. Quoting again from Harish Damodaran’s Khatri ascendancy in independent India marks them out
engrossing book, “The community’s full-fledged as a uniquely enterprising business community.
emergence on the national business map had to wait for Prominent Khatri businesses include M&M,
a cataclysmic event like Partition, which literally pushed HeroMoto, Hero Cycles, Apollo Tyres and most of the
them in droves towards Delhi and its auto-ancillary companies in the NCR
neighbourhoods. This massive exodus (Subros, Rico, Sona Koyo, etc.), the
marked a human tragedy unparalleled The roll call of various entities of the Thapar group
in history, even as it opened up new prominent Khatri (Ballarpur, Greaves Cotton, Crompton),
avenues for a middle class with sound
moorings in education and trade…
businesses is long Ranbaxy, Max Life, East India Hotels,
Berger Paints, the Apeejay group
Proximity to the seat of power provided enough for this (owners of the Park Hotels chain), the
a platform from where they could be community to be late Ponty Chadha and the India Today
heard and also a vantage position to rated second only group. Most of India’s sports-goods
influence policy. A combination of
enterprise, articulation and strategic
to the Marwaris in industry – centred around Jalandhar
and Meerut – is controlled by the
closeness to the national capital – the power and Khatris. In Bollywood, the Khatris’
which, in itself, was becoming a major influence they supremacy has been absolute since
growth hub…- created conditions for wield, especially Independence. Raj Kapoor, B R Chopra,
Khatri capital to flourish in the post-
Partition period.”
in NCR Yash Chopra, Subhas Ghai, Dev
Anand, Ekta Kapoor, Prakash Mehra,
Today, the roll call of prominent Shekhar Kapur and Vidhu Vinod
Khatri businesses is long enough for Chopra are all Khatris. WI
this community to be rated second only to the Marwaris
in the power and influence they wield, especially in the Saurabh Mukherjea is the author of ‘The Unusual Billionaires’ and
National Capital Region (NCR), which is clearly the ‘Coffee Can Investing: the Low Risk Route to Stupendous Wealth’. He’s
Khatris’ stronghold with nearly 10 per cent of the part of the Investments team at Marcellus Investment Managers, a SEBI
population of India’s capital city belonging to that regulated provider of Portfolio Management Services.
The authoritative guide

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EVERYDAY
ECONOMICS
Understanding basic income

The idea of universal basic income looks promising but there are
challenges to its implementation in India
PUJA MEHRA
‘Don’t give them fish; teach them to fish’, way to achieve financial stability and dignity for all
goes the conventional commentary on anti-poverty citizens. A beneficiary was quoted in ‘The Economist’
policies involving unconditional cash transfers to the as saying that he was able to risk quitting his old job
poor. Such stereotypes and narratives stand challenged for an internship, which led to him getting better-
by two recent studies on experiments involving cash paying full-time work.
transfers—sometimes pejoratively called ‘doles’. A few months earlier, in September 2020, researchers
In March 2021, the Stockton Economic Empowerment at Georgetown University published a study (https://
Demonstration, or SEED, released its preliminary arxiv.org/pdf/2009.01749.pdf) that compared a
findings from the first year – the pre-COVID time workforce training programme to cash transfers in
period from February 2019 through February 2020 – of Rwanda. Launched in 2017, the US Agency for
its guaranteed income experiment (https://bit. International Development (USAID) development
ly/3rXRq6z). Stockton is a small city in California’s programme provided 40,000 youngsters with
Central Valley. This initiative was launched in employment training, including 10 weeks of ‘workforce
February 2019 by a former mayor, Michael D. Tubbs. readiness preparation’, 10 weeks focused on ‘individual
Under this programme, 125 Stocktonians received $500 youth entrepreneurship’ and 10 weeks of technical
per month for 24 months. The cash was unconditional, training for a trade. The training programme
with no strings attached and no work requirements. successfully improved outcomes such as productive
The primary research questions were: how does hours, assets, savings and subjective well-being. But
guaranteed income impact income volatility? How do cash transfers equal to the cost of the training
changes in income volatility impact psychological programme proved superior to all these outcomes and
health and physical well-being? How does guaranteed also improved consumption, income and wealth.
income generate agency over one’s future? Training outperformed cash only in the production of
The key findings did not validate fears of increased business knowledge. In 2018, the two researchers had
laziness or tendency to shirk employment in the similarly found that
beneficiaries. They are quite the opposite in fact:
Q Guaranteed income reduced the month-to-month
Universal basic the results of
nutrition programme
a
income fluctuations of households and alleviated income can were not superior to
financial scarcity, creating new opportunities for self- mitigate the cash transfers.
determination, choice, goal-setting and risk-taking. impact of massive Pilots in a range of
Unconditional cash enabled recipients to find full-
job losses from countries, from India
Q
time employment. to Finland, have

Q Recipients of guaranteed income were automation and produced similar
healthier, showing less depression and anxiety and increased reliance findings. Debate and
enhanced well-being. on artificial interest about the idea
The authorities running SEED believe that the
experiment proves that a guaranteed income is one
intelligence of universal basic
income died in India

EVERYDAY
ECONOMICS
after the conclusion of the

2019 Lok Sabha elections that
handed a renewed term to the
incumbent government under
Prime Minister Narendra
Modi. The opposition,
specifically the Congress
party, had promised a
universal basic income
scheme called NYAY in its
manifesto. Universal basic
income is normally cash
provided unconditionally and
with no targeting involved.
The Modi government,
though, had implemented a
targeted universal basic
income scheme for a category
of farmers, called ‘PM Kisan’,
ahead of the polls. The
debilitating impact of the
pandemic on incomes and
jobs creation and the increased focus on the need to them to it. Finding new resources to finance the
rebalance the role of the state in delivering social and scheme is likely to be even tougher; cost of public
economic justice are bound to renew interest in borrowings in India tends to be twice as expensive as
universal basic income around the world. in advanced countries.
The promise is tremendous. Governments are likely Second, India has limited markets. Just having cash
to see it as an instrument for improving social justice in hand is not enough. What it can be spent on depends
in face of deepening inequalities because of structural on what is and can be made available in the market.
imbalances in economies that policies for fighting the Poor people are unlikely to be able to use the cash
coronavirus have only accentuated. These include transfers to buy quality education, skills training,
unequal bargaining power in labour markets for low- loans and other financial products, nutrition and
skill workers versus top managers and gender equity. healthcare to improve their quality of life simply
Universal basic income can mitigate the impact of because these services are not available at affordable
massive job losses from automation and increased prices in India. These segments are underserved as
reliance on artificial intelligence. Plus, it is simple, private players focus on richer consumers. India does
transparent and can easily replace chaotic mazes of not have a supply side for affordable services for the
state-provided schemes, especially in countries where bottom of the pyramid. That is the main reason for the
bureaucracies are ineffective and delivery mechanisms expectations from the state to supply these rather than
leaky. The added advantage is that cash transfers can simply provide cash. So, policy steps, especially of the
soothe the growing resentment towards elites. In sort that make it easy to do business will still be needed
advanced economies, funding is hardly going to be a simultaneously – something that has been a challenge,
constraint, with public borrowing already at and whatever might be the improvements in global
unprecedented levels. rankings and pecking orders based on such parameters,
These are all factors that make basic-income material changes have been insufficient. If, however,
schemes attractive. There are, though, important genuine improvements do become a reality, then
considerations worth paying attention to for a country entrepreneurs may come up with products aimed at
as complex and with unique conditions such as India. this class of consumers. That’s when basic incomes
First, a country with competing demands and interest may become a way of improving lives in India. WI
groups, as India has, may find it difficult to collapse
Puja Mehra is a Delhi-based journalist and author of
the plethora of schemes in use at present into a single ‘The Lost Decade (2008-18): How India’s Growth Story
basic income and redeploy fiscal allocations from Devolved Into Growth Without A Story’

STRAIGHT TALK
Big markets and valuations

Valuing a company on the basis of its market size is fraught with pitfalls
ANAND TANDON
Writing about markets and valuations cially since many companies have business models
is Professor Aswath Damodaran’s day job as Professor that have not evolved, there are three other assump-
of Finance at the Stern School of Business at NYU. In tions that are implicit when investors decide to put
a paper and subsequent blog post (https://bit.ly/3lybt- money into such companies. “First, the company must
pW), Prof Damodaram explains attractions and risks be able to capture a reasonable share of that big mar-
in investing in companies that operate in ‘big market, a task that can be made difficult if the market is
kets’. He points out that many companies that initially splintered, localized or intensely competitive. Second,
raise money at monstrous valuations justify it on the the company has to be able to generate profits in that
basis that the ‘total accessible market’ (TAM) is big market and create value from that growth, also a
extremely large. Uber estimated its TAM at over $6 function of the firm’s competitive advantages and
trillion, and WeWork suggested that the commer- market pricing constraints. Third, once profitable, the
cial-real- estate market was enormous. company has to be able to keep new entrants out, eas-
Even if that were true, and that’s not a given, espe- ier in some sectors than in others. It is therefore dan-
4HYRL[]HS\LVM[OLNSVIHSH\[VPUK\Z[Y` (UU\HSYL]LU\LJVTWHYPZVUVM,=ZWLJPHSPZ[ZHUK
PUJS\KPUN,=ZWLJPHSPZ[ZHUK[YHKP[PVUHSH\[V [YHKP[PVUHSH\[V
At end-January 2021, the total combined market value of the eight EV The total revenue of the eight EV manufacturers is a tiny fraction of the
manufacturers reached $1.0 trillion, almost equal to the $1.1 trillion revenue generated by the traditional automakers.
combined value of the traditional automakers. $2,500,000 EV specialists Traditoinal automakers
$2,400,000 EV specialists Traditional automakers Total (Traditional + EV)
Market capitalisation (US$ billion)
2,000,000
Revenue (US$ million)
1,800,000
1,500,000
1,200,000
1,000,000
600,000 500,000
0 0
January 2018 January 2021 2018 2019 2020
Note: The figure includes the 37 largest automakers in the world by market capitalisation. Companies included are based on the list compiled by CompaniesMarketCap.com with the
exception of Fisker, Tata Motors, and SsangYong Motor, which do not provide sufficient financial information to be included in our analysis.
Source: Research Affiliates, LLC, based on data from Bloomberg.

STRAIGHT TALK
gerous to base an argument for invest- Tesla’s humongous investors on the basis of its ‘full-stack’
ing in a company and assigning it high business model with the supposed
value based on enthusiasm for the size
market cap is ability to disrupt batteries, solar pan-
of the market that it serves, but that often justified by els and even space!
danger does not seem to stop analysts investors on the The EV industry delivered sales of
and investors from doing so.” basis of its ‘full- 3.5 million in 2020, growing at a rate of
ESG-based investing has been gather- 43 per cent. A combination of con-
ing momentum in recent years. This has
stack’ business cerns about the environment as well
given rise to investment opportunities model with the as favourable government policies and
in ‘clean energy’ and electric vehicles, to supposed ability to tax incentives were responsible for the
name a couple. We examine whether disrupt batteries, growth. For the moment, investors are
their current valuations are justifiable. assuming that not only will Tesla be a
solar panels and big winner, so will all the other EV
Electric vehicles even space! makers – Nicola Corp founded in 2015
After two years of fall, the global auto with hardly any sales is currently
industry gained market value in 2020. priced at 60,978 times price to trailing
During the fall, while traditional automakers declined 12 months sales (this despite a fall in price from a peak
in value, EV makers gained. By the start of 2021, the of about $94 to a more recent $15). Relatively newer
market capitalisation of both segments was roughly entrant Li Auto with a market cap of $23 billion trades
equal despite the EV specialists making only a small at a price to sales of 30 times.
fraction of the cars that the traditional manufacturers Automobile manufacturing is a highly competitive,
rolled out. On February 1, 2021, Tesla was priced at capital-intensive industry. Even premium automakers
$852 per share, giving it a market capitalisation of trade at low single digit EV/EBIDTA, reflecting the
over $800 billion (currently, $626 billion) and made up constant investment required to develop new models
about three-fourths of the market value of EV special- to expand sales. This need for innovation is unlikely to
ists (and therefore of the traditional players as well). change just because of a change from internal-combus-
Tesla’s humongous market cap is often justified by tion engine to electric motors. Besides, new entrants
)PKZMVYZVSHYWV^LY[HYPMMZOH]LJVUZPZ[LU[S`[YLUKLKSV^LY
Maximum and minimum bid for solar power tariff, Dec 2020 (Rs/unit)
8 7.81
6.97 7.12 6.89
7
6.71 5.98 5.88 5.98 5.94
6 6.47 6.44 6.45 5.64
5.48 5.07
5
4.89 4.78 5.85 4.80 4.67 4.82 4.98 5.01 4.97
5.25 5.05 5.17 5.09 4.36 5.08 5.06 4.36
4.63 4.78 4.69 4.78 4.66 4.82 4.94 4.94 4.73 3.97
4 4.34 4.41 4.35
2.98 3.15 3.06 3.33 3.03
3 2.45 3.47 2.49 3.32 2.45 2.51 2.51 2.38
2.97 3.14 2.98 3.02 2.01
2 2.44 2.47 2.44 2.50 2.50 2.36
2.00
1
Uttar Pradesh (SECI), 75 MW, Jun-2018
Uttar Pradesh (NTPC), 500 MW, Jun-2019

Telangana, 500 MW, Aug-2014
Andhra Pradesh, 500 MW, Oct-2014
Andhra Pradesh, 400 MW, Oct-2016
Tamil Nadu, 1,500 MW, Jun-2017
Gujarat (GUVNL), 500 MW, Sep-2018
SECI (ISTS), 1200 MW, Feb-2020

SECI (ISTS), 2000 MW, Jun-2020
Madhya Pradesh, 100 MW, Dec-2013
Madhya Pradesh, 300 MW, Jul-2015

Telangana, 2000 MW, Aug-2015
Andhra Pradesh, 500 MW, Nov-2015
Uttar Pradesh, 100 MW, Jan-2016
Telangana, 350 MW, May-2016

Chattisgarh, 100 MW, Jun-2016
Madhya Pradesh, 750 MW, Feb-2017
Rajasthan (SECI), 1070 MW, Nov-2020

Gujarat, 250 MW, Jul-2016
Rajasthan, 130 MW, Jul-2016
NTPC tender, 250 MW, Oct-2017

Punjab, 500 MW, Sep-2015
Jharkhand, 1,200 MW, Mar-2016
Rajasthan, 500 MW, May-2017
Rajasthan (SECI), 750 MW, Dec-2017
Rajasthan (SECI), 750 MW, Jun-2019

Rajasthan, 420 MW, Jan-2016
Maharashtra, 450 MW, Jan-2016
Rajasthan, 100 MW, Mar-2016
Gujarat, 500 MW, Mar-2018

Chattisgarh, 100 MW, Apr-2014
Karnataka, 500 MW, Aug-2014
Karnataka, 950 MW, Jun-2016

Karnataka, 860 MW, Mar-2016
Karnataka, 500 MW, Apr-2016
Source: Media reports, Kotak Institutional Equities

STRAIGHT TALK
(ZVSHYWSHU[^PSS`PLSKHU099VMHYV\UKWLYJLU[H[HIPKVM`\UP[HUK
JHWL_VM`TPSSPVU4>
IRR analysis of solar projects at a bid of `2.3/unit
(ZZ\TW[PVUZ *HWL_`TU4>
Capacity (MW) 100 11.99% 35 37 39 41 43
Cost (` mn/MW) 35 21 8.20% 7.20% 6.30% 5.50% 4.70%
PLF (%) 25 23 10.10% 9.00% 8.00% 7.20% 6.40%
Generation (MU) 219 PLF (%)
25 12.00% 10.80% 9.80% 8.80% 8.00%
Tariff 2.30 27 13.90% 12.60% 11.50% 10.50% 9.50%
O&M (` mn/MW) 0.5 29 15.80% 14.40% 13.20% 12.10% 11.10%
Debt (%) 7.5
Leverage (%) 70
Cost of equity (%) 12.0
Cost of capital 8.9
Useful life (years) 25
Year 1 2 3 4 5 6 7 8 9 10 15 20 25 26 27
Revenues 504 504 504 504 504 504 504 504 504 504 504 504 504
O&M (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50) (50)
EBITDA 0 0 454 454 454 454 454 454 454 454 454 454 454 454 454
Depreciation — — (140) (140) (140) (140) (140) (140) (140) (140) (140) (140) (140) (140) (140)
Interest (92) (184) (173) (163) (152) (142) (131) (121) (110) (100) (47) — — — —
PBT (92) (184) 140 151 161 172 182 193 203 214 266 314 314 314 314
Tax — — (28) (30) (32) (34) (36) (39) (41) (43) (53) (63) (63) (63) (63)
PAT (92) (184) 112 121 129 138 146 154 163 171 213 251 251 251 251
Capex 1,750 1,750 — — — — — — — — — — — — —
Debt 1,225 2,450 2,310 2,170 2,030 1,890 1,750 1,610 1,470 1,330 630 — — — —
Equity 525 1,050
FCFE (617) (709) 112 121 129 138 146 154 163 171 213 321 391 391 391
IRR 12.0%
&DVKÁRZV
NPV (43)
Source: Kotak Institutional Equities estimates
will chip away at the technological edge that current a net debt of approximately `19,000 crore (September
leaders enjoy. Despite the setback received due to 2020, Screener.in). Assuming that the entire pipeline
COVID, it is likely that the Uber model of rent vs own of projects is fully funded and fresh capital (debt or
will continue to gain traction, implying a lower demand equity) does not need to be raised, the market is
for individually owned vehicles as technology pro- assigning a value of `15 crore per MW to the assets of
gresses. All of this is not good news for carmakers. AGEL
AGEL claims an average portfolio tariff at `3.26 per
Renewables unit. Tariff has been consistently falling for Adani,
Something similar is going on in power-generation with the price bid in June 2020 coming in at `2.3 per
companies engaged in renewable energy. Adani Green unit. This is in line with developments in the industry.
Energy Ltd (AGEL) investor presentation claims a total ReNew Power, another renewable energy company
portfolio of 14,195 MW (2,850 in operation, 3,345 MW from India, is adopting the SPAC route for a NASDAQ
ramp up, while 8,000 MW is contracted pipeline). Of the listing. ReNew has 5.4 GW of operating assets and
operational assets, 2,353 MW is in a 50:50 JV with Total. another 4.5 GW of committed capacity (where pow-
Adani is targeting a portfolio of 25 GW by 2025. er-purchase agreements have not yet been signed),
AGEL trades at a market cap of `1,77,650 crore with taking the total capacity to 9.9 GW. Assuming that the

STRAIGHT TALK
SPAC transaction were to conclude as planned, the key criteria for determining tariffs. Power tariffs have
valuation of ReNew Power would be at an enterprise fallen to levels that leave little scope for execution errors.
value of $7.85 billion ($4.37 billion post money equity). The illustration of the return on investment on a solar
This yields a valuation of `5.74 crore per MW for the plant as computed by Kotak securities in their recent
assets of ReNew Power. report is telling. One has to assume a capex including
NTPC, the country’s largest power generator, cur- land of not more than `3.5 crore per MW and a cost of
rently trades at a market capitalisation of `1 lakh debt of 7.5 per cent to get an IRR of 12 per cent on the
crore, with approximately `1,90,000 of project. Does this justify the 4.5 times
net debt. Its generation portfolio of 63 multiple to investment that AGEL
GW comprises 58 GW of coal assets, If interest rates attracts or the listing pop that investors
with the rest comprising renewables were indeed to in ReNew Power would expect?
(largely hydro). Without taking any of firm up, the The markets are coming to terms
the pipeline assets into account, NTPC
trades at `4.6 crore per MW. Its declared
biggest fall will be with the possibility that interest rates
may rise from the current levels. US
pipeline till 2032 includes 32 GW of in share prices of bond markets are jittery and yields
solar and wind power, which would companies that have shown an upward trajectory. If
take its renewable portfolio to 30 per have the highest interest rates were indeed to firm up,
cent. The market clearly sees wind and
power as winners, with coal not attract-
growth projections the biggest fall will be in share prices
of companies that have the highest
ing investor appreciation on ESG con- in the future with growth projections in the future with
cerns. lower cash flow lower cash flow now – they will behave
It can be argued with some convic- now like a long-duration bond. It may still
tion that with solar tariffs being lower not be too late to pare the portfolio of
than grid parity, the growth rates could investments that reflect a very bullish
remain at elevated levels. The issue here is the lack of ‘big market’ opportunity with no visibility of near-
entry barriers in this business, with technology being term earnings. WI
reasonably standardised and cost of capital being the Anand Tandon is an independent analyst.
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STOCK
SCREEN
Ideas to delve deeper

S
ound investment methods outlast cycles and However, please note that they are not our recommen-
fads and generate profits over the long run. dations.
Value Research presents stock screens based on Each stock screen explains the reason behind picking
time-tested principles. the stock, which over time will help you develop your
What are stock screens? These are a listing of attractive own investing rules. As we will be evolving such models
stocks based on the objective principles of sound and implementing changes to the methodology to be in
investment. We apply stock filters carefully crafted by line with economic and market cycles, the list will be
Value Research analysts on the universe of Indian stocks dynamic and updated periodically.
to identify these attractive stocks. The filters are devised In the following pages of ‘Stock Screen’, we present
to identify stocks of the following kinds: five categories that collectively list a number of
Quality stocks available cheap stocks. With these, you will be well-equipped to select
ttractive blue chips
A stocks to build your own portfolio after doing further
Stocks available at a steep discount to book value research. If you think that stock picking is a lot of
High dividend-yield stocks hard work, you can get started with these screens and
Growth stocks available at reasonable prices with time understand the way the ideas are shaping to
We believe that stocks listed in this section are a good make your own judgement on stock selection.
starting point to start a close scrutiny before adding Great investments are not easy to find, but practice,
them to your portfolio. patience and sound principles are all that you need.
Key terms
Universe companies In order to arrive at our universe of companies, we checked ICR of more than two implies that it can service more than twice its current
if the companies traded on all the days for the last two quarters. We considered interest charges.
the companies with a market capitalisation of more than `500 crore. Debt-equity ratio The debt-equity ratio is calculated as the ratio of total out-
Price to book value (P/B) Price to book value is the ratio of the price of a stock standing borrowings of the company to its total equity capital. It essentially tells us
to the book value per share of the company. It shows how much premium investors which companies use excessive leverage to achieve growth. Conventionally, the
are willing to pay for the underlying net assets of the company. debt-equity ratio of less than two is considered safe.
Price to earnings (P/E) The price-to-earnings ratio, or the P/E ratio, is simply Return on equity (RoE) This is measured by taking profit after tax as a percent-
the ratio of the price of a stock to its earnings per share. It shows in multiples how age of net worth of the company. It indicates how efficiently the company has been
much investors are willing to pay for the earnings. The thumb rule of valuing a stock able to utilise investors’ money.
is that a high-growth stock will have a high P/E ratio, while a value stock will have Stock return Stock return is calculated by taking the percentage change in the
a relatively lower P/E ratio. price of the stock adjusted for bonus or split.
Earnings per share (EPS) Earnings per share, or EPS, is calculated by dividing Dividend yield This is defined as the percentage of the dividend paid per share
the company’s net profit with the total number of outstanding shares. to the current market price of the stock. Since the denominator in this ratio is the
EPS growth Growth of the EPS over a specified time period – trailing 12 months market price, a stock’s dividend yield changes every day.
(TTM), a quarter or five years. Quarterly comparisons are on a year-on-year basis. Dividend-payout ratio This is the total dividend paid to the shareholders as a
For five years, the figures are annualised. percentage of net profit.
Price-earnings to growth (PEG) This ratio demonstrates how high a price we Altman Z-Score Developed by Edward Altman of New York University, the Z-Score
are paying for the growth that we are purchasing. It is the ratio of price to earnings predicts a company’s financial distress or the possibility of its going bankruptcy
to the EPS growth of the stock. In all our analyses, we have taken five-year historic within two years. A Z-Score of more than three is desirable.
EPS growth. Modified C-Score It tells the probability of financial manipulations. In order to
Earnings yield Earnings before interest and taxes (EBIT) divided by enterprise develop it, we have modified James Montier’s C-Score. A C-Score of less than four
value. Enterprise value is market cap added to total debt and less cash and is desirable.
equivalents. Piotroski F-Score Developed by Joseph Piotroski, the F-Score highlights financial
Dividend per share Total dividend declared during the year divided by the total performance as compared to that in the previous
number of outstanding shares. year. It thus points out to the current outperformer Growth Value
Net sales This is simply the income that a company derives by in terms of profitability and financial improvement.
selling the goods and services that it produces. The downside of taking sales as an An F-Score of seven or above is good. Large
indicator of growth is that it may not be matched by a similarly scintillating bot- Stock style It indicates the style of the stock. It
tom-line (net profit) performance. A company may be earning revenue at a high is derived from a combination of the stock’s valu- Mid
rate. But if it is doing so by incurring a very high cost, the bottom line may not grow ation — growth or value — and its market capital-
in proportion to the growth in the top line (sales). isation — large, mid and small. For example, on the Small
Interest-coverage ratio (ICR) This indicator is generally used to gauge right we have shown the stock style of a large-cap
whether a company has the ability to service its debt. The interest-coverage ratio growth stock.
is calculated as the ratio of operating profit to interest outgo. A company with an

STOCK
SCREEN
Quality stocks available cheap

The stocks listed below clear essential checks on solvency, accounting,
recent financial performance and valuations
No. of companies that
cleared the filters
REASONS TO INVEST THE FILTERS 1,003

Safety Market cap greater than C-Score less than 4
590
Soundness `500 cr PEG less than 1
86
Good performance Z-Score greater than 2.99 P/E to median P/E less
Reasonable valuations F-Score greater than or equal to 7 than 1.5 73
Earnings yield greater than 5% 14
Banking and finance companies were removed from this analysis as the metrics don’t apply to them.
Safe bets
Company Stock Altman Piotroski Modified Earnings Market Share 52-week
Industry style Z-Score F-Score C-Score yield (%) P/E PEG cap (` cr) price (`) high/low (`)
Associated Alcohols
Liquors
8.4 8 2 9.6 14.5 0.44 776 428 431-123
Aurobindo Pharma
Drugs & Pharma
4.7 9 0 9.1 9.1 0.38 48,923 835 1024-289
Bharat Rasayan
Pesticides
17.2 9 2 5.1 26.6 0.70 4,083 9,643 11700-4500
Clariant Chemicals
Dyes & Pigments
4.6 9 1 6.4 4.2 0.12 883 383 608-183
Ester Industries
Plastic Packaging goods 5.2 9 3 17.9 6.8 0.09 982 118 137-22
Globus Spirits
Liquors 4.1 9 1 15.9 8.3 0.17 909 315 423-61
Granules
Drugs & Pharma 5.5 9 0 8.0 15.0 0.42 7,704 311 438-114
Heidelberg Cement
Cement 3.9 8 1 8.3 21.1 0.35 5,102 225 245-122
IOL Chemicals & Pharma
Drugs & Pharma 7.7 8 2 18.6 7.3 0.13 3,347 570 899-146
KRBL
Other Agri.prod. 5.2 8 3 16.1 7.9 0.53 4,518 192 340-92
Laurus Labs
Drugs & Pharma 7.6 8 2 5.4 24.3 0.40 19,385 361 386-61
Marksans Pharma
Health Services 15.3 9 1 13.0 10.6 0.86 2,149 53 66-10

STOCK
SCREEN
Company Stock Altman Piotroski Modified Earnings Market Share 52-week

Industry style Z-Score F-Score C-Score yield (%) P/E PEG cap (` cr) price (`) high/low (`)
RPG Life Sciences

Drugs & Pharma
6.9 9 2 8.4 17.6 0.85 634 384 458-143
Shree Digvijay Cement

Cement
7.0 9 3 8.1 18.4 0.27 917 65 72-18
Data as on March 22, 2021. New entrants.
High dividend-yield stocks

Good dividends are not just a bonus in addition to stock returns, they also
accumulate to become sizeable in the long run
REASONS TO INVEST THE FILTERS
Cushion against volatility Market cap greater than Stocks with a current dividend 1003
Higher total return `500 cr yield of more than 3%
822
Generate regular tax-free Dividend payout ratio of less Stocks with sustained per
income than 40% share dividend and amount 20
over the past five years
10
Dear dividend
Company Stock Dividend Dividend Dividend Earnings Market cap Share 52-week
Industry style P/E PEG per share (`) yield (%) pay-out ratio (%) yield (%) (` cr) price (`) high/low (`)
Andhra Sugars
Diversified 5.4 0.08 20.0 6.6 26.7 19.5 827 305 364-117
Century Enka
Synthetic Yarn
12.9 7.77 8.0 3.1 18.3 20.7 570 261 286-95
CESC
Electricity Generation
6.0 0.18 20.0 3.3 20.4 14.3 7,924 598 731-365
Cochin Shipyard
Shipping
9.3 0.36 16.6 4.6 34.6 27.3 4,756 361 427-209
Gujarat Industries Power Co 5.9 0.78 2.9 3.7 17.7 25.8 1,181 78 95-44
Housing & Urban Dev Corp 6.4 0.24 3.1 6.5 36.3 9.7 9,539 48 55-18
Housing Finance
PNB Gilts 1.6 0.02 3.0 6.1 29.0 9.2 887 49 62-20
Invest.Services
Rail Vikas Nigam 7.4 2.46 1.1 3.8 31.6 10.2 6,318 30 36-10
Construction

STOCK
SCREEN
Company Stock Dividend Dividend Dividend Earnings Market cap Share 52-week
Industry style P/E PEG per share (`) yield (%) pay-out ratio (%) yield (%) (` cr) price (`) high/low (`)
Srikalahasthi Pipes
Pig Iron 7.0 -1.83 7.0 4.0 17.4 21.0 808 173 224-96
Tamil Nadu Newsprint

Paper
– – 6.0 4.1 31.9 3.2 1,006 145 156-87
Discount to book value

Stocks available at a discount to their book value indicate bargain and
inherent value, provided the business fundamentals are sound
REASONS TO INVEST THE FILTERS
1,003
Really cheap Market cap greater than Companies must have a five-year
Relatively undervalued `500 cr earnings growth of more than 833
Companies with assets Debt-equity ratio of less than 1.5 10%
Price-to-book should be between 502
times
Return on net worth of more than 0.01 and 1
295
10% in the most recent year
13
Bargain hunt
Company Stock 5Y EPS Dividend Debt-equity Market cap Share 52-week
Industry style P/E P/B growth (%) yield (%) ratio RoE (%) (` cr) price (`) high/low (`)
Andhra Paper
Paper 16.5 1.0 19 0.0 0.0 24.5 925 233 299-112
Andhra Sugars
Diversified 5.4 0.7 113 6.6 0.2 18.0 827 305 364-117
CESC
6.0 0.8 46 3.3 1.5 13.3 7,924 598 731-365
Dalmia Bharat Sugar & Ind

Sugar
4.6 0.7 165 1.2 0.8 12.7 1,304 161 184-40
Dhampur Sugar Mills

Sugar
5.1 0.8 86 3.3 1.3 16.7 1,222 184 208-66
Elecon Engineering Co 6.9 0.8 14 0.0 0.5 10.9 666 60 70-16

Other Machinery
GHCL 7.3 1.0 18 1.3 0.6 19.6 2,199 231 258-69

Soda Ash

STOCK
SCREEN
Company Stock 5Y EPS Dividend Debt-equity Market cap Share 52-week
Industry style P/E P/B growth (%) yield (%) ratio RoE (%) (` cr) price (`) high/low (`)
Nava Bharat Ventures

Diversified 2.7 0.3 14 2.1 0.8 13.5 1,158 70 76-32
Polyplex Corporation
Plastic Films 6.4 0.8 96 2.1 0.3 17.0 2,602 829 945-288
Sandur Manganese
Minerals
6.9 1.0 56 0.7 0.5 19.1 890 989 1320-295
Seshasayee Paper
Paper
11.1 1.0 62 2.5 0.0 18.1 1,010 160 184-80
Technocraft Industries
Steel Tubes & Pipes
8.2 0.9 16 0.0 0.7 14.2 917 373 444-144
Usha Martin 12.5 0.8 17 0.0 0.5 41.9 1,029 34 39-10

Other Metal prod.
Data as on March 22, 2021. EPS growth rates are annualised.
Reasonably priced growth stocks

Growth investing is about picking companies that are fast growing their
bottom lines. But make sure that the valuations are not overheated.
REASONS TO INVEST THE FILTERS cleared the filters
All-weather style Market cap greater than

At least 20% in the trailing 12
1003
Companies with strong `500 cr months YoY
fundamentals Earnings growth of:

At least 20% in latest quarter
YoY 95
Greater stability vis-a-vis
At least 20% in the past five Stocks with a P/E of less
value or growth years 41
than 15
On fast track
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)
Alembic
Drugs & Pharma
6.7 23.7 0.22 26 43 26 2,595 101 123-25
Associated Alcohols
Liquors
14.5 12.3 0.44 58 21 33 776 428 431-123
Aurobindo Pharma
Drugs & Pharma
9.1 16.6 0.38 318 110 23 48,923 835 1024-289
Bajaj Healthcare
Drugs & Pharma
8.9 18.6 0.21 327 464 24 636 461 600-185

STOCK
SCREEN
Bhansali Engg Polymers

Thermoplastics
14.2 20.0 0.21 706 186 69 2,538 153 180-23
Birla Corporation
Cement
11.2 19.6 0.47 82 31 24 6,420 832 932-372
Clariant Chemicals
Dyes & Pigments
4.2 36.8 0.12 306 780 38 883 383 608-183
Dalmia Bharat Sugar & Ind

Sugar
4.6 5.0 0.03 39 61 165 1,304 161 184-40
Dolat Investments
Invest.Services
10.8 16.7 0.13 140 64 84 1,135 65 70-27
Dwarikesh Sugar Industries 6.8 5.7 0.05 65 42 125 595 32 39-13

Sugar
Ebixcash World Money 9.3 17.0 0.37 409 304 26 536 481 600-296
Misc. Fin.services
Ester Industries 6.8 7.8 0.09 70 105 72 982 118 137-22

Plastic Packaging goods
Everest Kanto Cylinder 9.5 7.3 0.42 6,099 83 22 808 72 88-10

Metal Tanks & Fabrications
Garware Polyester 14.5 11.1 0.39 276 40 37 1,669 719 775-132

Plastic Films
Globus Spirits 8.3 16.9 0.17 215 207 58 909 315 423-61
Liquors
Godawari Power & Ispat 6.9 3.8 0.15 443 79 47 2,370 672 690-81
Sponge Iron
Granules 15.0 17.3 0.42 135 71 31 7,704 311 438-114

Drugs & Pharma
GRM Overseas 11.0 8.2 0.21 24 348 51 531 1,347 1347-119

Other Agri.prod.
Gujarat Ambuja Exports 11.4 10.7 0.46 102 93 26 3,126 136 155-42
Other Agri.prod.
Gujarat Narmada Valley 7.5 7.3 0.29 114 72 26 4,687 302 340-96
Nitrogenous Fertilizer.
ICICI Securities 14.9 18.9 0.66 94 76 36 13,326 413 569-204

Invest.Services
INEOS Styrolution 13.9 18.0 0.65 411 547 22 1,717 977 1115-463
Thermoplastics
Kirloskar Ferrous Industries 9.7 14.5 0.26 406 176 37 2,173 157 178-37
Pig Iron

STOCK
SCREEN
KNR Construction
Construction
14.8 13.3 0.53 88 34 31 5,737 205 242-86
KSE
Oil cakes & Animal Feed
7.3 15.6 0.17 229 2,661 43 727 2,271 2620-870
LT Foods
Other Agri.prod.
6.8 8.7 0.27 46 81 21 1,842 58 66-14
Mangalam Cement
Cement
8.3 17.4 0.23 201 42 36 727 272 305-117
Panama Petrochem
Lubricants, etc.
11.4 12.9 0.44 733 119 26 929 154 189-26
PNB Gilts 1.6 6.7 0.02 279 612 66 887 49 62-20

Invest.Services
Sadbhav Engineering 1.6 21.0 0.03 65 702 45 1,173 69 85-23

Construction
Savita Oil Technologies 9.5 13.4 0.27 275 40 36 1,426 1,013 1181-475
Lubricants, etc.
SMC Global Securities 12.4 15.2 – 214 23 24 807 71 110-68

Misc. Fin.services
Summit Securities 11.4 26.3 0.48 29,380 28 24 563 516 625-197

Invest.Services
Sunflag Iron & Steel Co 10.5 9.4 0.34 102 79 30 1,096 61 73-20
Finished Steel
Supreme Petrochem 14.7 20.8 0.56 8,393 134 27 3,967 421 449-117
Crude Oil & Natural Gas
Tata Metaliks 10.4 9.8 0.30 45 33 30 2,320 735 935-308

Pig Iron
Thangamayil Jewellery 10.4 20.1 0.15 117 84 70 843 614 676-220

Gems & Jewellery
Triveni Engineering & Ind 5.9 7.4 0.18 115 28 36 2,043 84 98-29
Diversified
Welspun Enterprises 10.0 18.5 0.05 46 99 204 1,782 120 135-33

Construction
Wockhardt 6.0 40.8 0.25 58 674 23 4,975 449 570-147

Drugs & Pharma
WPIL 7.9 11.8 0.34 171 56 25 565 578 685-218

Pumps & Compressors
Data as on March 22, 2021. EPS growth rates are annualised. New entrants.

STOCK
SCREEN
Attractive blue chips

Investing in blue chips at reasonable valuations is one of the simplest
methods of wealth creation with limited pain
REASONS TO INVEST THE FILTERS 275

Liquidity Large and mid caps 234
Large companies in respective businesses Debt-equity ratio of less than two
181
Strong balance sheets Interest coverage ratio should be more than two
Liked by institutions Five-year average ROE of more than 20% 86
Annualised earnings growth of more than 20% over 19
the past five years
12
PEG of less than 1.5
Five-year average return on equity above 20% 8
Solid foundation
Company Stock Debt-equity Interest 5Y avg 5Y EPS Market cap Share 52-week
Industry style P/E PEG ratio coverage ratio RoE (%) growth (%) (` cr) price (`) high/low (`)
Alkyl Amines Chemicals

Organic Chemicals
43.2 1.07 0.2 24.5 27 40 10,886 5,330 5610-1040
Aurobindo Pharma
Drugs & Pharma
9.1 0.38 0.3 13.3 24 23 48,923 835 1024-289
Coromandel International
Other Fertilisers
15.8 0.48 0.4 6.9 21 33 22,251 757 881-443
Gujarat Gas
Indl.Gases
29.8 1.36 0.6 6.9 21 21 35,122 510 568-191
Gujarat State Petronet

9.3 0.23 0.7 7.6 30 29 14,568 258 311-146
KEC International
Power Projects
20.9 0.64 0.8 3.0 20 33 11,500 447 486-154
Petronet LNG
12.8 0.53 0.0 8.7 21 24 34,335 229 281-170
Vaibhav Global
Gems & Jewellery
51.2 1.30 0.1 28.3 21 39 13,071 4,014 4850-551
Data as on March 22, 2021. EPS growth rates are annualised.

WORDS WORTH
NOW
Seventy districts of the country witnessed a 150

50
per cent rise in the last few weeks. This emerging
rging
‘second peak’ of coronavirus has to be stopped
ed
immediately. If we do not stop this growing
pandemic now, then a countrywide outbreak
can occur.
Narendra Modi Prime Minister, Mint, March 18, 2021
GDP growth is slowly turning the corner. For next year, From our side, we are very clear that
we have given a growth forecast of 10.5%. The large we are not shuttingg all options.
p
capital expenditure announced by the We will allow certain
ertain
government will support economic windows for people
ople
activity and investment...From now on, to do experiments
nts on
the economy is expected to move only blockchain, bitcoins
coins or
in one direction – that is, upwards. cryptocurrency.
Economic activity is near normal and Nirmala Sitharamann
financial markets have stabilised… Finance Minister,
Business Standard,
Shaktikanta Das Governor, RBI, March 15, 2021
The Economic Times, March 18, 2021
While we believe 2021 will We have never been short-sighted in

be the year of the recovery, we our approach. We have never targeted
don’t see it happening until the short-term market share gains at the cost
second half of 2021, and any of stability. Importantly, we have laid a
yield increase that could act lot of emphasis on our risk management
as a bit of a brake would be practices. As an organisation, we do
undesirable. strongly believe that the best risk
Christine Lagarde President, ECB, management framework is one that
Mint, March 19, 2021 fortifies the balance sheet in good times
so as to create sufficient ammunition
to tackle a downturn…
The [vehicle-scrappage] policy Questions were raised
will boost Indian auto industry’s on the liquidity issues
trurnover to Rs 10 lakh crore faced by the smaller
from Rs 4.5 lakh crore at NBFCs, but in fact we
present...availability of scrapped were the beneficiaries
material to reduce the cost of of that situation…
auto components by 30-40%. Keki Mistry CEO, HDFC,
GST revenue to get a leg-up too. The Economic Times,
March 16, 2021
Nitin Gadkari Minister for Road Transport
and Highways, Financial Express,
March 19, 2021

WE’RE HERE TO HELP
INVESTORS SAVE TAX AND
AIM TO BUILD A BRIGHTER
FUTURE.
Franklin India Taxshield is a fund in the equity linked
savings scheme category that offers investors tax
deduction on investments up to `1.5 lac under Sec
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The fund offers the following benefits:
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Call your Mutual Fund Distributor or visit

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PRODUCT LABEL
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Instruments Wealth Creation Very High risk
product is suitable for them.
Riskometer is as on February 28, 2021
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Call your Mutual Fund Distributor / Registered Investment Adviser Today.

Benchmark - MSCI India (Total Returns) 32.09 11.76 N.A.

y To generate long-term capital appreciation/income

• Long term wealth creation

their principal will be at

WHAT’S IN IT FOR YOU?

Editor: Dhirendra Kumar.

Total pages 64, including cover

4 Wealth Insight April 2021

by SAURABH MUKHERJEA 20 WORDS WORTH WISDOM

The Khatris’ reinvention

48 8 MARKET MOVES 54 STOCK SCREEN

April 2021 Wealth Insight 5

April 2021 Wealth Insight 7

Newsmakers of the month

8 Wealth Insight April 2021

The PSU comeback

New acquisition by Adani Ports As PSU stocks witness a revival, we look at

     

Year-end data. 2021 data as on March 15, 2021

April 2021 Wealth Insight 9

+LLWHR-LY[PSPZLYZChemicals M-cap (` cr) 2,428 -\[\YL*VUZ\TLYTrading M-cap (` cr) 1,276

(KHUP;V[HS.HZTrading M-cap (` cr) 81,089 *LU[YHS)HURVM0UKPHBank M-cap (` cr) 9,607

/PUK\Z[HU*VWWLYNon-Ferrous Metals M-cap (` cr) 11,639 -\[\YL9L[HPSRetailing M-cap (` cr) 3,029

1\Z[+PHSMiscellaneous M-cap (` cr) 5,606 )SPZZ.=:7OHYTHHealthcare M-cap (` cr) 1,075

Data as on March 19, 2021

10 Wealth Insight April 2021

The gas-industry champion

April 2021 Wealth Insight 11

3M return (%)   1Y return (%)  With rising prices of

: 7):,)HZPJ4H[LYPHSZ Top 5 constituents 3M return (%) 1Y return (%)

3M return (%)  1Y return (%)  This index

: 7):,0UMYH Top 5 constituents 3M return (%) 1Y return (%)

3M return (%)  1Y return (%)  Infrastructure stocks

: 7):,7V^LY Top 5 constituents 3M return (%) 1Y return (%)

3M return (%)  1Y return (%)  Power stocks have

: 7):,7:< Top 5 constituents 3M return (%) 1Y return (%)

3M return (%)  1Y return (%)  After being out of

Data as on March 19, 2021

12 Wealth Insight April 2021

S&P BSE Basic Materials

2L`U\TILYZ 0UKL_TV]LTLU[ )HZPJ4H[LYPHSZ:LUZL_4LKPHU

Mar ’19 Mar ’20 Mar ’21

14 Wealth Insight April 2021

Two Reasons to Rejoice

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April 2021 Wealth Insight 17

18 Wealth Insight April 2021

April 2021 Wealth Insight 19

20 Wealth Insight April 2021

Financial history is replete with the names of famous

April 2021 Wealth Insight 21

American CEOs have an embarrassing record of devoting more

The math of repurchases grinds away slowly, but can be powerful

message to potential customers must be consistent with

April 2021 Wealth Insight 23

Sensex’s price to earnings

3M return (%) 1Y return (%) With rising prices of

3M return (%) 1Y return (%) This index

3M return (%) 1Y return (%) Infrastructure stocks

3M return (%) 1Y return (%) Power stocks have

3M return (%) 1Y return (%) After being out of

Bank & Branch 6DYH