Wealth-Insight - Feb 2024

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A. HDFC ELSS Tax saver - SIP Performance^ - Regular Plan - Growth Option
Since Inception* 15 year SIP 10 year SIP 5 year SIP 3 year SIP 1 year SIP
Total Amount Invested (` in lacs) 34.40 18.00 12.00 6.00 3.60 1.20
Market Value as on December 29, 2023 (` in lacs) 1,435.38$$ 64.53 27.73 10.26 5.10 1.36
Returns& (%) 20.79$$ 15.52 15.98 21.61 24.03 25.26
Benchmark Returns (%)# 14.84 13.89 14.43 17.38 15.83 19.72
Additional Benchmark Returns (%)## 13.70 13.08 13.50 15.45 13.41 13.48
@
Assuming ` 10,000 invested systematically on the fi rst Business Day of every month since March 31, 1996 (Scheme Inception Date). &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. SIP - Systematic Investment Plan. HDFC AMC/HDFC MF is not guaranteeing or assuring any returns
on investments in the Scheme.
B. HDFC ELSS Tax saver - Performance^ - Regular Plan - Growth Option NAV as at December 29, 2023 ` 1090.352 (per unit)
Period Scheme Returns (%) Scheme Benchmark Additional Benchmark Value of investment of (`) 10,000
Returns (%)# Returns (%)## Scheme Benchmark Additional Benchmark
(`) (`)# (`)##
Last 1 Year 33.20 26.91 21.30 13,310 12,683 12,124
Last 3 Years 25.85 20.34 17.24 19,906 17,411 16,101
Last 5 Years 16.92 17.48 16.25 21,838 22,367 21,220
Since Inception* 22.42$$ 14.46 13.12 27,50,503$$ 4,25,799 3,06,387
Common notes for the above table A & B: Past performance may or may not be sustained in future and is not a guarantee of any future returns. *Inception Date: March 31,
1996. The scheme is managed by Ms. Roshi Jain since January 13, 2022. # NIFTY 500 (Total Returns Index). ## NIFTY 50 (Total Returns Index). $$ All Distributions declared
prior to the splitting of the Scheme into IDCW & Growth Options are assumed to be reinvested in the units of the Scheme at the then prevailing NAV (ex-distribution NAV).
As TRI data is not available since inception of the scheme, additional benchmark performance is calculated using composite CAGR of NIFTY 50 PRI values from Mar 29,
96 (Data for March 31, 96 is not available) to Jun 29, 99 and TRI values since Jun 30, 99. As NIFTY 500 TRI data is not available for March 31, 96, benchmark performance is
calculated from March 29, 96. Âbove returns are as on December 29, 2023.
C. Performance of Other Funds Managed by Ms. Roshi Jain, Fund Manager of HDFC ELSS Tax saver (who manages total 3 schemes)
Returns (%) as on December 29, 2023
Scheme Managing Scheme sinceLast 1 year (%) Last 3 years (%) Last 5 years (%)
HDFC Flexi Cap Fund July 29, 2022 30.60 28.19 19.07
Benchmark - NIFTY 500 (Total Returns Index) 26.91 20.34 17.48
HDFC Focused 30 Fund January 13, 2022 29.58 29.08 18.36
Benchmark - NIFTY 500 (Total Returns Index) 26.91 20.34 17.48
Common notes for the above table B & C: Past performance may or may not be sustained in future and is not a guarantee of any future returns. 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. The above returns are of Regular Plan - Growth Option.
HDFC ELSS TAX SAVER (An open ended equity linked savings scheme with a statutory lock in of 3 years and tax benefit) is suitable for investors
who are seeking~:z To generate long-term capital appreciation / income z Investment predominantly of equity & equity related instruments
*Investors should consult their financial advisers, if in doubt about whether the product is suitable for them.
Name and Riskometer of Benchmark Name of scheme(s) Riskometer^^ of the Scheme(s)
NIFTY 500 (Total Returns Index) Modera
oderate High tely
o M
Modera w t erate Hi Contact your MFD/RIA today
oderate High tely
Mo Lo
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z HDFC ELSS Tax saver

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w t erate Hi
HDFC Flexi Cap Fund
Mo Lo
Very
z
gh
High
Low
d
z HDFC Focused 30 Fund 7397412345.

Very
High
Low
RISKOMETER
Investors understand that their principal will be at
RISKOMETER very high risk
Benchmark and Scheme Riskometer as on December 31, 2023
^^For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
Build your investments with the
growing manufacturing theme
Invest in
ICICI Prudential
Manufacturing Fund
0124
To invest, contact your Mutual Fund Distributor IPRUTOUCH App | www.iciciprumf.com

ICICI Prudential Manufacturing Fund (An Open Ended Equity Scheme following manufacturing theme.) RISKOM
ME ET
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is suitable for investors who are seeking*:
C E
• Long term wealth creation
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Investors
• An open ended equity scheme that aims to provide capital appreciation by investing in equity and understand that
equity related securities of companies engaged in manufacturing theme. their principal
will be at Very
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»ŀğ͘¦ņơř̿ų̿Ŧğƭğƙ͘ơƖğĐņǦğė͘ñĎųǍğ͘ǎņŝŝ͘Ďğ͘ğǍñŝƵñƭğė͘ñŨė͘ƵƖėñƭğė͘ųŨ͘ñ͘ŦųŨƭŀŝǔ͘Ďñơņơ̩͘£ŝğñơğ͘ƙğķğƙ͘ŀƭƭƖơ̶̶̫ǎǎǎ̩ņĐņĐņƖƙƵñŦĐ̩ĐųŦ̶Ũğǎơ̿ñŨė̿ƵƖėñƭğơ̶ñŝŝ̿Ũğǎơ͘ķųƙ͘Ŧųƙğ͘
details on scheme riskometers.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

February 2024 VOLUME XVII, NUMBER 8
50 COVER STORY
Earnings
EDITORIAL POLICY
The goal of Wealth Insight, as with
all publications from Value
Research, is not just limited to
momentum
generating profitable ideas for its
readers; but to also help them in
generating a few of their own. We
aim to bring independent, unbiased
and meticulously-researched stories
explained
that will help you in taking better-in-
formed 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
rigorous qualitative research obtained
by speaking to a wide variety of
stakeholders. We firmly stick to our
Why it works and why it fails
belief of fundamental research and val-
ue-oriented approach as the best way
to earn wealth in the stock market.
Equally important to us is our unwa-
veringly 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 Foolproof scrutiny of
that we over-simplify.
moat, management,
Read, learn and earn – and let’s
grow and evolve as we undertake this and valuation
voyage together.
EEDITOR-IN-CHIEF Dhirendra Kumar

COPYEDITING Khyati Simran Nandrajog,
Mithilesh Bhaumik and Ujjal Das
RESEARCH & ANALYSIS Aakar Rastogi,
Aditya Gupta, Ashish Kumar Pal,
Hemkesh Khattar, Karon Anand, Karthik
Anand Vijay, Kunal Bansal, Nipun Arora,
Ravikant Prasad, Samridh Rela, Sanat
43 SPECIAL REPORT 62 INTERVIEW
Kumar, Satyajit Sen, Shubham Dilawari,
Sneha Suri, Udhayaprakash J and Your tax-saving “Sustainability is
Vishal Goyal
action plan inherent in the DNA”
DESIGN Aman Singhal, Anand Kumar,
Aprajita Anushree, Harish Kumar, Kamal All you need to know to make
Kant Koner, Mukul Ojha and Nitin Yadav wise tax-saving decisions as the
DATA SOURCE FOR STOCKS AceEquity financial year comes to a close
MARKETING Aastha Tiwari,
Aditya Roy, Ashish Jain, Jash Ashar
and Kasturi Kaushik
PRODUCTION MANAGER &
CIRCULATION
Hira Lal +91-9958058407
ADVERTISING CONTACT
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Investment Managers
EMAIL editor@valueresearch.in
4 Wealth Insight February 2024


CONTENTS
7 Edit 42 vis-a-vis
by DHIRENDRA KUMAR
Fuelling progress
Good momentum, bad momentum India’s city gas distributors are leading the march to a
The two sides of momentum investing gas-based economy
8 Twitter 66 Stock Advisor

The value advocate by DHIRENDRA KUMAR
Intrinsic Compounding | @soicfinance | 187.3k Still good times

Are the markets making you nervous? Here’s the antidote.
10 Market Reporter
Buzz of the month 68 ABCD ETF
Passive funds for active mutual fund investors
14 Stock Story
Windward bound 69 Main Street
by SAURABH MUKHERJEA
Suzlon Energy’s topsy-turvy sail in the currents of
renewable power How India changed its master narrative
The 180-degree transformation in India’s growth story
18 Big Moves
72 Straight Talk
The most significant price movements
by ANAND TANDON
24 Market Barometer The era of Bitcoin ETPs arrives

Trends and trails Regulatory greenlight ushers in a new paradigm
Here are some charts that will help you make sense of the for digital assets
current market in terms of valuations and return potential
76 Everyday Economics
by PUJA MEHRA
26 Index Watch
How large is India’s economy?
S&P BSE Realty
Is the country on the right path to becoming an
28 Analyst’s Diary economic superpower?
z A tale of diminishing returns 78 Stock Screen

z Payables or debt?
z Luggage industry showdown High-quality small caps
z Flourishing in fluorines Using Value Research Stock Ratings to find promising
z The profit masters small caps
82 Wordsworth Now
38 IPO Tracker
Quotable words from prominent figures
D-Street debutants
Here is how the S&P BSE IPO Index has performed over the
last one year and how the biggest IPOs have fared.
9DOXH5HVHDUFK,QGLD3YW/WG
40 Words Worth Wisdom Wealth Insight is owned by Value Research India Pvt. Ltd.,
5, Commercial Complex, Chitra Vihar, Delhi 110 092.
The maverick of value investing
Editor-In-Chief: Dhirendra Kumar.
Gleaning wisdom from the investor who Printed and published by Dhirendra Kumar on behalf of Value Research India
Pvt. Ltd. Published at 5, Commercial Complex, Chitra Vihar, Delhi 110 092.
beat the market for over a quarter-century
Printed at Option Printofast, 46, Patparganj Industrial Area, Delhi-110092
Andrew Brenton Total pages 84, including cover
',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
materials contained and/or expressed in this Magazine or of the results obtained, direct or consequential, from the use of such information, statistics, statements, opinions and materials. The publishers of this Magazine do not certify and/or endorse any
opinions contained, provided, published or expressed in this Magazine.Reproduction of this publication in any form or by any means whatsoever without prior written permission of the publishers of this Magazine is strictly prohibited. All disputes shall be subject
to the jurisdiction of Delhi courts only. ALL RIGHTS RESERVED
February 2024 Wealth Insight 5

by Dhirendra Kumar
EDIT
Good momentum,
bad momentum
X The two sides of momentum a bad one, meaning that prices are rising because
somehow they have started rising, and a whole lot of
investing people are buying because they hope that prices will
keep on rising. Effectively, these are the two different
O
ld-timers who have followed Value Research types of momentum I discussed above.
for years or decades must be somewhat The rise in the price of a stock is a signal. It could
surprised at the topic of this month’s cover be a meaningless signal, or it could be a misleading
story. There’s no denying it – for long years, signal, or it could be a useful signal.
‘momentum’ has been a dirty word in everything we A meaningless signal is when prices start rising or
publish and, certainly, in everything I write. In fact, falling for no fundamental reason. This happens
if one classifies equity investing as fundamentals- frequently in all markets – prices can gain
driven or momentum-driven, practically everything momentum in either direction simply because a
I write and say about investing is anti-momentum. critical mass of buyers or sellers have jumped in for
So yes, your surprise is justified. no reason other than the movement itself. A
However, as the phrase goes, there’s momentum, misleading signal is when prices initially move for
and then there’s momentum. Our cover story is what appears to be a valid reason but then detach
about momentum investing and not about from that reason and take on a movement of their
momentum investing. Is that clear? Good. Let’s own. It could also be just price manipulation. The
delve a little deeper. useful signal is when prices rise in sync with
The dictionary definition of momentum is “The force improving fundamentals.
or speed of an object in motion, or the increase in the Valuations expand but are supported by growing
rate of development of a process: A falling object gains earnings, sales, market share, etc. In these cases, the
momentum as it falls.” Basically, in terms that apply to momentum builds on a sturdy foundation. Astute
investing, momentum means that something that has investors aim to identify and ride this kind of
picked up speed will continue to go faster and perhaps momentum, where the wisdom of the crowds and the
pick up speed. In all markets (not just stock markets), underlying facts are aligned.
prices tend to follow the trend that is already established, This distinction – between good and bad reasons
at least for a certain period of time. If you know nothing for momentum – is what our cover story is all about.
about why the price of stocks or wheat or gold or One thing I’d emphasise is that the very same price
potatoes should rise or fall in the near future, then you rise at the same point in time can be good for some
can guess that it will continue in the current direction, investors and bad for others. If you’ve done your
no matter what that is. If price is all you know and research homework and you understand why a price
understand, then all your decisions must be made based is rising, then it’s good, but if you haven’t, then the
on price alone. If you want to use big words, then this is very same price rise is bad.
also called technicals, but that’s a separate joke topic. In the cover story, our team takes you through
Following prices is the most basic method of the entire thought process behind our distinctive
trading - and it does work, sort of. When the price of view on momentum investing and then presents
something rises, there’s always an underlying reason. 10 case studies of specific stocks where a strong
The reason could well be a good one, meaning other momentum has been visible. Momentum is a useful
people have discovered why the price should tool but not the ultimate guide, and that’s what we
legitimately be higher. On the other hand, it could be hope to demonstrate.

TWITTER
The value
advocate
Interesting insights from one of the defence companies concall:-
Intrinsic Compounding The savings due to Simulators over the period of 30 years is around
@soicfinance `130 crores. So, investment of a few crores can result in a savings of
`130 crores over 30 years.
187.3k | Followers Tank Simulators
People in this game of QOQ investing. Forget that a few businesses are
Why Follow
seasonal and YOY is what should be looked at.
Even worse is the pack like behaviour of Markets, and then realisation
M
ore famously known
comes after a few days about seasonality.
as SOIC, Intrinsic Beauty of being a long term investor..One can sit back, think and act big
Compounding is a if valuations are reasonable. Markets aren’t completely efficient.
handle dedicated to investing
Never write off a business model until you have studied it in depth.. A lot
and educating amateur
of winners come when people are in disbelief
investors. It shares various
insights and analyses about Banks which haven’t spent on Digital transformation, will need to going
companies, industries, trends forward. That is where the opportunity lies for IT product companies.
These are proxy to Modernisation effort by the banks!
and portfolios. One thing that
it does exceptionally well is Sometimes inspite of the Price going up 80%+, the stock can be cheap.
providing us with snippets Sometimes inspite of the Price falling by 80%, a stock can be expensive.
from earnings concalls and Wisdom is to focus on valuations, stage analysis and de-anchor yourself
investor presentations of from aur kitna upar Jaega or Neeche jayega (How much more will it go
up or fall down)
various companies that one
might typically miss. Like other The beauty of a diversified portfolio of reasonably valued companies is,
ardent followers of Buffett and its extremely difficult to lose Money on a Portfolio level over the long run.
Munger, the underlying theme No one remembers that one match in which Virat Kohli was out at 0 and
India still won. Portfolio should be treated similarly. PF should win,
in its content is the focus on
irrespective of one batsmen being out or not.
long-term investing.
Follow us on
social media
@VROStocks vrostocks VROStocks

MARKET REPORTER
Maruti Suzuki, Eicher Motors announce

capex plans
Auto major Maruti Suzuki is investing `35,000 crore in a new Gujarat
plant, which will be operational by FY29, and `3,200 crore for a fourth
production line in Suzuki Motors Gujarat for electric vehicles.
Two-wheeler giant Eicher Motors is allocating `3,000 crore for
greenfield and brownfield projects, focusing on new product
development, including electric vehicles.
Polycab plummets
21 per cent in a
single day
Polycab India, India’s top
wires and cables
BYD overtakes Tesla in
manufacturer, saw its shares quarterly EV sales
plunge by 21 per cent in a
In the December 2023 quarter, Chinese
single day (January 11, 2024),
electric vehicle (EV) giant BYD
marking the sharpest decline
surpassed Tesla, becoming the world’s
since its listing. This drop
leading EV manufacturer by sales
followed the Income Tax
volume. BYD sold over 5,26,000 vehicles,
department’s raids at 50 of its
eclipsing Tesla’s 4,84,500. Despite this,
sites, including the ones in
Tesla continues to be the leader in
Delhi, Pune and Mumbai. The
battery-only cars as it sold 18 lakh cars in
company is accused of
2023 as compared to
concealing cash sales totalling
BYD’s 16 lakh cars.
approximately `1,000 crore in
its official records.
Tech giants declare their Q3 FY24 results
YoY growth (%)

Revenue 4.0 1.3 6.5 -4.4
Operating profit -0.6 -3.4 8.0 -9.7
Operating profit margin (bps) -109.7 -100.3 26.1 -86.8
Profit after tax 2.0 -7.3 6.2 -11.7

Tata Consumer Products in action
Tata Consumer Products is set to acquire Capital Foods (known for Ching’s Secret
and Smith & Jones) and Organic India (known for its organic food products). With
this move, the company aims to diversify its offerings and tap into new markets. It
will initially secure a 75 per cent stake in Capital Foods, with plans to acquire the
remaining stake within the next three years. This acquisition values Capital Foods
at `5,100 crore. It will fully acquire Organic India for approximately `1,900 crore.
HDFC Bank’s worst fall since COVID

HDFC Bank’s profit after tax saw a modest 3 per cent
sequential increase in Q3 FY24, hindered by elevated
provisions under new RBI regulations. Net interest income
dropped by 70 basis points due to higher fund costs. This
subdued performance led to investors reacting
poorly, resulting in a sharp 8.5 per cent stock decline
on January 17, 2024.
`4,000 crore
buyback announced by Bajaj Auto.
The buyback price is set at `10,000
per share, a 40 per cent premium
over the January 17, 2023 share price
Moody’s downgrades Vedanta

Resources’ credit rating
Mining major and parent company of
Vedanta, Vedanta Resources successfully
secured bondholders’ approval for its
proposed debt restructuring plan. This
involves an initial partial payment on
bonds due in 2024 and 2025, with the
remainder extended to 2027 and 2028.
However, Moody’s viewed this as a default
Apple overtakes Samsung avoidance strategy which could affect
in global smartphone sales bondholders. Consequently, it downgraded
Vedanta Resources’ credit rating from Caa3 to Ca.
For the first time in 12 years, Apple has
outpaced Samsung, becoming the top
`2 lakh crore
smartphone seller globally. International
Data Corporation data reveals Apple’s 2023
shipments increased by 3.7 per cent, while
Samsung’s declined by 13.6 per cent.
Currently, Apple boasts a 20.1 per cent
pledged by Gautam Adani at the Vibrant Gujarat
market share, marginally leading over Summit 2024 for building a green energy park, which
Samsung’s 19.4 per cent. he envisions to be “visible from space.”

MARKET REPORTER
Japan’s Nikkei 225 and TOPIX reach ECONOMIC METRICS

34-year high *67FROOHFWLRQ
Japan’s Nikkei 225 and TOPIX indices have 2,00,000 In ` cr
soared to their highest points since 1990,
1,50,000
driven by negative interest rates and
increased foreign investments. Key 1,00,000
drivers of this rise include giants like
50,000
Toyota Motors, Keyence Corp, and Sony
Group. Despite this surge, it is still below 0
the 1989 peak during Japan’s bubble economy. Dec '21 Dec '23
,QIODWLRQ&RQVXPHU3ULFH,QGH[
Aarti Industries 8 % change YoY
lands a contract 7
for `6,000 crore 6
Aarti Industries announced 5

a four-year contract for a 4
L&T secures major

niche specialty chemical, Dec '21 Dec '23
projected to yield `1,500 cr
contract for India’s annually, summing up to
`6,000 cr. This represents 24
,QGXVWULDODFWLYLW\,QGH[RI
bullet train project per cent of its TTM (trailing
,QGXVWULDO3URGXFWLRQ
twelve months) revenue as 24 % change YoY
L&T Construction has bagged a
of September 2023. The firm 16
mega contract, worth
approximately `15,000 crore, for confirmed its current 8
electrification work on the capital expenditure is 0
Mumbai-Ahmedabad bullet train sufficient for this deal, and -8
project. This involves deploying additional capex is not Nov '21 Nov '23
the Japanese Shinkansen High- required.
Speed Electrification Technology,
,15YV86'
marking its first introduction in
India. The Japan International 72 Inverted scale
Cooperation Agency is financing 75
this ambitious project to
revolutionise Indian rail travel. 78
81
84
Reliance Industries’ Jan '22 Jan '24
`3,300 crore investment

&UXGHRLO
in Alok Industries 150 Brent $/barrel
Reliance Industries, owning 40 per cent of
Alok Industries, has invested `3,300 crore 120
via non-convertible preference shares.
These shares, with a 9 per cent annual 90
dividend, are redeemable at par within 20
years from the date of allotment at the 60
company’s discretion. Dec '21 Dec '23

STOCK STORY SUZLON ENERGY
Windward bound
Suzlon Energy’s topsy-turvy sail in the currents of renewable power
S
uzlon Energy is India’s largest
wind energy provider. It
boasts an impressive installed
capacity of over 20 Gigawatt and
operates across 17 countries with
14 manufacturing units.
Recently, its share prices soared,
doubling in just six months. This
surge was due to consecutive
orders, including a notable 300 MW
contract in December 2023.
However, as rosy a picture as this
may paint, Suzlon’s path hasn’t
been without its challenges.
Suzlon’s journey
Founded in 1995 by the late Tulsi
Tanti, Suzlon aimed to address
India’s erratic electricity supply rising electricity demand and a and expensive acquisitions, funded
and contribute to climate change shift towards renewable sources. by significant debt.
mitigation through wind energy. Orders started pouring in for The 2008-09 Global Financial
As a pioneer in the segment, it Suzlon, and it came out with its Crisis made matters worse.
grew rapidly, leading Tanti to sell IPO (initial public offering) in 2006, Demand slowed, and Suzlon
his textile business in 2001 to focus raising `1,496 crore. But then, struggled with mounting interest
solely on Suzlon. ambition led to overreach. The costs and a lack of new orders. The
The timing seemed perfect, with company pursued global expansion company defaulted on a $221
Suzlon Energy Sensex Sensex rebased to stock price
Jan 08, 2008

`417
Apr 05, 2006
`258 Apr 04, 2007
`176
Mar 26, 2008

Jun 13, 2006 `210 Jan 04, 2012
Oct 19, 2005 `148 `17
`127 Mar 12, 2009
`31
Mar 18, 2006 May 25, 2007 Mar 31, 2010 Jul 12, 2010 Nov 13, 2011 Nov 11, 2012
Acquired Hansen Acquired REpower Suzlon’s execution Rights issue of Sells Hansen Defaulted on
Transmissions Systems (Senvion) halved from `1,188 crore Transmission for $221 million foreign
International for 2.8 GW in FY09 to $187 million currency convertible
around `3,140 crore 1.4 GW in FY10 bonds and entered into
after the Global a corporate debt
Financial Crisis restructuring program

Revenue and profit after tax Operating profit and margin
Revenue (` cr, left side) Operating profit (` cr, left side)
Profit after tax (` cr, right side) Operating profit margin (%, right side)
24,000 4,000 2,000 60
18,000 500 1,000 30
12,000 -3,000 0 0
6,000 -6,500 -1,000 -30
0 -10,000 -2,000 -60
million loan in 2012. However, the FY14 FY23 FY14 FY23
company was able to negotiate with its
lenders, and what followed was a Total debt and no. of shares Capacity additions during
decade of restructuring from FY13-22, outstanding the year
including the shedding of its earlier Total debt (` cr; left side) 2.0 GW
Number of shares (in cr; right side)
acquisitions.
20,000 1,600 1.5
The path forward 15,000 1,200 1.0

Despite these hurdles, Suzlon 10,000 800
remained innovative in its product 0.5
5,000 400
line. It is still the market leader, 0
0 0
retaining a 33 per cent share in India’s
FY06 Sep ’23 FY14 FY23
installed wind sector. Its debt has
shrunk from `18,000 crore in FY15 to 1,145
`121 crore by September 2023. This
financial turnaround, however, came
at the cost of shareholders’ equity,
requiring significant dilutions.
By Kunal Bansal
Jan 05, 2024

Feb 20, 2019 Mar 25, 2020 May 19, 2023 `41
`3 `2 `9
Jan 22, 2015 Feb 23, 2017 Jul 17, 2019 Aug 16, 2023 Dec 28, 2023
Sale of Senvion Government of India Suzlon defaults Completes qualified Secures orders
for `7,200 crore switches to reverse again on FCCBs institutional for 400 MW in
e-auctions from a of `1,200 crore placement (QIP) of two days
feed-in-tariff system `2,000 crore

BIG MOVES
Large caps
3M returns Price to 3Y avg 3Y earnings
Stock Rating (%) earnings RoE (%) growth (%)
Adani Green 80.2 204.3 32.5 233.8

Incorporated two subsidiaries for power generation and transmission.
HPCL 75.2 3.9 10.1 29.3

Share touched a 52-week high due to falling crude oil prices in the last few months.
Adani Total Gas 74.6 199.4 23.8 10.6

Signed an MoU with Flipkart for supply chain decarbonisation.
IRFC Unrated 70.5 3.6* 14.6 20.7

Raised `2,500 crore through non-convertible bonds and signed an MoU with RITES.
Adani Power 64.1 10.0 32.7 258.0

Consortium led by Adani Power agreed to buy Coastal Energen.
Power Fin. Corp. 62.6 1.4* 28.0 26.3

Signed an MoU with the Gujarat government worth `25,000 crore.
Suzlon Energy 55.6 103.0 - 35.0

Won multiple orders, including a 300 MW order from Apraava Energies.
HAL 54.4 33.3 26.4 33.3

Opened a new design and test facility for the development of strategic engines.
BHEL 53.5 987.7 -2.1 26.1

Signed a contract worth `2,957 crore with the Ministry of Defence.
Trent 51.6 178.3 3.2 78.6

Its Q2 FY24 revenue jumped 53 per cent YoY while profit after tax tripled.
REC Unrated 49.7 9.0 21.1 27.3

Its Q2 FY24 profit after tax rose by 39 per cent YoY.
Adani Ports 49.3 40.9 15.1 18.1

The Board approved the issue of non-convertible debentures worth `5,250 crore.
Macrotech Developers Unrated 48.8 75.6 6.9 -12.9

Company to invest `800 crore in two housing projects in Bengaluru.
Adani Energy 48.2 95.9 18.6 18.5

Raises $300 million from TotalEnergies for JV projects.
Yes Bank 44.9 1.8* -2.5 8.7

Its Q2 FY24 profit after tax rose by 43 per cent YoY.
*Price to book ratio. Our large-cap universe has 135 large companies, making the top 70 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in
the last three months. Data as of Janurary 15, 2024.

BIG MOVES
Mid caps
Inox Wind 121.8 - -38.2 -13.4

A wind project supplied by the company was commissioned
Angel One Unrated 88.3 27.0 43.2 78.4

Its Q2 FY24 profit after tax jumped 43 per cent YoY.
Prestige Estates 87.4 30.9 22.8 67.7

Its profit after tax and revenue grew by 505 and 57 per cent, respectively, YoY in Q2 FY24.
Jaiprakash Power 79.6 - 2.0 26.0

Stock is up due to general market conditions.
Bharat Dynamics 75.3 76.9 12.9 11.0

Domestic institutional investors increased their stake during the December 2023 quarter.
Sun Pharma Advanced Research 73.6 - -47.9 -15.4

Entered a global licence agreement for hair loss treatment.
Alok Industries Unrated 70.9 - - 20.1

Raised `3,300 crore from Reliance Industries (one of the promoters) via preference shares.
Swan Energy 70.2 46.5 -8.9 180.2

Completed the acquisition of Reliance Naval with an upfront payment of `231 crore.
Sobha 69.9 120.1 4.6 -9.9

Total sales value in Q2 FY24 is up 48 per cent YoY.
NLC India 69.0 16.6 9.2 14.2

Expects to raise `5,000 crore through a 1.4 GW renewable asset sale.
Reliance Power 68.1 - -2.4 23.3

Has agreed to sell a 1,200 MW hydroelectric power project for `128 crore.
Engineers India 63.9 26.2 16.8 3.7

Its Q2 FY24 profit after tax was up 70 per cent YoY.
MRPL 63.8 8.1 22.8 46.7

Both domestic and foreign institutional investors increased their stake in the December 2023 quarter.
HBL Power Systems 63.5 72.0 8.0 195.3

Its Q2 FY24 revenue and profit after tax jumped 77 and 242 per cent YoY, respectively.
Hindustan Copper 60.4 80.5 16.8 36.8

Its Q2 FY24 revenue and profit after tax were up 80 and 135 per cent YoY, respectively.
Our mid-cap universe has 303 mid-sized companies, making the next 20 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in the last three
months. Data as of January 15, 2024.

BIG MOVES
Small caps
Unitech Unrated 307.0 - -207.1 -4.9

The Supreme Court permitted new management to commence construction activities.
Newtime Infra 279.4 - -11.5 18.1

Its Q2 FY24 revenue was up 49 per cent YoY, and its net loss contracted.
Cupid 276.6 96.1 19.3 -8.7

The company announced a change in management. Its foreign institutional investors’ stake increased in Q3 FY24.
Oriental Rail Infra 148.9 204.0 12.6 -33.2

Its subsidiary won a `485 crore order from Indian Railways to manufacture wagons.
Integra Essentia 135.0 53.7 9.5 35.6

Its Q2 FY24 profit after tax more than tripled on a YoY basis.
Advait Infratech Unrated 132.1 110.3 17.9 146.8

Recently signed two MoUs with the Government of Gujarat for a proposed investment of `45 crore.
Veritas 121.3 11.4 5.0 -5.3

Its Q2 FY24 revenue and profit after tax were up 74 and 75 per cent YoY, respectively.
Inox Wind Energy Unrated 115.2 - -36.8 -

Share touched a 52-week high because of multiple order wins, including a 279 MW order.
Danlaw Technologies Unrated 110.6 110.1 9.4 61.6

Its Q2 FY24 revenue is up 52 per cent YoY. Reported a profit after tax as compared to a loss in the previous year.
Inox Green Energy Unrated 109.7 307.2 -6.6 17.2

Posted the highest-ever profit after tax in Q2 FY24 on the back of higher other income.
Kesoram Inds 101.2 - 72.7 4.8

Was recently acquired by Ultratech Cement for `5,432 crore.
Praveg 96.3 115.6 53.0 27.7

Shares rallied due to general market conditions.
Gallantt Metal 92.7 26.2 9.9 166.1

Its Q2 FY24 profit after tax was up 72 per cent YoY.
Scooters India Unrated 92.2 - -2.3 6.1

The stock is up due to general market conditions.
Apollo Micro Systems 85.9 157.6 4.6 21.3

Won multiple orders worth `20.7 crore in total from the Ministry of Defence.
Our small-cap universe (minimum market capitalisation `600 crore) has 1,065 small-cap companies, making the last 10 per cent of the total market capitalisation. The list mentions the stocks that
have fluctuated most wildly in the last three months. Data as of January 15, 2024.

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MARKET BAROMETER
Trends and trails

Here are some charts that will help you make sense of the current market in
terms of valuations and return potential
z Max Current z Median z Min
Sensex’s movement The Sensex is the most convenient indicator to

In ’000 tell the state of the Indian market. The 10-year
75
73,328 graph presented alongside shows the secular
run in the markets. However, this rally was
60
71,501 punctuated by several bearish phases.
The most prominent ones include the follow-
ing: Chinese growth concerns in 2015, demon-
45 etisation blues in 2016, the sell-off in 2018
due to US-China trade war and the March
2020 COVID-19 shock. After staging a remark-
30 able recovery from the lows of March 2020,
the markets yielded to the Russian invasion of
20,193 Ukraine and rising interest rates. However,
15 with recessionary fears easing, Sensex
Jan ’14 Jan ’24 reached a new all-time high.
Sensex’s price-to-earnings ratio The price-to-earnings ratio of the Sensex is a

40 simple market-valuation ratio. A general
guideline to help understand the valuation is:
35 35.1 Highly undervalued
(mouthwatering Fairly Dangerously
30 valuations) valued overvalued
25 23.1 25.5 P/E

12 16 20 24
20 Undervalued Overvalued
16.8
15 This graph is based on standalone data of Sensex companies.
Jan ’14 Jan ’24 If one takes the consolidated data, the P/E will likely be lower.
Sensex’s price-to-book value

4.0 The price-to-book value ratio tells us how
3.83 many times an investor is ready to pay for
3.71 a rupee of net assets. Since book value is
3.6
stable and less volatile than earnings, some
consider it better than the P/E as a measure
3.2 3.03 of valuation.
If:
2.8 P/B > Median P/B = Overvalued
P/B < Median P/B = Undervalued
2.4 2.36
2.0
Jan ’14 Jan ’24

Sensex’s dividend yield
1.6% Dividend yield is nothing but the return an
1.52 investor gets in the form of dividend on his
investment. It is measured as dividend per
1.4 share divided by price per share. Generally
speaking, when stocks are cheap, dividend
yields are high.
1.2
If:
1.22 1.11 Dividend yield > Median dividend yield
1.0 = Undervalued
Dividend yield < Median dividend yield
= Overvalued
0.8
0.72
0.6
Jan ’14 Jan ’24
Market cap to GDP

140% Here we have considered the market
capitalisation of all the listed companies on
the BSE.
110 125
This measure is Buffett’s personal favourite.
125 He said, “It is probably the single best
95 measure of where valuations stand at any
given moment.”
81 If:
80 Market cap > GDP = Overvalued
Market cap < GDP = Undervalued
65
Considering market cap of all the listed companies on
57 the BSE, revised estimates of FY22 nominal GDP and
advance estimates of FY23 and FY24 nominal GDP
50
FY14 FY16 FY18 FY20 FY22 FY24
10Y G-sec yield vs Sensex’s earnings yield

4.6% The spread between G-sec yield and Sensex’s
earnings yield is another valuation measure.
3.97 G-sec yield is the yield of the 10-year
3.8 government bond. Sensex’s earnings yield
is the inverse of the Sensex’s P/E ratio.
2.91 3.24 The greater the deviation from the median
3.0 in either direction, the greater the degree
of overvaluation or the undervaluation
of the Sensex.
2.2
If:
Spread > Median = Overvalued
1.4 Spread < Median = Undervalued
0.94
0.6
Jan ’14 Jan ’24 All data as of January 17, 2024

INDEX WATCH
S&P BSE Realty

Delivering a three-month return of 42.8 per cent, the S&P BSE Realty has been the
best-performing index. All the stocks in this index have given a return of over 50 per
cent due to favourable demand. However, this rally has resulted in an overvaluation,
with its P/E, P/B and dividend yield ratios exceeding their five-year medians.
.H\QXPEHUV ,QGH[PRYHPHQW
z BSE Reality z BSE Sensex z Median
60.4 5.7
7,500
6,000
Price to earnings Price to book 4,500

3,000
0.23 6.0 1,500

0 Sensex rebased to index
Dividend yield (%) Market cap (` lakh cr) Jan ’19 Jan ’20 Jan ’21 Jan ’22 Jan ’23 Jan ’24
,QGH[ZHLJKWV 3ULFHWRERRNYDOXH 3%

6.0
DLF
Others 26.3 4.5
23.7
3.0
2.6
1.5
In %
Prestige 0
Estates Macrotech Jan ’19 Jan ’20 Jan ’21 Jan ’22 Jan ’23 Jan ’24
9.5 Developers
15.0
3ULFHWRHDUQLQJVUDWLR 3(
The Phoenix Mills 200
11.9 Godrej Properties
0
13.6 40
-200
9DOXDWLRQVGLYLGHQGVDQGUHWXUQV -400
Dividend 1Y
Company P/B P/E yield (%) return (%) -600
Prestige Estates 4.9 31.7 0.11 205.4 -800
Macrotech Developers 9.3 76.7 0.16 139.1 Jan ’19 Jan ’20 Jan ’21 Jan ’22 Jan ’23 Jan ’24
Sobha 5.0 117.1 0.23 123.1

Brigade Enterprises 6.6 75.0 0.21 121.4
'LYLGHQG\LHOG
In %
DLF 5.3 89.2 0.50 113.7 1.5
Godrej Properties 6.8 96.9 0.00 85.7 1.2

Oberoi Realty 4.4 29.1 0.25 84.5 0.9
The Phoenix Mills 5.0 48.0 0.20 72.7 0.6
0.40
Swan Energy 5.7 46.7 0.02 66.8 0.3
Mahindra Lifespace 5.1 846.3 0.40 59.7 0
Data as of January 15, 2024 Jan ’19 Jan ’20 Jan ’21 Jan ’22 Jan ’23 Jan ’24


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6+ 7 8 9

ANALYST’S DIARY
A tale of diminishing returns

What led to the recent decline of once
top-performing stocks
S
tock market ups and downs are common.
Just because a stock did well in the past
doesn’t mean it will in the future, and the
opposite is true too.
Underperformance in stocks can be due to
various reasons like changes in the business
environment, increased competition, high
valuations, market sentiments, inconsistent
performance over time and more.
Further, two people investing in the same
company may get different returns depending on
when they invested.
This got us curious, so we looked at companies that
had big share price growth in the past decade but are
not doing so well now. We applied the following filters:
Waning away
These companies are in a spot of bother Share price return (% pa) 5-year growth (% pa)
Company Stock Rating 10-year 5-year 3-year Revenue Profit after tax
Indraprastha Gas 22.8 9.1 -6.1 25.6 17.8

Whirlpool of India 20.5 -0.6 -19.5 6.7 -8.6
Bombay Burmah Trading* 29.4 2.8 5.1 10.2 -197.1
P&G Health 24.1 9.5 -10.7 12.0 30.3
Avanti Feeds 38.4 2.4 -5.6 8.4 -7.7
V-Mart Retail* 23.6 -5.1 -7.0 15.1 -163.2
IFB Industries 28.3 2.2 -7.1 13.6 -28.4
Sudarshan Chemical Inds. 29.6 9.9 4.8 6.9 11.9
Tasty Bite Eatables 53.8 8.5 3.6 9.9 2.6
Johnson Controls - Hitachi* 21.8 -9.2 -26.0 1.8 -196.1
Venky’s 20.2 -3.9 3.6 9.5 -18.8
HIL 25.3 6.9 8.8 22.2 3.7
Kiri Industries 21.7 -1.6 -8.1 -3.3 -21.5
IG Petrochemicals 35.2 3.2 4.9 15.5 6.5
Oriental Aromatics 28.8 7.1 -9.9 10.9 -4.7
Hester Biosciences 30.2 4.7 -4.6 14.4 0.8
Excel Industries 28.8 -8.4 3.9 12.7 1.6
Dolat Algotech 44.6 -1.3 3.8 6.5 30.2
Transpek 34.4 5.6 6.0 18.1 25.9
Stock Rating and price data as of January 1, 2024. Financials as of FY23; *Loss in FY23.

z Trading history of at least 10 years in FY23. ROCE also got a boost. However, revenue
z Market cap above `1,000 crore growth continues to be on the lower side and with
z Ten-year annual share price return exceeding consistently high valuations, the return has diminished.
20 per cent
z Five-year and three-year annual share price Avanti Feeds
returns below 10 per cent A leading shrimp feed producer in India, Avanti Feeds
We found 19 such companies in India and focused faced a turbulent business environment over the last
on the top seven by market cap, each having its decade. Despite rapid growth until FY18 due to
reasons for decline. increased seafood consumption, things changed from
there on, especially with the COVID-19 pandemic.
Indraprastha Gas High raw material prices and a decline in shrimp
Once a consistently performing PSU, Indraprastha demand and prices impacted the financials of the
Gas has fallen from grace. Despite growing profits, it company. Sales volume dropped, operating margins
has faced challenges, particularly in recent years. contracted and PAT fell by 7.7 per cent annually over
High gas prices have significantly reduced the the last five years.
operating profit margin, dropping from 20.2 per cent
in FY19 to 11.5 per cent as of TTM September 2023. V-Mart Retail
The rise of electric vehicles in recent times has also Targeting mass retail with affordable apparel, V-Mart
pressured its CNG segment, from which it earns the expanded from 108 stores in FY16 to 266 in FY20. Its
majority of its revenue. Additionally, its P/E ratio revenue and operating profit grew 18 and 16 per cent
decreased from 40 in January 2021 to 16 in January 2023. annually between FY15-20.
However, the pandemic and market conditions
Whirlpool of India impacted its performance. While revenue increased,
Whirlpool enjoyed a successful period in the mid-2010s rising operating expenses led to a decrease in PAT.
with efficient capital allocation, stable profit margins, Increased competition, including new players like
consistent growth and a debt-free balance sheet. Zudio, affected the company’s market share.
However, increased competition in home durables Ballooning depreciation and interest costs resulted in
became a significant challenge. Revenue growth a loss of `104 crore as of TTM September 2023.
slowed, and annual profit after tax fell by 8.6 per cent
over the last five years. The return on capital IFB Industries
employed also contracted from 32.3 per cent in FY19 to The company derived around 80 per cent of its
9.1 per cent in FY23. revenue from the home appliances segment and the
rest from engineering products for automobile
Bombay Burmah Trading Corporation companies as of FY23. Similar to Whirlpool, the
Bombay Burmah is primarily a holding company and crowded and highly competitive home appliances
has a significant stake in several companies of the market has severely impacted IFB’s financials with
Wadia Group. stagnant earnings growth over the last decade.
However, it has faced some problems lately, like Go As a result, the home appliances segment failed to
Air going bankrupt and corporate governance issues generate substantial profit. The operating profit margin
with Bombay Dyeing. In FY23, the company recorded and ROE also remain in the lower single digits.
an impairment loss of `1,475 crore, leading to an
overall consolidated loss of `1,676 crore. Investors’ takeaway
These tales of once high-flying stocks serve as
P&G Health cautionary tales. They highlight the inherently
This is quite an interesting story. Following the unpredictable and volatile nature of the business
acquisition of Merck’s India business in 2018, P&G environment, emphasising the critical need for
Health successfully turned around its business by investors to remain constantly vigilant and informed.
focusing on consumer-facing brands and selling off other This helps in making more calculated and cautious
segments. Operating efficiency improved, with operating investment decisions.
margins rising from 13.9 per cent in FY18 to 23.7 per cent By Hemkesh Khattar

ANALYST’S DIARY
Payables or debt?
New accounting standards may change how payables are viewed
A
re you a credit card user?
If so, you likely
understand how it
works. The bank pays on
your behalf. Then, on a stipulated
date, you pay the bank back.
In other words, the bank acts as a
financial intermediary facilitating
trade between you, the buyer and
the store, the supplier.
You would be surprised to know
that trade is conducted in a similar
fashion globally through two mech-
anisms: factoring and reverse fac-
toring. Simply put, these are agree-
ments between buyers and suppli-
ers where a third-party financial
institution manages the cash flow
involved. Here’s how they work. receivables. On the flip side, the financial statement users to evalu-
buyer initiates reverse factoring to ate their impact on liabilities, cash
What are factoring and manage its payables. flow and liquidity risks.
reverse factoring Second and most important,
Factoring. The supplier sells its reverse factoring or supplier finance Impact on financial ratios
outstanding invoices to a financial agreements convert part of the The forthcoming changes will
institution called the factor. The buyer’s trade payables into short- reverberate through various finan-
factor then pays the supplier an term debt. But it doesn’t show up as cial ratios, particularly those asso-
advance, usually a percentage of debt on the financial statements. ciated with debt:
the invoice’s value. Also, it takes on However, this is about to change. QThe debt-to-equity ratio will
the responsibility of collecting the rise with the inclusion of short-

full payment from the buyer. Change on the horizon term debt.
Reverse factoring. In reverse In May 2023, the International QAn extended credit period will
factoring, also called supplier Accounting Standards Board pub- increase the interest burden,
finance agreements, the buyer lished amendments to IAS 7: diminishing the interest cover-
approves the supplier’s invoices Statement of Cash Flows and IFRS 7: age ratio.
and forwards them to the financier Financial Instruments - Disclosures, QFurthermore, the arrangement
or factor. The factor pays the sup- specifically addressing supplier may reduce available cash for
pliers early (usually at a discount), finance arrangements. As part of current debt obligations.
and the buyer pays the factor at a India’s adherence to IFRS Standards, For investors, this shift towards
later date with interest. Indian Accounting Standards (IND transparency represents a positive
AS) will be amended. step forward. It will enable a more
How they differ As outlined in an Exposure Draft precise evaluation of the implica-
While both are similar in many by the Accounting Standard Board tions of debt and the associated
ways, there are a few fundamental of India, companies now must dis- risks linked to supplier finance
differences. First, factoring is initi- close information about supplier arrangements.
ated by the seller to finance its finance arrangements, enabling By Sanat Kumar

ANALYST’S DIARY
Luggage industry
showdown
We explore the evolving landscape of the industry
T
he Indian travel industry is thriving post-
pandemic, with hotels, restaurants and air
traffic all reaping the benefits of the pent-up
demand for travel.
The luggage industry, too, is joining the
celebration, with two listed players, VIP Industries
and Safari Industries, experiencing robust growth.
This growth is attributed to the overall volume
surge due to the economic expansion in India and
the notable shift from the unorganised to the
organised sector.
What distinguishes this industry is the preference for
the value segment over the premium segment, as
observed by the management of VIP Industries. This shift
has propelled Safari Industries into prominence, which
was once trailing the industry leader - VIP Industries.
A glimpse into the past turn of events

VIP Industries had Sudhir Jatia at its helm until 2010.
However, in a somewhat cinematic twist, he had to step
down from his role because of strategic disparities and
to make way for the promoter’s daughter. its chairman and managing director. With his Midas
Later in 2011, he acquired a majority stake in Safari touch, Jatia orchestrated a remarkable turnaround
Industries, which was facing challenges, and became for Safari Industries.
The right segment at the right time

Safari Industries’s wild ride While competitors fixated on the premium market,
Safari Industries has taken over VIP Industries to become the most Jatia astutely targeted the value-for-money segment.
valued luggage company A substantial 90 per cent of Safari Industries’s
`12,000 cr z Safari Industries z VIP Industries revenue stems from products priced under `3,000.
The changing consumer preference from
9,000 unorganised to organised markets fueled the rise of
entry-level products - a trend accentuated after the
6,000 pandemic. Jatia asserts that Safari Industries’s
success doesn’t come at the expense of its rival but
3,000 rather from securing a larger share of the
expanding market.
Responding to this trend, VIP Industries increased
0
Jan 2014 Dec 2023 its mass segment contribution from 25 per cent in
Data as of December 29, 2023. FY20 to nearly 40 per cent in the first half of FY24.

A multi-fold increase in revenue Safari vs VIP: Operating profit margin
Safari Industries has witnessed a masssive jump! Safari Industries has finally caught up to VIP Industries in operating margin
z FY13 z FY23 20 % z Safari z VIP
2,082
2.5 times increase
10
In ` cr
0
1,212
12 times increase
838 -10
-20
100
-30
Safari Industries VIP Industries FY13 FY23
The digital push and VIP’s challenges margins over the years, capitalising on the consumer
Safari Industries leveraged the strength of e-commerce shift towards hard luggage.
from early on as it realised the potential of the growing Unlike soft luggage, which is labour-intensive and
digital landscape. The company has consistently dependent on Chinese supply, hard luggage is
invested in the digital push since 2015. This strategic manufactured in-house using polycarbonate.
move resulted in Safari Industries generating almost a However, due to the rising polycarbonate prices,
quarter of its revenue from the e-commerce segment. Safari Industries found an alternative in
In contrast, VIP Industries lagged in this arena. polypropylene, whose prices are relatively stable.
Moreover, the closure of Future Group’s stores was TPresently, around 40 per cent of Safari Industries’s
also a huge blow, as it contributed to around capacity is polypropylene-based.
15 per cent of VIP Industries’s revenue before the The move paid off, improving its operating margin
pandemic. A temporary shutdown of its Bangladesh significantly. Further, capacity expansion, coupled
factory further impeded growth. with the high operating leverage of its business model,
further augmented its profitability. Consequently,
Shift towards hard luggage Safari Industries’s Stock Rating grew from one star to
Shifting trends between soft (backpacks, duffle bags, three stars in the last decade.
soft-cover suitcases) and hard luggage created
challenges. Safari Industries improved its operating Conclusion
The story is far from over; in fact, it takes an
exciting turn.
Revenue share of top three players Safari Industries has shifted its focus towards the
Safari’s share has increased from below 5 per cent to over 24 per cent premium segment, while VIP Industries has intensified
z Safari z VIP z Samsonite its efforts in the mass market. As the industry leader,
100 %
VIP Industries has made strides to overcome setbacks,
80 maintaining its three-star Stock Rating. For instance,
VIP Industries has increased its focus on e-commerce as
60 revenue contribution from this segment went from 9 per
cent in FY20 to 21 per cent in the first half of FY24. It has
40
also increased the usage of polypropylene in
20 manufacturing hard luggage.
With both players bringing out their best in the
0
backdrop of tourism growth, it is safe to say that
FY12 FY23
we are set to witness exciting competition in the
Due to unavailability of industry-wide data, we have considered only the top three companies
in our analysis
luggage industry.
By Kunal Bansal

ANALYST’S DIARY
Flourishing in fluorines
We analyse the ambitious capex strategy of Navin Fluorine
T
he Indian specialty chemical industry is
undergoing a paradigm shift spurred by
numerous domestic and international prospects
arising from the ‘China plus one’ strategy. In
response, several Indian companies are strategically
expanding their capacities to capitalise on these
emerging opportunities. One such company which
caught our attention is Navin Fluorine.
The company has incurred `1,700 crore in capital
expenditure since FY22, effectively tripling its fixed
assets. Notably, it has been a multibagger over the
past decade, boasting an impressive 10-year annual
return of 54 per cent. the mining and metals industry. For a long time,
The company has allocated most of the capex to the refrigerant was its bread and butter, contributing
specialty chemicals and contract manufacturing 58 per cent of the overall revenue in FY10.
segments. But why these two segments in particular? But this changed when the company faced pressure
To gain an insight, let’s take a closer look at how from Chinese suppliers. The surge in competition
the company has evolved over the years. impacted its margins and growth prospects. Trying to
find a way out, it banked on the expertise it gained in
Company’s business fluoro chemical compounds to venture into the
Known for its expertise in fluorine and fluoride specialty chemicals business. This move not only
chemicals, Navin Fluorine initially gained aimed to diversify its product portfolio but also
prominence in the refrigerants business, being an enhance its profitability. It primarily catered to agri
early domestic producer of chlorofluorocarbon (CFC) and pharmaceutical industries. The company also
gas for refrigeration. It also had a small presence in established a dedicated R&D facility for contract
the fluoro-based specialty chemicals and supplied manufacturing in the pharmaceutical sector.
inorganic fluorides domestically, which were used in In FY12, Navin Fluorine acquired the UK-based
Manchester Organics to strengthen its contract
manufacturing business. Simultaneously, it
A gargantuan outperformance commissioned a new plant in Gujarat to manufacture
Navin Fluorine has multiplied its shareholders’ wealth by 73 times complex compounds for agrichem and pharma clients.
over 10 years
Despite initial struggles, the company’s bet paid
` 5,000 z Navin Fluorine z BSE500 Index off, with specialty chemicals and contract
manufacturing revenues growing at 14 and 39 per
4,000
cent, respectively, annually over the past decade.
3,000 Export revenues also saw significant growth, with
the US and Europe emerging as major markets.
2,000 Additionally, profitability also improved with the
operating profit margin almost doubling over
1,000
the years.
0
January 2014 January 2024 Tracing the trail of latest capex
BSE500 Index rebased to the stock price. Data as of December 28, 2023. The latest capital expenditure is primarily directed
towards expanding capacities in the high-margin

Share of new segments on the rise Expanding margins and efficiency
Contract manufacturing services has been Navin Fluorine’s fastest growing New segments had a profound impact on the company’s efficiency
segment in recent years
35% z Operating profit margin (%) z ROCE (%)
z Refrigerants & inorganic fluorides
100 % z Specialty chemicals z Contract manufacturing
30
80
25
60
20
40
20 15
0 10
FY10 FY23 FY10 FY23
segments of specialty chemicals and contract as of September 2023. The company raised capital
manufacturing. The management targets both the through debt, increasing total debt from `3 crore in
agrochemical and pharmaceutical industries, FY21 to `1,238 crore as of September 2023. While the
aiming to fulfil complex and large commercial debt-to-equity ratio remains below one, concerns
orders regularly. arise due to the rapidly changing balance sheet. To
New revenue opportunities have also surfaced in fund further expansion, the management plans to
the refrigerant and inorganic fluorides segment. raise additional capital from institutional investors,
Navin Fluorine has achieved a milestone by potentially diluting shareholders’ stake.
becoming the first Indian company to commercialise Operational challenges have also surfaced, with a
hydrofluorocarbons, a more efficient and substantial increase in inventories and receivables.
environmentally friendly gas set to replace CFCs in As a result, in FY23, the company reported a negative
the refrigerant industry. A capex of `450 crore has cash flow from operations for the first time in over a
been allocated for this initiative in FY24, and the decade. While the first half of FY24 witnessed a
company has secured new clients from South positive turn in cash flow and operational activities
Asia and the US markets in its inorganic in the newly established plant for a purchase order
fluoride business. commenced in October 2023, the impact on financials
remains to be seen. The stock’s rating has declined
But there is a cost from five to three stars between FY13 and now, as per
The aggressive expansion strategy is impacting the ‘Value Research Stock Ratings,’ reflects a
Navin Fluorine’s balance sheet. The cash balance has deteriorating valuation score.
decreased from `544 crore in FY21 to under `30 crore By Hemkesh Khattar
Invest like pros

Learn the craft of investing by reading about the
investment styles of world-class money managers
https://shop.valueresearchonline.com/store/

ANALYST’S DIARY
The profit masters

We look at the major players in five key industries
By Shubham Dilawari and Nipun Arora
I
ndustries differ significantly in characteristics This article delves into
such as consumer base, regulatory environment an analysis of five
and capital requirements. In some industries, the prominent industries,
competition is fierce, with numerous companies examining the market share
battling for market dominance. In contrast, other of leading companies. We assess these top players
industries are marked by a handful of firms based on criteria like market capitalisation, revenue
maintaining a stronghold. and net profit.
Stock Rating and price data as of January 4, 2024. Financials as of TTM September 2023. PAT has been adjusted for exceptional items.
Stock Rating z Market cap (` lakh cr)
Automobile he automobile industry
Maruti Suzuki
Share in (%) T exhibits high
concentration, with just five
3.17 out of 20 companies
16.0
Tata Motors contributing over 90 per cent
20.2
2.60 15.4 of revenue and profit after tax.
Substantial capital
M&M 50.7
requirements and brand
2.06 8.3
16.6 loyalty to well-known
companies are some of the
Bajaj Auto
29.8 20.0
1.98 4.9 1.9 reasons for this concentration.
24.7 12.7
15.3 While entry barriers are
Eicher Motors 15.9 21.1 6.6 prominent, competition among
1.06 9.8 10
industry players is intense,
Others Market Revenue PAT amplified high exit barriers
cap
— 1.96 and operating leverage.
Banks he top five banks command
HDFC Bank
Share in (%) T 55 per cent and 64 per cent
of net interest income and
12.90
12.5 profit after tax, respectively.
8.1
ICICI Bank 15.1 Strict regulations and high
7.4
6.89 3.9 capital requirements in the
6.1 banking industry create entry
SBI
21.7 barriers. As a result, new
5.70 28.2 5.7 4.3 44.8 28.7 entrants struggle to compete
Kotak Mahindra Bank 22.5 with the major players.
10.0
3.71 13.2 The dominance of private
36.3 players over public peers is
Axis Bank 13.5 18.0 evident, with only one public
3.37
sector bank (SBI) making the
Others Market Revenue PAT top list.
cap
— 13.13

FMCG he top five FMCG
HUL
Share in (%) T players command
35 per cent of revenue and
6.12 71 per cent of profit after
10.1
ITC 23.5 5.0 tax. They benefit from high
4.7
5.95 profit margins driven by
2.6 brand power, economies of
3.1 64.9
Nestle India
3.5 scale and a robust
2.57 32.5
5.5 4.3 distribution network.
24.2 3.5 Despite industry
Britannia 14.3 38.4
1.27 fragmentation due to
the entry of small and
Godrej Consumer
11.6 28.6 regional players, the
19.7
1.20
top players maintain
Others Market Revenue PAT their stronghold.
cap
— 8.22
Pharma he top five pharma
Sun Pharma
Share in (%) T companies dominate with
31 per cent and 47 per cent shares
3.11 in sales and profit after tax,
5.2
Divi’s Labs 5.9 respectively. The industry is
1.07 6.3 highly fragmented, encompassing
57.4
12.7 various categories like generics,
2.5 68.3
Cipla 6.4 branded generics and contract
1.05 7.3 3.0
research and manufacturing
11.9
2.1 6.9
Dr. Reddy’s Labs services (CRAMS).
3.1 8.4
0.99 52.7 Different segments have
18.7
different margin profiles.
Mankind Pharma 13.0 20.9 Balancing innovation, cost-
Unrated 0.86 efficiency and market
Market Revenue PAT
Others cap positioning is crucial for
— 9.55 success in this sector.
13.0
Technology he tech sector is highly
TCS
Share in (%) T competitive and
fragmented. It encompasses a
13.36
16.5 10.4 large number of small players,
Infosys 6.3 evidently due to low entry
6.19 4.7 barriers. Despite this, the top
12.7 five IT companies secure
HCL Tech 18.2 11.0 4.2 76 per cent and 85 per cent of
3.90
revenue and profit after tax,
26.6
Wipro 35.5 20.9 respectively. This is due to
13.0
2.38
28.2 9.8 3.7 25.7 several reasons, like brand
37.5 recognition and economies of
LTIMindtree
15.1 scale, allowing these players to
1.76
offer competitive pricing and
Others Market Revenue PAT attract a larger client base.
cap
— 9.99

IPO TRACKER
D-Street debutants
Here is how the S&P BSE IPO Index has performed over the last one year
and how the biggest IPOs have fared
HIGHEST ,32LQGH[YVWKH6HQVH[
LISTING-DAY GAIN
With a slew of IPOs, the IPO Index has performed well in the last few months
Tata Tech
160 z IPO z Sensex
140% 151
HIGHEST 140
LISTING-DAY LOSS
Yatra Online
120
122
-8.5%
100
HIGHEST
POST-LISTING GAIN
Signatureglobal 80 Rebased to 100
155.8% January 2023 January 2024
HIGHEST MOST LEAST BIGGEST TOTAL

POST-LISTING LOSS SUBSCRIBED IPO SUBSCRIBED IPO IPO ISSUE SIZE
Ideaforge Tech Motisons Jewellers Radiant Cash Mgmt. Mankind Pharma
-40.3% 159.6 times 0.5 times `4,326 cr `49,039 cr
7RS,32VE\LVVXHVL]H
Subscription Issue Issue List Current Listing Change post Sensex Current
Company Listing date ratio (times) size (` cr) price (`) price (`) price (`) gain (%) listing (%) change (%) P/E
Mankind Pharma 09-May-23 15.3 4,326 1,080 1,300 2,188 20.4 68.3 18.7 68.4
JSW Infra 03-Oct-23 37.4 2,800 119 143 211 20.2 47.4 11.9 59.8
Tata Tech 30-Nov-23 69.4 2,251 500 1,200 1,172 140.0 -2.3 9.5 76.2
RR Kabel 20-Sep-23 18.7 1,965 1,035 1,179 1,514 13.9 28.5 9.8 90.0
Honasa Consumer 07-Nov-23 7.6 1,702 324 324 474 0.0 46.3 12.9 -
Concord Biotech 18-Aug-23 24.9 1,551 741 900 1,399 21.5 55.4 12.9 61.0
IREDA 29-Nov-23 38.8 1,501 32 50 122 56.3 144.2 9.6 4.1*
KFin Tech 29-Dec-22 2.6 1,500 366 369 537 0.8 45.4 19.9 42.6
Inox India 21-Dec-23 61.3 1,459 660 933 883 41.4 -5.4 3.5 52.5
Cello World 06-Nov-23 38.9 1,430 648 831 903 28.2 8.7 12.9 72.0
Samhi Hotels 22-Sep-23 5.3 1,370 126 131 195 3.6 49.0 11.1 -
Sai Silks 27-Sep-23 4.4 1,201 222 230 257 3.6 11.6 10.9 40.4
DOMS Industries 20-Dec-23 93.5 1,201 790 1,400 1,501 77.2 7.2 4.0 95.1
India Shelter Finance 20-Dec-23 36.7 1,200 493 613 559 24.3 -8.7 4.0 2.3*
SBFC Finance 16-Aug-23 70.2 1,025 57 82 88 43.8 7.0 11.9 3.5*
*Price-to-book value. Data as of January 15, 2024.

A friendly advice that will
change your life.
Home Loans from

T&C apply
IDBI Bank.
*

WORDS WORTH WISDOM
(5+9,>)9,5;65 Founder and CEO of Turtle Creek Asset Management
The maverick of value investing

Gleaning wisdom from the investor who beat the market for over a quarter-century
A
ndrew Brenton is the founder and CEO of
Turtle Creek Asset Management. A low-key
investor who hasn’t garnered much attention
from the media, Brenton’s returns have been
nothing but impressive.
Turtle Creek Asset Management, an independent
firm focused on long-term capital growth, has been a
testament to Brenton’s investment acumen. Since its
inception on November 1, 1998, the firm has turned a
$1,000 investment into a staggering $88,517 by
September 30, 2023. This translates to an annual return
of 20 per cent, a feat that commands respect in the
investment community.
Our curiosity led us to an enlightening interview with
Brenton, where he discusses his investment philosophy
and evolution as an investor. We’ve distilled some key
insights from this conversation, but for those eager to
absorb the full breadth of his wisdom, the entire
interview is accessible via this link: http://tinyurl.
com/39e57jz9.
A rather unique value investor

Brenton is a one-of-a-kind value investor who has never
immersed himself in the works of renowned figures like
Buffett, Graham, Munger, or any other famous value
investor. Instead, his investment perspective was shaped
by his firsthand experiences in mergers and acquisitions
at his previous firm. This unique background led him to
appreciate the critical importance of paying the right
price, propelling him into the world of value investing.
At Turtle Creek, Brenton has developed a

straightforward framework for investment:
z Identifying the right companies
z Gaining a deep understanding of businesses and
determining their value
z Achieving optimal diversification
z Continuously assessing and optimising
the portfolio
The search for unique companies

Illustration: ANAND
Brenton’s interest is piqued by companies that stand

out from the crowd. He looks for businesses poised
to create wealth over the next 10-20 years - those

with innovative business models or unique products that (price-earnings) ratio and favours the discounted cash
lack direct peers. However, he emphasises the necessity flow method instead.
for these companies to be shareholder-friendly. “In our view, you can’t look at a P/E multiple. There
“We are really drawn to one-of-a-kind unique are so many accounting irregularities… And so you need
companies... wouldn’t it be great to own companies to do a lot of work. You need to build a financial model
that are more likely to get more mispriced in both because it also forces you to explicitly think about all the
directions and that’s really been our experience and I assumptions and it creates a lot of back and forth and
think to a small extent that is one of the sources of dialogue with management of the company over time,”
our outperformance over time,” Brenton explains. Brenton states.
Evaluating unique companies A fondness for mid-cap companies

One challenge of investing in such unique companies Brenton’s portfolio predominantly features mid-cap
is the absence of benchmarks or comparables. How companies. He believes that the management of
can one determine whether the company’s actions are such companies is more easily accessible than
right or wrong? smaller companies.
Brenton advises not to overthink this. “There isn’t He says, “We need access to the management, we need
a checklist, we are just waiting for them to say to be able to reach out to them…When COVID hit we were
something stupid and when they do then we realise able to get on the phone with all of our companies within
it’s not a great company. One of our holdings of over the first week or two and that was very helpful for us…”
20 plus years, they now have their third CEO. He is Regarding mid-cap companies, Brenton continues,
just standard in the way he talks in the quarterly “They are not at an earlier stage or are not some of the
calls but when you get him on a one-on-one call or tech companies, and so they are well-built out companies
when you visit him, you start grilling down and that are trading at attractive valuations…”
asking questions and that’s when the cream rises to Brenton’s story is a testament to the notion that
the top...” there isn’t a one-size-fits-all approach in the
investment world. His unique methods stand as a
A different valuation perspective beacon, illuminating the diverse paths one can take
Brenton distances himself from metrics like P/E in the pursuit of investment excellence.
6XEVFULEH1RZ
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VIS-A-VIS
Fuelling progress
India’s city gas distributors are leading the march to a gas-based economy
Indraprastha Gas Gujarat Gas
Indraprastha Gas (IGL) is a leading city gas distribu- Spanning over 1.75 lakh square kilometres across six
tion firm with a significant footprint in Delhi NCR states and one union territory, Gujarat Gas ranks
and select UP and Rajasthan cities. It has 791 CNG among the top city gas distribution (CGD) companies
(compressed natural gas) stations, 23.7 lakh residen- in revenue and market capitalisation. It holds 27 CGD
tial PNG (piped natural gas) connections and nearly licences, representing 9 per cent of total licences grant-
9,000 commercial connections. CNG contributes ed by the Petroleum and Natural Gas Regulatory
75 per cent of its volume. Notably, IGL also powers the Board. Unlike Indraprastha Gas, Gujarat Gas empha-
world’s largest CNG bus fleet. Additionally, it owns a sises commercial connections, and its primary revenue
50 per cent share in Central UP Gas and Maharashtra driver is PNG. As of FY23, it commands a 39 per cent
Natural Gas. market share in commercial PNG connections.
)LQDQFLDOV (All numbers in ` cr)

Revenue Operating profit Net profit Net worth Total debt Cash from operations Market cap
15,735 1,807 1,509 9,007 0 2,032 30,034
15,810 1,576 1,254 7,085 0 1,641 35,414
(%,7'$6&0 In `
3ULFHFKDUW
600 8.3 8.3 7.8 8.0
7.2
6.3 6.1
450
4.8 5.4
4.1
300
150
0
FY19 FY20 FY21 FY22 FY23
January 2019 Rebased to 100 December 2023
*Standard Cubic Meter. It reflects how effectively a company manages to
turn its output into profits.
16.6 28.2 3.3 5.0 3.03 1.29 Debt-free companies

Price to earnings Price to book Dividend yield (%) Debt to equity
23.6 )LYH\HDUDQQXDOLVHGJURZWK SD

21.1
17.6 18.7 39.2
9.6 11.5 10.0 25.5 25.7
7.9 22.1
17.8
12.4
Net Operating ROE (%) ROCE (%)

margin (%) margin (%) Revenue Operating profit EPS
Price data as of December 29, 2023. Financials as of TTM September 2023.
The government is increasing domestic gas production to transition India into a gas-based economy. The
goal is to elevate the role of gas in India’s energy mix from 6 per cent to 15 per cent by 2030. Efforts include
expanding pipeline infrastructure nationwide and enhancing liquefied natural gas terminal capacity to
boost imports. Additionally, the Gas Exchange launch and anticipated updates to the transportation tariff
policy will likely accelerate industry growth, positioning India as a dynamic gas market.

SPECIAL REPORT
Your
tax-saving
action plan
All you need to know to make wise tax-saving decisions
as the financial year comes to a close

SPECIAL REPORT
I
f you are reading this report to find out perspective. Most tax-saving investments
how to save income tax, there is good lock your money for a long time, so pick
and bad news for you. The good news is them wisely. Don’t see tax-saving
that after reading this report, you will investments as a compulsion. Rather, see
know how exactly you can save income them as important components in your
tax efficiently. The bad news is that you overall financial planning.
are already late with your tax-planning Take for instance 80C investments,
exercise. The right time to start it is at the which are central to the entire
beginning of the financial year, not tax-saving exercise. If you have
towards the end of it. been investing in a tax-saving
While it’s customary for the mutual fund, you must
media to publish articles undertake proper research.
related to tax If you have invested in a
planning towards poor fund, you may have
the end of the saved taxes but you are
financial year, as losing out on wealth
an investor, you creation. Over the long
should get into term, you may
action when have to bear
there is no enormous
pressure to save opportunity
When you start taxes. If you are an costs. Similarly, if
your tax- employee, the accountant at your you are picking life insurance,
planning company would have asked for your tax you must research properly to pick the
exercise early, declaration around the start of the best plan. What’s the point in buying
you have time financial year. You would have duly something that’s not going to be useful for
to act wisely. supplied it and may have relaxed your loved ones when it’s needed? The
thereafter, thinking that many months same goes for health insurance (Section
Remember that
were remaining for its implementation. 80D) and other tax-saving options as well.
in investing,
That was the mistake. You should have got Before we introduce you to tax-saving
time is your
into action right away. avenues, let’s first understand how to
best friend.
When you start your tax-planning calculate income tax.
exercise early, you have time to act wisely.
Remember that in investing, time is your How to calculate your income tax
best friend. So, the earlier you start, the To know your taxable income, you need to
better. The later you start, the hastier first take a sum of your income from all
your investment decisions are likely to be. sources. Many of us have just one
Such decisions not only impact your source of income – salary. But
overall return experience but can even others can have multiple
derail your financial goals altogether. sources like income from
property or business or capital gains,
Think beyond tax-planning etc. Overall, there are five such categories:
Many investors tend to see the tax- z Salary
planning exercise as a be-all and z House property
end-all. In reality, the taxes that z Profits and gains from business
you save should not be the or profession
ultimate goal; at best, they should z Capital gains
act as incentives to do the right thing. z Sources other than the ones mentioned
What should matter is how good your above, such as interest income from
decisions are from a long-term bank deposits, income from lottery, etc.

expenditures’. What you are left with now is
6SKHUKUL^PUJVTL[H_ZSHIZ your taxable income. Note that the interest
You can avail of tax-saving avenues discussed in this from a savings bank account beyond `10,000
report only if you opt for the old tax slabs.
is taxable as per your tax slab.
Check the tax slabs to know how much
Old regime New regime
tax you need to pay. Do note that the Union
Income (`) Tax rate Income (`) Tax rate
Budget for FY21 introduced an alternative
Upto 2.5 lakh* Nil Upto 3 lakh Nil tax structure, which is in addition to the
2.5 to 5 lakh 5% 3 to 6 lakh 5% existing tax slabs. You can pick either of
5 to 10 lakh 20% 6 to 9 lakh 10% them, depending on which saves you more
Above 10 lakh 30% 9 to 12 lakh 15% tax. The new structure has lower tax rates
12 to 15 lakh 20% but then you don’t have most deductions
Above 15 lakh 30% and exemptions available in it, including
*Upto `3 lakh if you are a senior citizen and `5 lakh if you are Section 80C.
more than 80 years old.
OLD TAX REGIME:
• Tax rebate of up to `12,500 under Section 87A to those whose
Understanding Section 80C
income post-tax deductions is up to `5 lakh. When it comes to tax planning, Section
• Additional educational cess of 4% on tax payable. 80C of the Income Tax Act provides many
• Surcharge of 10% for income between `50 lakh and `1 crore;
15% for `1 crore to `2 crore; 25% for `2 crore to `5 crore; 37% avenues, as is given in the table titled
for above `5 crore. ‘80C tax-saving options’. You can
NEW TAX REGIME: invest up to `1.5 lakh in these Note that you
• Tax rebate of up to `25,000 under Section 87A to those whose
instruments. Section 80C can also make
income post-tax deductions is up to `7 lakh.
• Additional educational cess of 4% on tax payable. consists of many avenues: tax- an additional
• Surcharge of 10% for income between `50 lakh and `1 crore; saving funds (discussed later), investment of
15% for `1 crore to `2 crore; 25% for above `2 crore.
Public Provident Fund, National Savings `50,000 in the
Certificate, tax-saving fixed deposits NPS, under
Once you have combined the income from (FDs) and so on. The Sukanya Samriddhi Section
all sources, you arrive at your gross taxable Yojana (SSY) is meant specially for the 80CCD(1B),
income. From the gross taxable income, you girl child. Investments made towards the beyond
deduct your tax-saving investments and National Pension System (NPS) also come `1.5 lakh
expenditures. These fall under many under this section. Note that you can also
categories, as described in tables ‘80C tax- make an additional investment of `50,000
saving options’ and ‘Tax-saving in the NPS, under Section 80CCD(1B),
beyond `1.5 lakh.
Most of us also have employees’
:HTWSL[H_JHSJ\SH[PVU\UKLY provident-fund deductions. These
[OLVSKYLNPTL deductions (not the employer’s
For an individual under 60 years of age contribution) are also included in Section
In `
Gross taxable income 10,00,000 80C. Do take them into account when you
Less: Standard deduction 50,000
calculate your investment amount. For
instance, if you have made a provident-
Less: 80C investments 1,50,000
fund contribution of `50,000, you need to
Less: 80CCD(1B) NPS 50,000
invest only `1 lakh towards Section 80C.
Less: 80D health insurance 25,000
Taxable income 7,25,000
Tax up to `5 lakh 12,500
Life insurance
The premiums paid towards life insurance
Add: Tax up to `7.25 lakh 45,000
also come under Section 80C. Life
Total tax 57,500
insurance policies come in many forms.
Add: Cess @ 4% 2,300
But the best is term insurance. Term
Tax payable 59,800
insurance provides you with a large cover

SPECIAL REPORT
*[H_ZH]PUNVW[PVUZ
)(5205.
Product Lock-in period Yearly returns Taxability of returns Minimum investment (`)
Five-year 5 years 6.50%* Taxed as per the 1,000

bank FD applicable slab
*Interest rate for a deposit of below `2 crore with State Bank of India as on January 13, 2024.
Source: State Bank of India website.
76:;6--0*,:*/,4,:
Product Lock-in period Yearly returns* Taxability of returns Minimum investment (`)
Five-year post- 5 years 7.50% Taxed as per the 1,000

` office deposit applicable slab
Minimum *Annual rate of interest for the period January–March 2024. Subject to revision every quarter.
Source: Website of Department of Economic Affairs, Ministry of Finance, Government of India.
investment
in PPF
.6=,954,5;)(*2,+:*/,4,:

Minimum
Product Lock-in period Yearly returns* Taxability of returns investment (`)
NPS corpus Public Provident

Fund
15 years; pre-mature withdrawal
is allowed at a penalty after 5 years
7.10% Tax-free 500 per annum
that you can

withdraw tax- Sukanya 21 years; partial withdrawal allowed 8.20% Tax-free 250 per annum
Samriddhi Yojana in certain cases after girl turns 18
free at 60
years of age Senior Citizens 5 years; pre-mature closure is 8.20% Taxed as per the 1,000
Savings Scheme allowed at a penalty applicable slab
`LHYZ
National Savings 5 years 7.70% Taxed as per the 1,000
Certificate applicable slab
Lock-in * Annual rate of interest for the period January–March 2024. Subject to revision every quarter.
period for Source: Website of Department of Economic Affairs, Ministry of Finance, Government of India.
tax-saving
mutual funds – 7,5:065
the least in the Taxability Minimum
80C basket Product Lock-in period Indicative returns of returns investment (`)
NPS^ Till 60 years of age; partial Tier I Equity Plans*: 16.14% Tax-free with- 1,000 per annum
withdrawal allowed after 3 Tier I Government Bond Plans*: drawal of up
years for specified expens- 7.98% to 60% of the
es Tier I Corporate Debt Plans*: 7.97% corpus
*Average annualised returns for the five-year period ending January 11, 2024. Returns are indicative and would depend on the market performance;
^Section 80C exemption is available only in case of Tier I accounts.
Source: Value Research Analysis and PFRDA website.
6;/,905=,:;4,5;(=,5<,:
Minimum
Product Lock-in period Indicative returns Taxability of returns investment (`)
Tax-saving 3 years 18.65%* 10% on gains beyond `1 lakh One-time: 5,000; recurring through
funds^ in a financial year SIP: 500 per month
*Average annualised returns for the five-year period ending January 12, 2024. Returns are indicative and would depend on the market
performance. ^Section 80C exemption is available only in the case of equity-linked savings schemes.

SPECIAL REPORT
;H_ZH]PUNL_WLUKP[\YLZ
Expense Amount Section
School or college fees paid for up to two children Up to `1.5 lakh 80C
Interest paid on education loan for self or spouse or children No limit 80E
Medical-insurance premium paid for self, spouse & dependant children `25,000 (`50,000 if policy includes senior citizens) 80D
Medical insurance for parents `25,000 (`50,000 if policy includes senior citizens) 80D
Preventive health check-up (included in `25,000 above) `5000 80D
Expenses incurred on the medical treatment of self or dependants (specified diseases only) `40,000 (`1 lakh for 60 yrs & above) 80DDB
Medical expenses for a disabled dependant `75,000 (`1,25,000 if severe disability) 80DD
Interest on loan for acquiring the first residential house property between FY20 and FY22 `1,50,000 80EEA
Interest on loan for acquiring electric vehicle between FY20 and FY23 `1,50,000 80EEB
Donations towards social causes No limit 80G
House rent (for self-employed) Lowest of the following: Up to `5,000/mth; actual rent paid 80GG
minus 10% of the total income; 25% of the total income
at relatively low premiums. it difficult to compare plans across

Term insurance is different insurance companies, this basic term
from endowment and unit-linked insurance can do the job for you. However, Life-insurance
policies (ULIPs). Endowment do note that you can have a maximum policies come
and unit-linked policies are also cover of only `25 lakh with it. So, do assess in many forms.
savings plans and the premiums paid your requirements. But the best is
towards them are accumulated over time. Do note that life insurance isn’t term insurance.
In the case of ULIPs, the premiums are meant for everyone. It is meant only Term insurance
invested in the stock market. On the other for those who have financial dependents. provides you a
hand, while term insurance provides a Non-earning members don’t need life large cover at
large cover, you don’t get your premiums insurance. Many parents buy relatively low
back. This makes many investors think life insurance in the name of their premiums.
that endowment policies and ULIPs are children. While doing this may be
better than term plans. That’s not the case, emotionally appealing, it doesn’t have
however. any financial logic. Since parents are not
The primary function of insurance is to financially dependent on their children,
provide protection. The insurance they should not buy insurance in the
products that double up as investments children’s name. Rather, they should buy
fail to provide both – the insurance cover it in their own names.
is inadequate and the investment returns
are disappointing. Therefore, as a general Health insurance
rule, don’t mix insurance and investment. While life insurance isn’t meant for
For investments, buy pure investment everyone, we all must buy health
products. For protection, buy pure insurance. Medical emergencies can
insurance products. severely impact our financial health.
Most life insurance companies also offer Section 80D of the Income Tax Act
a standardised term-insurance policy allows deduction of health
called Saral Bima Yojana, as mandated by insurance premiums of up to
the insurance regulator IRDAI. If you find `50,000 for senior citizens and up

by life insurers and can help you avail a
4VZ[YL^HYKPUN[H_ZH]PUNM\UKZV]LY large cover against a particular disease. If
[OLSHZ[`LHYZ you have a special requirement, feel free
to explore these.
Scheme name Fund rating 10Y SIP return (% pa)
Quant ELSS Tax Saver Fund 24.7 Tax-saving funds
Bank of India ELSS Tax Saver Fund 18.8 Tax-saving equity mutual funds, also
Bandhan ELSS Tax Saver Fund 17.7 called equity-linked savings schemes
DSP ELSS Tax Saver Fund 17.3 (ELSS), are a good tax-saving
JM ELSS Tax Saver Fund 17.0 option as they provide equity
SBI Long Term Equity Fund 16.8 advantage and hence better
Canara Robeco ELSS Tax Saver Fund 16.5 returns than most other 80C
Kotak ELSS Tax Saver 16.3 options. ELSS has a lock-in period
Tata ELSS Tax Saver Fund 15.9 of three years. For most other tax-saving
Franklin India ELSS Tax Saver Fund 15.8 options, the lock-in period is five years.
Data for regular plans as of December 2023 For the Public Provident Fund (PPF), the
tenure is 15 years.
ELSS is one of the few 80C options which
to `25,000 for insurance of self, spouse provide equity exposure. The other options
and dependent children. Additionally, a are ULIPs and the NPS. The Employees’
deduction of up to `50,000 is available Provident Fund Organisation (EPFO) has
for buying health insurance coverage also started investing in equity, so a part of
for parents. your provident fund gets invested in equity
In today’s highly stressful and fast- through exchange-traded funds (ETFs).
paced life, health insurance has taken ULIPs have an opaque structure and
many independent forms, which were high costs. On the other hand, ELSS has a
earlier offered as riders. These are indeed transparent structure and is
Arogya
important and you must consider them as professionally managed. Fund houses
Sanjeevani is a
well. A couple of such insurance are must regularly file disclosures of their
standardised personal-accidental insurance, cancer activities. The NPS allows you to invest
health- protection and critical-illness insurance. in equities but the best equity exposure
insurance plan, A personal-accidental cover provides you can get is 75 per cent. Also, being a
as mandated compensation in case of a disability and retirement tool, the NPS is illiquid. Still,
by the IRDAI. accidental death. A critical illness cover is its low cost and focus on retirement make
If you find it meant for serious diseases which result in it useful for many. Do consider it if it fits
difficult to very high expenditures and are not your requirements.
compare covered in normal health insurance. An Indian individual normally already
products Even if they are, the sum assured is likely has a debt component in his portfolio in the
across to fall short of the expenditure incurred. form of provident fund and FDs. This makes
insurers, you Arogya Sanjeevani is a standardised ELSS all the more important to generate
can go for it. health-insurance plan, as mandated by the inflation-beating returns and to properly
IRDAI. If you find it difficult to compare allocate assets between equity and debt. Do
products across insurers, you can go for it, remember that like any other equity fund,
provided it fits your requirements. Saral SIPs are the best option to invest in ELSS as
Suraksha Bima is a standardised personal- well. As you may be aware, SIPs help you
accidental and disablement cover, average your investment cost and instil
mandated by the IRDAI. discipline in investing.
Then there are health insurance plans The table ‘Most rewarding tax-saving
for specific diseases, such as cancer or funds’ lists some top-performing tax-
heart diseases. They are often provided saving funds over the last 10 years.

COVER STORY
Earnings
momentum
explained
Why it works and why it fails
By Udhayaprakash, Hemkesh Khattar, Nipun Arora and Samridh Rela

magine turning `10 lakh into `20 lakh in six
I
So, in this issue, we go where Wealth Insight has
months! Sounds like every investor’s wishful never gone before: Momentum investing. But before
daydream. But, recently, this has been the reality we dive in, we must say these are uncharted waters for
for many. A mind-boggling 158 stocks have us. Also, our adventure into these new lands should
doubled in value in the past six months. Including not be confused as an endorsement. We do not delve
micro caps, the figure zooms to 336! into how to make money off momentum investing or
Even as strict proponents of long-term investing, what strategy to follow. Our core philosophy remains
we cannot deny that the allure of doubling your the same: invest for the long term.
money in a matter of months is hard to ignore. We are only exploring the underlying principles
But should you give in to the urge and follow the herd behind momentum investing. We will look at two
blindly? Maybe not. You can, however, learn how to broad types of momentum, what makes them tick, and
ride the soaring waves of a bull market safely so that the risks involved. Also, at the end, we list companies
you don’t crash headfirst. experiencing one of them.
The momentum game

Exploring the inner workings of momentum investing
E
ver watched surfers glide through the waves? grown 68 per cent, making it one of the best-
They wait for the perfect wave, and then off performing indices of 2023. What is impressive is that
they go, riding it as long as they can. But, if this growth has been secular. Out of the 88 companies
you watch closely, an integral part of surfing in the sector with a market cap above `500 crore,
is knowing when the wave is about to ebb down. 82 have rewarded investors with double-digit returns.
Momentum investing is similar. It is about waiting But note that spotting a trend is the easy part.
for a trend to emerge, riding it and then exiting at the Like an expert surfer, riding a market wave also
opportune moment. requires knowing when to exit. Every wave crashes on
A case in point is the present rally in the capital the shore, and the nature of the market ensures that
goods sector. Most players are undertaking huge every trend eventually disappears.
capex. Concurrently, the returns are following suit. Therefore, momentum investing is inherently a
In the past year, the BSE Capital Goods Index has short-term play. Success in this field requires the
ability to predict not only when a trend will emerge
but also when it’s likely to taper off. This skill is
notoriously difficult to master – if it were easy, we
would all be reading this edition of Wealth Insight
from our luxurious yachts in some tropical paradise.
Nevertheless, it is a difficult task but not
impossible, and a well-planned strategy improves the
odds of accomplishing it. So, let’s begin our journey
with a trip back to the basics. First, let’s look at the
two broad categories of momentum.
Price Momentum: This is all about the direction of a
stock’s price.
Earnings Momentum: Generally easier to predict, this
relates to the growth in a company’s profits.
Now, let’s delve into the intricate details of each.

COVER STORY
“Run Forrest Run!”

I Why it fails
n the Academy-award-winning movie Forrest
Gump, the title character, played by Tom Hanks, is
often seen running across the country. His running Friedrich Nietzsche, the famed German philosopher, once
starts spontaneously and, over time, attracts a large said, “Madness is rare in individuals – but in groups,
number of followers who join him, not fully parties, nations, and ages, it is the rule.” The same can be
understanding why he’s running but eager to be part said about price momentum.
of the phenomenon. This continues until Forrest Any rally in the market is initiated by a diverse array
suddenly stops, leaving his followers confused and of factors. However, over the course of the rally, these
unsure of what to do next. factors make way for a single driving force: the madness
Price momentum is akin to people running with of herd mentality. The rally is purely then sustained by
Forrest. A stock, for a multitude of factors, sets off on the mood of the market, which may change in the blink of
a rapid upward trajectory. Investors, guided by an eye.
technical metrics such as trend lines, moving Let’s revisit the 2006 real estate rally. Wondering how
averages, oscillators, etc., and their fear of missing it ended? A massacre, to put it mildly. The infamous 2008
out, start pouring in money. This accelerates the recessionary crisis that engulfed much of the globe
share price growth further, attracting more inflows turned the real estate trend from wealth creator to
from investors. destroyer. The impact still resonates today, and the index
is yet to recover.
Why it works
By definition, price momentum is a self-sustaining
cycle: Rapid price growth attracts investors. The The real estate rally
influx of investors catalyses the price, calling in The BSE Realty Index went up over eight times between 2006 and 2008
more investments and accelerating the price 15,000
growth further.
Take, for example, the 2006 real estate boom. 12,000
The market as a whole was euphoric about the sector,

9,000
deriving its optimism from India’s promising
economic growth and low interest rate environment of 6,000
the time. An investment of `1 lakh in the BSE Realty
Index in January 2006 would have increased eightfold 3,000
by January 2008!
0
It’s hard to deny that riding the price momentum January 2006 January 2008
wave can lead you to fortunes. The self-sustaining Return data between January 2, 2006 and January 2, 2008
mechanism ensures that. Until it doesn’t.

Returns dispersion of real estate stocks Distant memories
Only one company gave a negative return How these real estate giants measure up to their 2008 peaks
Market cap Share price Current share
Number of companies 33 Company (` cr) in Jan 2008 (`) price (`)
9 15 5
1 1 DLF 1,86,379 1,085 753
Anant Raj 10,326 369 319
<0 0-25 25-50 50-75 75-100 >100
Indiabulls Real Estate 5,268 814 97
2Y annualised return (% pa) Puravankara 4,882 448 206
Annualised return data between January 2, 2006 and January 2, 2008 Ganesh Housing 3,615 504 434
Unitech 2,274 538 9
And who can forget the great Adani correction? B.L. Kashyap and Sons 1,632 210 72
Anything Adani was in vogue between 2020 and 2022. Peninsula Land 1,607 143 55
The group companies doubled in value in that period. Omaxe 1,490 542 81
Fast forward to 2023, and the starry skies are now
Texmaco Infra 1,334 188 105
shrouded in a grey smog. Investors who bet on the group
Price data as of January 5, 2024
in early 2023 lost nearly 50 per cent of their capital in the
next few months!
In short, the self-sustaining cycle also writes its own suddenly discovering a fundamentally strong
end. If you identify and hop on the trend at the right time company is safer than betting on trends based on
and exit just before the crash, you stand to be rewarded. pure price growth. For example, Intense Technology,
Miss the timing by even a day, and you might end up in a highly inconsistent micro-cap, gave an eye-popping
the land of obscene losses. 334 per cent in 2016. But, had you invested in it swayed
So, is there a hidden trick to master the art of by its returns, you would have lost 44 per cent of your
timing the market? Sadly, we do not have an answer investment in the next three years.
for that. What we can for certain say, however, is that Now, let’s unravel the intricacies of price momentum’s
riding the momentum wave driven by the market distant relative: earnings momentum.
Earning from earnings

C
an you blame any investor for chasing profits?
At its heart, earnings momentum is betting on
companies witnessing blistering earnings
growth. The belief is that the growth rate will continue,
the surge in earnings will attract investors and price
appreciation will follow eventually.
You may be wondering how riding an
earnings wave is different from growth
investing. The devil is in the details, and in this
case, it’s the time frame.
Growth investing is akin to a marathon, where
investors look at profit expansion over several
years. It’s a long-haul commitment. In contrast,
earnings momentum is more of a 100-metre dash. Here, their bets, hoping to ride the short
investors focus on recent performance, examining just but potentially lucrative wave of
the past few quarters. Driven by optimism, they place earnings acceleration.

COVER STORY
Why it works Why it fails

Unlike price momentum, earnings momentum is not a A tree is only as strong as its roots. Similarly, the
byproduct of the market’s herd mentality. Every sustainability of a company’s earnings growth is
company has a story being written, and the trends in contingent upon the underlying factors driving it.
their earnings are unique chapters in their story. So, the If a company’s earnings growth stems from factors
drivers of earnings momentum are multifaceted, ranging within its control, like benefits from capital expenditure,
from new market opportunities and reductions in input it’s somewhat easier to predict its continuity. However,
costs to broader macroeconomic events like geopolitical more often than not, a company’s earnings momentum
shifts or industrial tailwinds arises out of factors that are unsustainable in the long
For instance, several capital goods companies are run. As a result, its growth train comes to a sudden halt,
currently experiencing double-digit earnings growth due crashing everyone onboard.
to increased capital expenditure from both public and Take HEG, a leading graphite electrode manufacturer,
private players. In 2016, Indian chemical companies for example. Between March 2017 and October 2018, the
witnessed strong earnings growth for multiple quarters company saw a staggering 2,053 per cent return, thanks
due to a favourable demand scenario and reduced supply to significant profit growth across multiple quarters. But
from Chinese players. a deeper analysis reveals that this growth was largely
But, like price momentum, the returns are derived driven by increased prices and reduced supply from
from mass euphoria. Investors flock to invest as soon China. When this trend reversed about a year later,
as they witness a few quarters of rapid growth, HEG’s stock plummeted. Its revenue, earnings, and share
driving up prices. price have not reached their 2018 heights since.
For example, out of 40 companies that have posted Predicting the duration of a market trend is
double-digit growth in profit after tax in each of the last notoriously challenging. Moreover, investors often
eight quarters (till September 2023), 37 have also recognise earnings momentum only when it’s well
delivered double-digit returns. underway and valuations have reached their peak.
In short, momentum investing is no child’s play. It
demands an almost uncanny ability to time the market —
Earnings euphoria a skill that is near-impossible to perfect. However, we do
Top 10 companies with stellar earnings growth contend that earnings momentum is grounded in more
concrete factors and not on the whims of the market. In
the following section, we’ll present a framework to help
you identify companies amidst an earnings surge.
Shilchar Tech BLS Note that our methodology only identifies potential
369.1 International
155.4 candidates. It would offer little help if you are looking for
167.1
86.5 a concrete answer to how to profit off them.
Nitta Gelatin KP Energy

104.7 153.0
74.4 74.4 A roller coaster ride
The ups and downs in HEG’s stock price
Anant Raj `5,000 z HEG share price z Quarterly profit after tax (` cr)
106.8 Kings Infra 9.3 865
122.0 132.0 4,000 776
z 2Y return (% pa) 100.3 634
z TTM PAT growth (%) 3,000
Power Mech
116.2 AGI Infra 482
121.7 2,000
39.3
23.9 202
Elecon Engg 342
Fluidomat 1,000
117.4 120.5 243
-3 -8 -1
58.3 45.2 114
0
March 2017 January 2020
Return data as of January 5, 2024; TTM data as of September 2023

Our methodology
Identifying companies witnessing an upward earnings trend
W
e chose to focus on earnings momentum as it is calculated on a year-on-year basis for consistency and
a more tangible metric than price momentum. seasonal adjustment. We also adjusted the profit
We applied the following filters to identify figure for any exceptional item(s).
companies in an upward earnings trend: 4. Finally, we looked for accelerating earnings
1. Excluded banking, financial services, and insurance momentum. Companies had to demonstrate higher growth
companies due to their unique assessment metrics. rates in revenue, operating profit, and PAT in the Sep 2023
2. Minimum market capitalisation of `600 crore to quarter compared to the same quarter in 2022.
eliminate micro-cap companies. This stringent selection process yielded a final list of
3. Revenue and profit after tax (PAT) growth of at 23 companies. In the following pages, we explore the top
least 15 per cent for four consecutive quarters, 10 companies ranked by market capitalisation in detail.
The rising tide of earnings

Only five companies have a Stock Rating of four or more
TTM September 2023 YoY growth (%)
Company Market cap (` cr) Stock Rating Revenue Operating profit Profit after tax P/E 1-year return (%)
Adani Green Energy 2,65,120 47.5 97.4 173.6 203.2 -9.9
ABB India 1,02,373 22.0 92.0 121.3 84.7 72.2
KPIT Technologies 41,308 Unrated 56.4 64.3 53.2 84.8 120.9
Sona BLW 37,943 Unrated 29.3 50.0 31.1 82.0 56.0
Jupiter Wagons 14,125 117.6 233.7 282.0 61.8 245.0
Action Construction 10,871 28.8 83.6 68.0 46.1 187.7
Craftsman Automation 10,574 Unrated 48.1 35.7 43.3 35.5 43.2
H.G. Infra 5,555 28.1 41.2 38.5 10.1 32.3
ITD Cementation 4,929 48.7 97.5 109.9 27.4 135.4
Banco Products 4,578 22.1 107.3 97.9 16.1 221.3
Ashapura Minechem 3,979 142.6 2,055.3 525.9 16.9 367.4
Nucleus Software 3,865 47.6 513.1 324.1 18.9 272.7
Kovai Medical Center 3,482 18.3 26.9 37.6 25.6 81.8
Venus Pipes 2,861 Unrated 49.7 74.7 75.6 45.9 94.6
Bharat Bijlee 2,694 31.9 76.3 69.7 26.1 98.3
Manorama Industries 2,551 42.1 53.8 48.4 68.3 101.3
Confidence Petroleum 2,547 82.4 79.8 54.6 22.0 12.5
Control Print 1,651 21.6 27.3 30.2 28.4 155.7
Deep Industries 1,632 Unrated 35.1 56.9 101.4 10.4 77.4
Servotech Power 1,617 121.1 155.7 384.6 94.4 378.9
Veritas 1,588 40.2 54.6 55.9 13.1 170.9
Om Infra 1,377 155.6 429.5 6,528.0 25.3 250.5
AGI Infra 993 22.8 10.7 23.9 18.6 64.7
Stock Ratings and price data as of January 5, 2024. Profit after tax is adjusted for exceptional items.

COVER STORY
ADANI GREEN ENERGY
Green growth
A
dani Green Energy, a key player in the Adani to an impressive 57 per cent in the trailing twelve
Group, stands as India’s largest producer of months (TTM) as of September 2023.
renewable energy. Specialising in solar, wind Looking ahead, Adani Green’s earnings
and hybrid power, the company boasts a robust growth trajectory appears promising,
capacity nearing 8,000 MW. It generates all of its especially after securing a massive 1,800 MW
revenue from domestic operations and turned contract in December 2023. The management
profitable in FY21. Since then, both revenue and is committed to significant capital
profit after tax have surged by almost three and six investments in the near future, aiming to
times, respectively. ramp up capacity to 45,000 MW by the
The global shift towards renewable energy as a end of FY30. Despite
response to climate change has significantly these optimistic
benefited companies like Adani Green. Over the past projections, the
five years, its production capacity has increased company’s current
33 per cent annually, underpinned by investments P/E ratio stands at
approximating `30,000 crore. This period has also 205 times,
seen the company secure several large- accompanied by a
scale projects, propelling its growth. modest valuation
Stock Rating
A strategic shift to a low operating cost score of 4 in our
model has resulted in its operating 203.2 Stock Rating.
Current P/E
margin soaring from 23 per cent in FY19
ABB INDIA
Engineering India’s tomorrow

A
BB India, one of the country’s leading segments. Remarkably, its operating profit
engineering solutions providers, has been a Stock Rating margin crossed double digits for the first
pivotal player in India’s industrial evolution. 84.7 time in over a decade, reaching 13.1 per cent
Its operations span four primary segments: Current P/E in the twelve months ending September 2023.
electrification, motion, process automation, and ABB India boasts an order book of
robotics, with the first two segments `8,008 crore, ensuring revenue
accounting for approximately 73 per cent of visibility for multiple quarters. The
its revenue as of the twelve months ending company’s management
September 2023. anticipates continued order
Its order book has shown impressive inflows. However, the
growth, increasing by over 15 per cent YoY company’s growth
in each quarter since December 2021. trajectory is closely tied
This growth is attributed to ABB India securing to the nation’s capital
numerous significant orders from both government expenditure trends. It
and private enterprises. The rising also faces challenges with
demand for electricity and inconsistent ROCE, with a five-year
transportation in India, coupled with median of just 12.5 per cent. Fluctuations
the need to modernise client in input costs remain a critical factor to
production facilities, has driven monitor. Furthermore, the stock is currently
double-digit growth in all four business trading at a high P/E ratio of 85 times.

KPIT TECHNOLOGIES
Navigating auto evolution

O
ver the past decade, the global automotive The ongoing shift
industry has undergone a significant towards EVs is
technological transformation. This era has been anticipated to
marked by the emergence of electric vehicles (EVs), drive the
advanced software programs, and autonomous driving industry
technologies, reshaping the industry’s landscape. forward. The
KPIT Technologies stands out as a success story in company has also
this evolving sector. Specialising in mobility software entered partnerships
solutions, the company generates approximately with renowned manufacturers like Renault and
83 per cent of its revenue from the US and European Honda. Its management is also venturing into
markets as of TTM September 2023. hardware production for its software products,
KPIT Technologies’ recent growth can be traced aiming for vertical integration.
back to strategic decisions made following its Nevertheless, the automotive industry’s inherent
demerger from Birlasoft in 2018. Leveraging its cyclicality poses challenges. Moreover, KPIT
automotive engineering and technology expertise, the Technologies faces stiff competition from established
company forged partnerships with major global entities. The company’s financials, including
automakers in the US and Europe. Its Unrated trade receivable as a percentage of revenue at
Stock Rating
expansion has been fueled by introducing 21 per cent as of September 2023, warrant closer
new software products and the rising 84.8 examination. Furthermore, the company trades at a
Current P/E
demand for tech-enabled vehicles. P/E ratio of 85 times.
SONA BLW PRECISION FORGINGS
Gearing up for change

S
ona BLW has been active in the Indian components for internal combustion engines to
automotive landscape for over two decades, those for electric vehicles (EVs) and hybrid engines.
establishing itself as a top auto ancillary This shift, combined with its robust international
company. Operating nine manufacturing plants presence and the rising popularity of EVs, has
across four countries, it is one of the world’s spurred remarkable growth. Impressively, its
foremost exporters of differential bevel gears operating profit has surged by over 40 per cent YoY
(a vehicle component). in each quarter since December 2022.
As of the first half of Since September 2022, Sona BLW has secured
FY24, 63 per cent of its orders totalling `1,600 crore, bolstering its order
revenue came from the book to `22,100 crore. Notably, 78 per cent of these
US and European orders are for EV components. The ongoing embrace
markets, while the of EVs and the efficient execution of its substantial
Indian market order backlog are expected to drive future growth.
contributed 30 per cent. However, like KPIT, Sona BLW isn’t immune to
In response to the industry’s cyclicality. Critical factors include
evolving industry the pace of EV adoption, which is
trends, Sona BLW has Unrated pivotal to its growth trajectory, and the
Stock Rating
strategically pivoted its recent expansion of its working capital
focus from 82.0 cycle. Additionally, its high P/E ratio of
manufacturing Current P/E 82 times is a concern.

COVER STORY
JUPITER WAGONS
Rails to riches

S
olidifying its position as a key FY22 to 12.2 per cent in TTM
player in the manufacturing Stock Rating September 2023.
sector, Jupiter Wagons 61.8 As of September 2023,
specialises in wagons for railways, Current P/E the company boasts an
automotive load bodies, and order book worth
containers for various applications such as ISO `5,952 crore,
marines and trucks. Its clientele includes major assuring strong
automotive companies and the Indian Railways, revenue visibility
contributing 20 per cent to its total order book as for the foreseeable
of FY23. future. Additionally,
Jupiter Wagons has greatly benefited from plans are underway to
increased capital expenditure on railways. In the upscale brake systems and
first half of FY24, its production of wagons and cast manganese steel crossing
commercial vehicle bodies, the primary revenue production, further fueling growth.
drivers, surged by 157 per cent and 30 per cent, However, growing trade receivables
respectively, compared to the previous year. Over the have raised concerns, forcing the company to
last four quarters, this spike has led to a doubling of rely on short-term debt, which has increased by
operating profit and profit after tax YoY each 35 per cent since FY23. Decreased railway capex
quarter. Enhanced efficiency contributed to or delays in order execution also pose potential
operating profit margin growth from 7.7 per cent in growth risks.
ACTION CONSTRUCTION EQUIPMENT
Building high

A
ction Construction Equipment (ACE) stands The export revenue almost doubled
as a prominent figure in manufacturing Stock Rating during the period on the back of
cranes and equipment for construction, 46.1 geographical expansion, with its
material handling, and agriculture. It commands a Current P/E contribution jumping by six percentage
63 per cent share in the mobile cranes segment and points. The company also recorded its
60 per cent in tower cranes within the domestic highest-ever revenue, operating profit, profit after
market. As of TTM ending September 2023, the tax and operating profit margin.
cranes segment was its primary revenue source, The management is optimistic about maintaining
contributing 73 per cent, followed by construction this growth trajectory, bolstered by a favourable
equipment at 14 per cent. demand outlook. The company also plans to invest
ACE has significantly benefited approximately `90 crore in expanding its capacity. The
from the recent surge in ongoing government-led infrastructure initiatives are
infrastructure development, driven anticipated to be key growth catalysts.
by capital expenditures from both However, a slowdown in capex, especially
public and private enterprises. from the government, can affect ACE’s
Notably, the company experienced growth momentum. Besides, the
YoY growth of 22 per cent in cranes company has a valuation
and a remarkable 78 per cent in score of just 2 in our
construction equipment as of TTM Stock Rating.
ending September 2023.

CRAFTSMAN AUTOMATION
Precision pioneer
Unrated
W
ith over 30 years in precision engineering, DR Axion (a powertrain component
Craftsman Automation has emerged as a leader Stock Rating manufacturer) for `375 crore to increase its
in India’s automotive powertrain parts 35.5 production capacity. Additionally, a
manufacturing. Operating 13 plants across India, the Current P/E greenfield project near Coimbatore is
company is present in multiple segments. As of TTM underway to expand capacities further.
September 2023, aluminium products are its largest Craftsman Automation is among other entities that
segment with a revenue contribution of 42 per cent, have improved their financials due to favourable
followed by automation-powertrain and industrial demand scenarios. However, given the industry’s
engineering at 40 and 18 per cent, respectively. cyclical nature, any slowdown can potentially impact
The company has a diverse product portfolio. It has growth and profitability. Rising debts, receivables and
also maintained long-term relationships with several inventories have led to a 28 per cent decrease in cash
reputed clients in the auto industry. This has helped it flow from operations as of September 2023.
capitalise on the booming auto segment in recent times.
All of its segments have recorded double-digit growth
consistently in the last few quarters. Revenue, operating
profit, and profit after tax have risen over 20 per cent
yearly since the first quarter of FY23. Also, its ROE
boosted from 15.5 per cent in FY21 to 20.6 per cent in
TTM September 2023.
Aiming to continue its growth, Craftsman acquired
H.G. INFRA ENGINEERING
Road to success
T
his rapidly expanding infrastructure order book, with non-road projects making up
development firm has played a crucial role in 20 per cent of its total orders during this period.
constructing numerous highways and With an existing order book worth `10,678 crore as
expressways nationwide. The company, primarily of September 2023 and an anticipated order influx of
engaged in road and highway projects, earned `9,000 crore in FY24, the company’s growth prospects
approximately 69 per cent of its revenue from look promising. This optimism is further bolstered by
government contracts in FY23. the government’s increased focus on road
Benefiting significantly from the government’s infrastructure, as evidenced by the 25 percent increase
emphasis on infrastructure development, H.G. Infra in allocation in the 2023 budget.
has seen robust growth. This success However, H.G. Infra’s heavy

is attributed to steady order inflows Stock Rating reliance on government projects is a
and prompt project completion. potential vulnerability. Reduced
10.1
Additionally, ongoing investments in Current P/E government spending on
machinery and equipment have infrastructure could be detrimental.
lowered leasing expenses, while Since FY21, the company has struggled
favourable raw material costs have to generate operating cash flows due to
increased operating margins from high receivables from government
12.6 per cent in FY20 to 18.3 per cent contracts, resulting in increased debt
in TTM September 2023. The dependence. As of September 2023, the
company has also diversified its debt-to-equity ratio stood at 1.02.

COVER STORY
ITD CEMENTATION
Building bridges to growth

T
his prominent engineering, procurement, and profit margins.
construction (EPC) company is renowned for As of September
its vast infrastructure project management, 2023, the company
encompassing a wide array of sectors like highways, boasts an order
bridges, flyovers, maritime structures, and book worth
specialised projects like hydros, dams and tunnels. `22,080 crore,
Established in the domestic market, the company is ensuring
progressively branching out internationally, substantial revenue visibility for the
with projects in Sri Lanka, Bangladesh, and forthcoming quarters. It also bagged its largest EPC
the Maldives. order worth `4,850 crore in June 2022. In addition to
Over the past two years, it has secured numerous its growth trajectory, the management anticipates
contracts from both government and private further margin improvements, especially as the
entities. Since December 2021, its order book has company wraps up long-standing legacy projects
surged by an impressive 91 per cent. This growth is with lower margins in FY24.
a testament to the company’s consistent execution Despite these successes, challenges remain. The
pace, contributing to a significant company faces increased working capital needs,
increase in both revenue and profit leading to higher short-term borrowings.
Stock Rating
after tax. Moreover, a strategic pivot Additionally, its five-year median ROE lingers at
towards higher-value projects has 27.4 6.3 per cent, reflecting suboptimal capital efficiency
Current P/E
accelerated growth and enhanced and resulting in a Stock Rating of two.
BANCO PRODUCTS
A cool success story

I
t is a leading name in manufacturing cooling striking improvement in operational
Stock Rating
modules for automobile and industrial sectors. efficiency, catapulting its operating profit
As India’s premier radiator producer, this 16.1 by over 40 per cent for four consecutive
segment forms the crux of its revenue. Exports Current P/E quarters on a YoY basis.
accounted for 28 per cent of revenue as of FY23. In a strategic move to broaden its
Its subsidiary, Banco Gasket, specialises in engine market reach, Banco is expanding into aftermarket
sealing systems that play a vital role in preventing components, with a substantial capital expenditure
engine fluid and gas leaks. The company boasts an of `125 crore in FY23. The earnings rally may
impressive clientele, including major automobile continue if there is a favourable demand scenario
players like Tata Motors, Eicher Motors, TVS, etc. for automobiles.
Experiencing a significant However, the auto industry’s
upswing post-pandemic, Banco’s inherent cyclicality may pose
recovery is a testament to its solid challenges. A notable concern is the
client base and the indispensable increase in inventory days to 134,
nature of its products. From FY21 adversely impacting the company’s
to FY23, the company cash conversion cycle, which
observed an annual growth deteriorated to 103 days as of March
of 26 per cent and 19 per cent in 2023. Any further escalation in this
domestic and export operations, trend could severely affect Banco’s
respectively. It also witnessed a working capital position.

INTERVIEW
“Sustainability is
inherent in the DNA”
Investing insights from a collector of Rahul Dravid-type companies
SAURABH MUKHERJEA
CIO & co-founder, Marcellus
Investment Managers

When you do this exercise, you end up with a very
R
egular readers of Wealth Insight need no
introduction to this month’s interviewee. You narrow universe. How do you go about valuing it?
know him as the ‘Main Street’ columnist. Everybody knows. There isn’t a secret.
He has been writing for us for the best part Let’s address the valuation issue. Between leaving the
of 10 years. However, for those new to investing, UK and whatever I knew of investing there and writing
Saurabh Mukherjea is the Chief Investment Officer and ‘Unusual Billionaires,’ this was the big intellectual leap
one of the founders of Marcellus Investment Managers, that my colleagues and I made.
a portfolio management outfit. He has authored several (Mukherjea gives three scenarios of cash flow
books, including ‘The Unusual Billionaires’, ‘Coffee compounding and the resultant P/E ratio using a DCF
Can Investing’ and ‘Diamonds in the Dust.’ (discounted cash flow) model. A company that
As part of our ‘Money Masters’ series, our editor and compounds its cash flows at 20 per cent over (a) five
CEO Dhirendra Kumar sat down with Mukherjea in years, (b) 15 years, and (c) 25 years, and then
January 2024 for a chat on all things investing. perpetually at five per cent. The fair P/E ratios in the
Here’s a sneak peek into the interview. Don’t forget respective cases are 25, 70 and 150.)
to keep an eye out for the complete interview on our The challenge for people like us and other investors
website. It’s a must-watch for any investor, brimming is figuring out longevity. How long will the
with anecdotes and indispensable wisdom. compounding continue? It is obvious that Nestlé or
Titan are great franchises. What’s not obvious is how
What do you think are the essential qualities long the compounding sustains.
of a great business?
Leaving aside clean accounts, the first sign of a
successful business is a long track record of steady The harder part is figuring out which of
revenue growth alongside a healthy return on capital. those 50 odd companies are the dozen and
I call them ‘Rahul Dravid-type’ companies, who at least
a half companies with overwhelmingly
over a decadal cycle have shown double-digit revenue
growth, which is a very fair ask given that nominal
powerful competitive advantages. The
GDP growth in India is at least 10 per cent. And pre-tax reason is that the companies with powerful
ROCE is at least 15 per cent. Or rather, a post-tax competitive advantages don’t shout about
ROCE of 12 per cent, which is above the cost of capital. it from the rooftops.
Broadly, roughly 50 to 60 companies will pass this
test. The harder part is figuring out which of those
50 odd companies are the dozen and a half companies Longevity has two parts to it. First, does the
with overwhelmingly powerful competitive promoter or the management team know how to do
advantages. The reason is that the companies with high-quality capital allocation? How do you assess that?
powerful competitive advantages don’t shout about it You look at the last 10-15 years and see how they’ve
from the rooftops. allocated capital. Have they allocated capital in the
I’m not saying they hide it, but they don’t like right initiatives so that the ROCE has consistently
talking about their strengths. Instead, they do boring increased or made a mess by moving into unrelated
quarterly conference calls. When they come on media, areas which didn’t bear fruits.
they will make banal statements which sound The second part of longevity is succession planning.
uninteresting. But it’s these companies where the real If I hypothesise that Titan will compound at a healthy
wealth compounding lies. rate for 15 years, the current C-suite of Titan would be
In a way, sustainability is inherent in the DNA. The long gone by then. Therefore, my colleagues and I have
promoters have evidenced a stable, rational frame of to spend a lot of time with the one-downs to the current
mind to stay the course in one large industry. Often, C-suite to assess their quality.
they will jump to adjacencies and pick them very Neither of these judgments will be perfect. These
capably. If you stay the course and focus every year on are tough, complex judgments. We will get it wrong
the same industry, you can build an overwhelming sometimes, but ‘Unusual Billionaires’ gave us faith
competitive advantage. But if you do 20 different that if you devote more time to it than other investors,
things, you are unlikely to build one. you can make more money.

INTERVIEW
Given what you have done so far, ‘Unusual correlated. If you make something which is essential
Billionaires’ and the universe of the stocks that you for a larger company, it tends to be sticky. Your
have focused on, how do you expand this universe? pricing power is high, you are profitable, you pay
There are two parts to how we work. One part is the your staff well and they tend to be loyal. What’s more,
companies that are like ‘Unusual Billionaires’. if there’s an angle of intellectual property or licensing
A different part of Marcellus, something I figured then toh sone pe suhaga.
out with my colleagues six years ago, is small-cap
investing. You’re looking for companies with, say, a How do you assess a company’s capital
market cap below `10,000 crore. allocation decision?
Quantitatively, you are asking, in the latest three The hardest one to draw is the company did the right
years versus the preceding three years, (a) has this thing, but the cycle was unfavourable. It’s happening
company’s revenue growth accelerated? (b) has its in our small-cap portfolio right now.
profit margins expanded? (c) have asset turns In the years ending March 2020, 2021 and even 2022
improved? (d) has the working capital cycle improved? – a big part of those fiscals were lost to Covid. Many
(e) has the return on capital improved and (f) has free profitable companies ended up with surplus cash on
cash flow improved or has the debt been wiped out? their balance sheets. Therefore, through the year
Because these are chota companies, you’re not ending March 2023, we saw a huge surge in capex
asking them to prove themselves over 10 years. You amongst many of our investee firms. That was the
are asking them to improve their operating metrics, right thing on their part. But in the context of
profitability, cash flow, asset turns and so on. specialty chemicals, the Chinese have dumped heavily
Qualitatively, what you’re seeking is companies on India in the last eight or nine months.
that could be small, but producing something essential So, our investee companies in specialty chemicals,
for a much larger industry. You’re looking for the who ramped up their capex through 2022-2023, look
company’s dominance in that specific niche, sticky stupid because they’ve got plants that they put up.
customer relationships and staff loyalty. Either the plants are at low capacity utilisation or if
Over time, we discovered that these things are the capacity utilisation is 60 per cent, profit margins
Longevity has two parts to it.

First, does the promoter or the
management team know how to
do high-quality capital allocation?
The second part of longevity is
succession planning.

are wafer thin. It looks
stupid at this juncture, but
we don’t penalise companies
because, to us, they did
the right thing.
We get a little worried
when a company, let’s say,
that specialises in a specific
sub-segment of FMCG
focused on South India, now
says I’m going to do a
different type of FMCG
focused on eastern India. We
realise that we are not that
smart that we can tell the
promoter that this is a dumb
idea. So, we give them some
years and say theek hai, aap
keejiye. You think it’s a great
idea to enter a new market
in eastern India but if, after a
couple of years, we can’t see (on capital allocation) There are two distinctions to be drawn.
any increase in ROCE and One is the company made the right call, but it hasn’t worked out
our channel checks suggest because of exogenous factors. You persist. In another instance,
that building competitive
the company throws good money after bad. That’s when people
advantage in eastern India is
like us have to head for the door.
going to be hard, then we say
this is not making any sense.
When do you sell? In your view, when does a company start

There are three sorts of sell signals that we have seen losing its way?
come through. Firstly, when the capital is not being In a way you already picked the key factors that
allocated sensibly. That’s reasonably clear if you read transition from the original founder or founding team
annual reports, speak to the management and see a to the next generation. Om Manchanda was
capital misallocation. wonderfully up for the challenge and Dr Lal has
The second is when succession planning isn’t benefitted because of that. Often, these transitions are
working out. Either there is a lack of succession very troublesome. Because we have always been so
planning or the successor is not up to the task. apprehensive about how Titan will perform after the
The third is when lethargy kicks in. When the great Bhaskar Bhat retired, we waited for the new
management or the owners are very happy with their management to settle in before we invested.
success, you know, spending a lot of their time on the The first manner by which a company can lose its
golf course rather than working. way is when the transition happens from the first to
These are the three sell signals. The whole aspect of the second generation management. The second is
valuation plays a role in ramping up and down the success. Surplus cash flow, the arrival of investment
position size. When Bajaj Finance went through the bankers in the board room and M&A typically end up
roof in 2023, we reduced the position size. When Bajaj being a trigger for poor capital allocation.
Finance smashed in the first four weeks of Covid, we Third is the entrance of deeply disruptive new
ramped it up. When Divi’s Labs fell halfway through players who either come from the West or the start-up
2022, in early 2023, we ramped the position size up. So, VC ecosystem with profoundly different technology to
valuation is a driver of position sizing. what the incumbent has.

STOCK ADVISOR
Still good times

who is even minimally observant of what
is happening.
The problem generally is that group one captures
all the mind space as soon as the markets fall. There
Are the markets making you are several reasons for this. One is that short-term
nervous? Here’s the antidote. loss aversion is a powerful motivator. This is

exploited to the hilt by the media and social media,
where pessimists always manage to sound smart.
Stock market downturns lay the foundations for
outstanding future returns. I have honestly never
grasped why an investor would be eager to own a
quality stock when prices were high yet become
unwilling when its price falls. Logically, one should
by desire the stock even more now at better valuations.
Dhirendra The paradox exists partly because the critics
Kumar making dire forecasts about markets, economies and
geopolitics often sound convincing. Their arguments
related to issues like war, inflation, rates and energy
T
his is a great time to be testing what an appeal to our fears. No doubt these issues genuinely
investor is made of. For many weeks now, matter. However, the icing on the pessimism cake
punters have been running scared of the occurs when stocks get repriced lower to reflect the
high levels that the Indian stock markets have prevalent worries, even though the long-term
attained. As I write this article on January 18, the company fundamentals may remain intact. As
markets are down about 3 per cent over the last two someone said – pessimists sound smart, but
days. Obviously, many big names are spluttering, optimists make money.
in particular, HDFC Bank. Anyway, there’s no point The times that try an investor’s patience and
in my labouring over the details because you’re convictions are actually the best times to buy for the
reading this page much after I have written it, long run. Risks are rarely static; they evolve. And
and a lot more would surely have happened markets have already adjusted to the well-known
in the meantime. risks while underestimating the likelihood of
However, for anyone who has spent any time alternate outcomes. Ultimately, fundamentals matter
observing what investors actually do, there are three more than headlines.
clear subtypes, each of which is clearly visible over All you need is a way of being sure of your
the last few days: investment thesis and having an adequate supply of
1. There are investors who choose to sell their stocks confidence. How do you do that? This is precisely
during even a small downturn, driven by the fear what Value Research Stock Advisor provides.
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stock’s eventual recovery. the recommendations but also the reasoning behind
3. A third group sees the reduced prices as an them. Investing is a marathon, and having guidance
opportunity to increase their holdings because they can be invaluable. While Value Research Stock
have strong confidence in what they are doing. Advisor doesn’t claim to make every decision for you,
we do act as your dedicated research support, aiming
Which of these reactions are justifiable today? to empower you as an investor. Our researchers and
After all, the Sensex is up about 6 per cent over six analysts continually revisit and refresh the rationale
months, 10 per cent over a year, and roughly a for every stock that we recommend. Members receive
100 per cent (double) over five years. The direction the ‘what’ and the ‘why.’ Investing is a marathon, and
of India’s economy and businesses is clear to anyone you could use every assistance available. This is

Illustration: ANAND
where Value Research Stock Advisor steps in. We What we do is give you all the inputs you need for you to
don’t claim to make every decision for you – consider maintain the strength of your convictions.
us your dedicated research team, aiming to empower Ultimately, recommendations are exactly what
you as an investor. they imply – suggestions for action. Many offer
Let me just recap what you get when you advice, but the true success of Value Research
become a member: Stock Advisor lies in its ability to transform
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zContinuous updates and analysis on all
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other stock and data which they can use to
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Many investors make good choices, but when a stock You can subscribe to the service
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Passive funds for active
mutual fund investors
The primary goal of an active mutual fund
is to beat the index. To achieve that goal,
fund managers use their stock-picking skills and
subjective judgement while building the portfolio.
But the stock Moreover, different investors have

market is no different risk appetites. If you are
pushover. All happy getting the index’s
fund managers return and don’t want to depend too
don’t beat the much on the fund manager’s discretion,
index. So, in then look no further. This is where
both good and passive funds can
bad times, a be of great help.
fund could lag
the index by
a big margin!
Passive funds simply track an underlying index and For instance, the
seek to generate returns as per that. They comprise index Nifty 50 Index
funds and exchange-traded funds/fund of funds. consists of India’s
biggest listed
companies in terms of
market capitalisation.
By investing in passive
funds tracking such an
index, you may get the
broader market return.
By parking a part of your corpus in passive

funds you may be able to minimise
negative surprises.
The views expressed here constitute only the opinions and do not constitute
Diversifying your portfolio through any guidelines or recommendation on any course of action to be followed by the
passive funds is as easy as… reader. The data/information/opinions are meant for general reading purposes
only and are not meant to serve as a professional guide/investment advice
for the readers. Readers are advised to seek independent professional advice
and arrive at an informed investment decision before making any investments.
An investor education and awareness initiative by Mirae Asset Mutual
Fund. All Mutual Fund investors have to go through a one-time KYC (Know
Your Customer) process. Investors should deal only with Registered Mutual
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complaint in case of any grievance, you may refer the Knowledge Center section
available on the website of Mirae Asset Mutual Fund.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.

MAIN STREET
How India changed its

master narrative
The 180-degree transformation in India’s growth story
The 180-degree turnaround in the last two decades
Fast forward to 2023, and India is the only large stock
market with a 20-year annualised return in dollar terms
approaching 12 per cent. Not only has India been the
best-performing large stock market in the world over the
past two decades, but it is also, by some distance, the fast-
est-growing large economy globally.
Over the last decade, the public infrastructure in India
By has visibly transformed, with the national highway net-
Saurabh work seeing a near doubling, domestic air travel passen-
Mukherjea gers more than trebling over 2009-2019, households with
broadband connections growing around seven times over
2013-2023 and the number of bank accounts growing near-
I
n 2016, two psychologists, Kate McLean and Moin ly three times between 2015 and 2023.
Syed, defined the term’ master narratives’ in the This begs the question, “How did India change its
following manner: “Master narratives are cultural- master narrative?” We believe three reasons have
ly shared stories that tell us about a given culture, and led to this shift.
provide guidance for how to be a “good” member of a
culture; they are a part of the structure of society.” India leads the roster in stock market returns
In the first few decades post-independence, India’s over a 20-year period
master narrative was built around: Total shareholder returns (% pa)
Q Failure as exemplified by the hammering that China
Country 30Y 20Y 10Y
handed us in the 1962 war or the country’s failure to US 10.0 9.7 11.8
generate per capita GDP growth north of 2 per cent.
India 8.4 11.7 10.9
Q Frustration to generate employment was exemplified
Australia 9.0 9.6 5.3
by Naxalite violence, which swept across Eastern,
Central and parts of southern India from the late Canada 8.0 7.6 4.8
1960s onwards. Famines in 1966-67 and 1972-73 Hong Kong 5.5 5.1 0.0
were a recurrent reminder of the economy’s Taiwan 7.2 10.1 11.0
medieval state.
Brazil 6.9 6.9 1.4
Q Fear of not just losing one’s ability to earn a living
China 4.8 7.0 4.0
but also of one’s life as a wave of terrorist attacks
hit the country. UK 5.1 5.0 2.4
The stifling socialism of the ‘License Raj’, where South Korea 3.8 7.5 2.0
private capital was dissuaded from being employed, France 5.0 6.8 6.3
was partly to blame. The result was a nation perpetu-
Germany 4.3 7.1 3.3
ally low in confidence that manifested in sub-optimal
Japan 2.8 6.4 6.0
results. This dire state prompted the best Indian
minds to migrate to the West at the first available Source: Marcellus Investment Managers, Bloomberg; for France and Germany (CAC and DAX
respectively) data taken from Jan 1, 1999 when Euro was adopted; Brazil (IBOV) data taken
opportunity. A massive scramble ensued among those from 1st July 1994 when Rial was adopted; all returns in USD terms
who stayed back to land a government job.

MAIN STREET
social perception has led to historically oppressed

The top 10 countries by GDP in 2023 castes faring far better on education today than 30-40
years ago. Even more encouragingly, women from
Country GDP ($ billion) YoY GDP growth (%)
these castes have pulled far ahead of their male coun-
USA 26,954 5.8
terparts, with the Gender Parity Index exceeding one
China 17,786 -1.0 around five years ago and staying there consistently.
Germany 4,430 8.4
Japan 4,231 -0.2 Economic policy reforms have been gradual
India 3,730 10.1
and very effective
1991 marked a paradigm shift in India’s policymaking
UK 3,332 8.1
with economic liberalisation and ending the ‘License
France 3,052 9.7 Raj’. Foreign Direct Investment (FDI) was allowed
Italy 2,190 8.7 with an investment limit of 51 per cent. More than
Brazil 2,132 10.8 30 years later, in almost all sectors, the FDI limit has
Canada 2,122 -0.9
been revised to 100 per cent. The result, unsurprising-
ly, is increased FDI inflows into the country.
Source: Marcellus Investment Managers, IMF, Forbes India
As Marcellus’ founders will testify, starting and
doing business in India is now easier than ever.
Whilst more can be done, the improvement is tangi-
India’s rise across various time periods
ble, especially in comparison to the rest of the world.
Eras in Avg. real USD-INR Both corporate and income tax rates for low-income
the Indian Sensex GDP exchange rate
economy returns (% pa) growth (%) growth (%pa) earners have fallen sharply over the past decade. The
1947-1979 NA 3.8^ -0.3*
combination of lower taxes, GST and the India Stack
has meant that (a) the incentive to evade taxes has
1980-1990 19.7 4.6 8.6
been reduced, and (b) it has become easier for authori-
1991-2013 13.5 6.6 4.0 ties to catch tax evaders courtesy of the electronic
2014-2023 11.4 5.6 3.2 trails created by the GST payment system. This has
meant that over the past couple of years, tax collec-
Source: Marcellus Investment Managers, Bloomberg; ^ - average calculated from 1952, the
first year for when GDP growth rate was available; *-CAGR calculated from 1973 to 1980
tions have grown faster than nominal GDP growth
(20 per cent vs 17 per cent).
Another beneficial effect of reduced tax evasion is
A safer and more secure country to live in the financialisation of savings. As per RBI, 95 per
Reduced violence and terrorism in the country: Fear of cent of Indian households’ savings are in physical
violent attacks and terrorism has decreased signifi- assets – real estate, land and gold. Historically, one of
cantly as the number of fatalities in terrorist move- the reasons Indian households have preferred physi-
ments has abated. Indians are now embracing entre- cal savings is because it is easier to park black money
preneurship and taking risks because their sense of in physical assets. However, over the past 20 years,
security is greater now than ever. these assets have struggled to beat inflation after con-
The creation of an economic safety net: Over the years, sidering taxes.
the typical preference of the Indian middle class has To give a sense of the scale at which financialisa-
shifted from having a stable government job to taking tion has played out in the last decade, it is worth look-
up more rewarding roles in the private sector. This is ing at the following numbers:
evident in the falling headcount figures for Public Q The number of demat accounts has grown 10 times
Sector Undertakings (PSUs) over the years. Ambitious to 13 crore

Indians are either launching their own companies Q The number of mutual fund folios has grown
(over 1.5 lakh companies were launched in FY22 com- 3.5 times to over 14.5 crore
pared to just 23,000 companies launched 20 years ago) Q Annual equity inflows into Indian mutual funds
or choosing to work in start-ups. have risen from `20,000 crore per year 10 years ago
The rise of hitherto suppressed sections of society: to roughly `1.6 lakh crore per year now
Improved access to opportunity and gradual change in Q The annual gross written premiums by life insurers

FDI inflows have increased over the decade Rapid financialisation has led to falling capital
costs, encouraging greater market participation
90 z Net FDI inflows ($ bn) z FDI inflows as a % of GDP 3.0
65,000 z Avg. daily volume (` cr) z India 10Y govt. bond yield (%) 10
75 2.5
60 2.0 52,000 8
45 1.5 39,000 6
30 1.0 36,000 4
15 0.5 13,000 2
0 0.0
0 0
FY12 FY23 2002 2022
Source: Marcellus Investment Managers, Bloomberg, Statista; figures are in Source: Marcellus Investment Managers, Bloomberg, Ace Equity; three-month moving
USD bn and those for FY22 and FY23 are estimates average ADV (average daily value) considered; BSE 500 index used for ADV calculation
have risen from `2.8 lakh crore per year a decade The next step was to build a Unified Payments
ago to roughly `7 lakh crore per year now Interface (UPI), which enabled digital transactions
Q The annual gross written premiums written by gen- as well as the transfer of money. Launched in 2016,
eral insurers has risen from `74,000 crore per year a according to the National Payments Corporation of India,
decade ago to roughly `2.5 lakh crore annually now the total value of UPI transactions for the calendar year
Q Add to that the roughly `1.8 lakh crore flowing every 2023 crossed $2 trillion or 50 per cent of the GDP!
year in NPS (National Pension Scheme) and EPF The next step in this journey is a similar infra-
(Employees’ Provident Fund), and you can see that structure for goods and e-commerce via Open Network
Indian households are investing roughly `13 lakh for Digital Commerce.
crore into the Indian financial system. A decade ago, These ‘digital public goods’ have been employed
the figure was just `4 lakh crore. to benefit consumers and producers of all shapes and
`13 lakh crore is $160 billion per year. That’s the sizes. This has reduced transaction costs and working
amount of annual inflows from Indian households into capital cycles, made access to financial funding easier
the financial system. Since the rapid financialisation for low-income borrowers and SMEs and enabled
of savings has resulted in the cost of capital dropping, easier tax collection.
one can see this both in the cost at which the Indian
sovereign finances its deficit in the bond market and Investment implications
the cost of equity, leading to greater participation. As Vladimir Lenin said, “There are decades where
nothing happens, and there are weeks where decades
Transformation of technology for the benefit happen.” India’s first few decades post-independence
of Indians far and wide were decades in which nothing much happened.
Over the past 20 years, tech visionaries in India like In the last few years, India is beginning to make up
Nandan Nilekani have teamed up with policymakers for the lost time.
to bring the benefits of technology to the masses. The What India has found is a flywheel where a combi-
overall set of tech innovations – called the ‘India nation of incentives, enforcement and modern tech
Stack’ – have been built step-by-step. drive tax collections (faster than GDP growth).
It began with a vision to provide all Indians with a This helps finance infra investments. Thanks
social security-like number for identity (Aadhaar) in to the same flywheel, savings are financialised, lower-
2009, which was then overlaid by bank accounts for all ing the cost of capital and making it easier for
(Jan Dhan) in 2015, and finally, the massive prolifera- companies to fund themselves and drive capex.
tion of low-cost internet and smartphones by 2017 This, in turn, drives GDP growth. Thus, the virtuous
(launch of Jio). Together, known as the JAM trinity, cycle continues.
these building blocks allowed 1.4 billion Indians to get
an identity, a bank account and a medium of connect- Saurabh Mukherjea is part of the Investments team at Marcellus
Investment Managers (www.marcellus.in). He is the author of
ing (at low cost) with the digital economy and the ‘Diamonds in the Dust: Consistent Compounding for
financial system. Extraordinary Wealth Creation’.

STRAIGHT TALK
The era of Bitcoin ETPs arrives

Regulatory greenlight ushers in a new paradigm for digital assets
more complex and difficult to manage than the spot
products, translating into higher costs for investors.
This was also at the heart of a ruling by a Court
of Appeals for the District of Columbia that forced
SEC’s hand.
Grayscale Investments LLC had proposed to con-
By vert Grayscale Bitcoin Trust into an ETP. The SEC
Anand disapproved of this conversion – a ruling that was
challenged in Court. At the crux of the SEC’s previ-
Tandon
ous rulings against a spot ETF was the argument
that no regulated exchange was able to monitor
M
ore than 10 years after filing the first spot Bitcoin Bitcoin trading in a way that would reliably detect
exchange-traded product (ETP) application, the fraud and manipulation. That contention was
U.S. Securities and Exchange Commission has opposed by Ark Investments, among others, which
finally approved multiple applications to allow the listing provided data showing a high correlation between
and trading of spot Bitcoin ETPs. Eleven funds were cash trading and the futures contracts that trade on
launched on the day after approvals were given. CME Group’s platform. The Court, vacating the
What is ETP?
The approval of ETPs on Bitcoin marks a paradigm
shift for digital assets. ETPs are a convenient instru-
ment. Through them, investors can gain exposure to
securities and non-securities, such as precious met-
als. ETP shares trade continually on national stock
exchanges at market prices. Authorized partici-
pants, largely institutional traders, create and
redeem shares of the fund. This helps to maintain
the price of these shares in line with the price of the
assets in the investment pool. ETPs are accessible to
investors, both retail and institutional, and operate
within the framework of the federal securities laws.
The legal fight

Bitcoin-based products have been trading for years
under other regulatory regimes. In 2017, for exam-
ple, the CME and the CBOE (regulated by the
Commodity Futures Trading Commission) listed bit-
coin futures. Retail investors could hold bitcoins
through non-exchange traded products or get some
exposure by buying into companies or funds that
owned or mined bitcoin. And in 2021, Bitcoin futures
exchange-traded funds (ETFs) started to trade. In
2022, the SEC approved the trading of Bitcoin
futures ETPs. These futures-based products are

Grayscale Order, reminded the SEC that “unex- The approval of exchange-traded products
plained discounting of the obvious financial and (ETPs) on Bitcoin marks a paradigm shift for
mathematical relationship between the spot and digital assets. ETPs are a convenient
futures markets falls short of the standard for rea- instrument. Through them, investors can gain
soned decision making.” exposure to securities and non-securities, such
Quoting this judgment, the SEC Chair, Gary
as precious metals. ETP shares trade
Gensler, released a statement permitting the setting
continually on national stock exchanges at
up of Bitcoin-based ETPs. “The Commission is merit
neutral and does not take a view on particular com-
market prices.
panies, investments, or the assets underlying an
ETP. If the issuer of a security and the listing to do precisely that – “Though we’re merit neutral,
exchange comply with the Securities Act, the I’d note that the underlying assets in the metals
Exchange Act, and the Commission’s rules, that ETPs have consumer and industrial uses, while in
issuer must be provided the same access to our regu- contrast, Bitcoin is primarily a speculative, volatile
lated markets as anyone else. Importantly, today’s asset that’s also used for illicit activity, including
Commission action is cabined to ETPs holding one ransomware, money laundering, sanction evasion,
non-security commodity, Bitcoin. It should in no and terrorist financing. While we approved the list-
way signal the Commission’s willingness to approve ing and trading of certain spot Bitcoin ETP shares
listing standards for crypto asset securities.” today, we did not approve or endorse Bitcoin.
Investors should remain cautious about the myriad
Permission – yes, approval – not really risks associated with Bitcoin and products whose
Despite the statement of not passing a judgment on value is tied to crypto”. This was immediately
the merit of the underlying assets, Gensler goes on denounced by the industry seeking to introduce
these products. Ark Investment Management’s
Cathie Wood told Bloomberg: “He just denigrated
the whole crypto space. I couldn’t believe it. This is
par for the course in disruptive innovation”.
How did the market react?

The market immediately firmed up on the announce-
ment. In the longer term, this increases the pool of
money that can be invested in Bitcoins. The trajecto-
ry of gold prices post the introduction of ETP’s pro-
vides some insight. An analyst at Standard Chartered
suggested that Bitcoin could climb to $200,000 by the
end of 2025 on ETF approvals, citing gold’s example.
The firm estimates inflows of $50 billion to
$100 billion into Bitcoin ETFs this year alone.
Now that the Bitcoin spot ETFs have been

approved, who stands to win the most?
Provided that prices rise, it’s fair to expect all holders
of crypto assets to win. When Bitcoin flies, other coins
tend to trade sympathetically. We can also expect the
ETF providers, who, at least in theory, are charging
enough for their ETFs to generate some profit. An
unexpected winner is Coinbase. Many of the ETF pro-
viders use Coinbase to custody their assets for the
funds in question. The exchange is going to likely see a
good influx of “storage income” for itself.
Illustration: ANAND

STRAIGHT TALK
On the flip side, ETF exchanges, which often suffer — IBIT — saw $1 billion change hands, the fifth-larg-
from cyber threats and charge a hefty commission for est ETF launch on record.
trading and storage, will likely suffer. Coinbase’s reve-
nues from trading may fall, and we have to see if custo- Will India allow Bitcoin ETPs?
dy fees rise enough to compensate. For now, the RBI governor has reiterated his opposi-
tion to allowing trading in bitcoins. “I don’t wish to
Is Bitcoin set to replace currency? comment on what a regulator of another country has
Bitcoin is “social technology” writes a Bloomberg done; they know what is best for their country. But I
columnist. In the abstract, it is useful for the world would like to say that they themselves have flagged
as just an entry in a computer database that we all risks in the product and advised people to be very
agreed was valuable just because, with no reference careful….We are all familiar with the Tulip mania in
to any underlying commodity, cash flows or indus- the Netherlands that led to an asset bubble in the
trial activity. Someone invented it. Fiat currency past. I don’t think emerging markets and the world
works like that: The US dollar, for example, is this can afford a crypto mania that could lead to similar
sort of social technology; it has value because it has outcomes,” the governor said.
value. Unlike Bitcoin though, the US has a govern- Some questions remain. How will Indian regula-
ment, an army, tax revenues, debt and a trade bal- tors deal with Indian investors buying ETFs over-
ance, which help to preserve the value of the dollar. seas? Usually, the principle governing investments
Bitcoin is a database entry without that - it has is that if an asset is regulated by a local regulator, it
value due to a broad voluntary market consensus is usually accepted by other regulators. ETFs are
based almost entirely on itself. In some sense, that
consensus is fragile — if a thing is valuable only Bitcoin has value due to a broad voluntary
because people think that it is valuable, it could market consensus based almost entirely on
stop being valuable when they stop thinking that — itself. In some sense, that consensus is fragile
but that is true of any social fact: The dollar is valua- — if a thing is valuable only because people
ble, exactly as long as there is social consensus. think that it is valuable, it could stop being
Bitcoin got to what seems like a pretty robust con- valuable when they stop thinking that.
sensus in 15 years.
A Bitcoin is rarely useful as an alternative to
money as a payment mechanism. The ETF will be accepted investments for investors using the liberal-
even less so. But it is more useful as a store of value: ised remittance scheme. Overseas investments are
You can hold it in your brokerage account. And so, taxed as debt investments under capital gain rules
the price of Bitcoin ran up in anticipation of the of income tax. Will that still apply? What if ETFs are
ETF approvals, because everyone expected that made available through GIFT city? This is an
the ETFs would lead to more people holding overseas jurisdiction where Indian tax and securi-
Bitcoin as a store of value, which is the best reason ties rules are not supposed to apply – though
for Bitcoin to go up. the Indian regulators seem to have trouble
accepting the concept!
Trading in ETFs One of the resistances to allowing crypto trading
A day after the approval from the SEC, 11 funds — is the opacity of the beneficial owner. With ETFs,
including offerings from BlackRock Inc. and Fidelity this is no longer an issue – the fund managers are all
Investments — got off to a strong start, with some required to follow know-your-customer rules. Will
$4.6 billion of shares changing hands. With that make bitcoin ETFs more acceptable?
$2.3 billion exchanging hands, the Grayscale Bitcoin As discussed earlier, Bitcoin is the new gold –
Trust saw the largest-ever first-day turnover for an there is no intrinsic value except for rarity and the
ETF. Grayscale’s product has existed in a trust inability to increase supply. This makes it a great
structure since 2013 and had a nearly $27 billion store of value. Should Indian investors, especially
head-start in asset size. But even ETFs that did not those who understand the risks, be denied access?
convert from an existing fund have seen historic Or will volatility erode Bitcoin’s appeal as a store of
trading volumes. BlackRock’s iShares Bitcoin Trust value? Time will tell.

EVERYDAY ECONOMICS
How large is India’s economy?

Is the country on the right path to becoming an economic superpower?
of 7.6 per cent for India to become a high-income
country as classified by the World Bank and
9.1 per cent to become an advanced economy per the
IMF classification. Only a handful of countries have
accomplished such feats of growing more than
7.5 per cent annually for 20-25 years.
By India is a large country with a huge population that
Puja has a lot going for it. Converting its potential to reality
Mehra depends on how well policies are tuned towards the
goal and their effective implementation. Such high
growth, the paper said, requires investment in physi-
T
here is a rising national aspiration for India to cal capital and reforms across sectors covering educa-
become a developed economy by 2047. tion, infrastructure, healthcare and technology.
Prime Minister Narendra Modi first spoke of it It’s not like India has never grown at 9 per cent.
in his address to the nation on August 15, 2022. What It has in the odd year whenever a previous year’s
does it mean to be developed? A paper published in base was so low that its statistical effect made the
the Reserve Bank of India’s (RBI) monthly bulletin of growth rate shoot up the following year. But India
July 2023 found that the concept of a ‘developed econ- has grown at 7.6 per cent consistently: From 2004 to
omy’ is not well defined. Nor is it universally used. 2011, barring the year of the Global Financial Crisis,
The World Bank does not use this terminology. It growth was 7.86 per cent or more (7.92 per cent,
does classify countries as low income, lower middle 7.92 per cent, 8.06 per cent, 7.66 per cent, 3.09 per cent,
income, upper middle income and high income, based 7.86 per cent and 8.5 per cent).
on their per capita income. I asked Dr Shankar Acharya about the national
As per its classification, a country with a per capi- aspirations and how India can grow more than
ta income of $13,205 or more in 2022-23 is classified as 7.6 per cent consistently over 25 years on a podcast I
a ‘high-income country’. The International Monetary do for the think tank ICRIER. Dr Acharya is an
Fund (IMF) classifies countries as advanced and Honorary Professor at ICRIER. He has been the long-
emerging-market developing economies based on three est-serving (1993 to 2001) Chief Economic Officer at the
criteria: per capita gross domestic product (GDP), Ministry of Finance, Government of India.
export diversification and global financial integration. Among other things, he was the non-executive chair-
The IMF gives no per capita income threshold for the man of Kotak Mahindra Bank for 12 years (2006 to 2018).
advanced country category. The authors of the paper He said that growing fast for 25 years is doable for
published by the RBI found that Croatia had the lowest
per capita income in 2022 among the advanced econo-
mies. Interestingly, it had a per capita income of One of the
$18,427, greater than the high-income threshold of characteristics
$13,205 used by the World Bank. common in all the
India’s per capita income currently is about $2,500. successful, sustained,
The paper’s calculations show that it will have to be
high-growth
more than $21,664 by 2047 for the World Bank to clas-
sify India as a high-income country. That’s quite a
economies, is
distance to be covered. Is it doable? sustained high growth
According to the paper’s calculations, it would take of exports.
a sustained growth rate of over a quarter of a century

Illustration: ANAND
India but would take many, many policy changes. This

column is taking up one of them. (Readers interested in
India must review its trade policies to see if
the other points made by him can watch the podcast).
One of the characteristics common in all the suc-
they’re really the best for encouraging
cessful, sustained, high-growth economies, he said, is exports. Any economy that has high import
sustained high growth of exports. What about global tariffs will not normally be very good at
trade slowing down – how can India tap the exports encouraging exports.
markets for growth then? Of course, you can blame the
outside world. Still, you have to look at what other
countries are doing, he said and gave the example of in India’ was a common label on the apparel sold
Vietnam, a country of about 100 million people, that in international lines in the US and Europe.
has continuously increased its market share from less Today, apparel sold in India by those same chains
than 0.5 per cent of world trade about 10-12 years ago rarely has that label.
to more than 1.5 per cent. So, it’s possible to tap the I asked Dr Acharya about the ‘atmanirbhar’ narra-
exports market, but that will not happen by itself. tive that India is a large market and doesn’t need to
India must review its trade policies to see if they’re depend on exports. True, India is set to become the
really the best for encouraging exports. Any economy most populous nation on earth. However, the per cap-
that has high import tariffs will not normally be very ita income remains low. Spending capacity is low.
good at encouraging exports. High import tariffs Our economy as a whole is about $3.7 trillion. The
make intermediate goods expensive, which means size of the world economy is more than $100 trillion.
that the economy will never be competitive. After So, India makes up less than 4 per cent of the world’s
1991, India’s foreign trade policy was going in the economy at market exchange rates. “That doesn’t
right direction, which increased India’s exports. sound too large to me,” he said. It’s hard not to con-
Exports as a share of GDP were about 25 per cent in cur with him. China is an economy that is around
2012 but are less than that right now, and tiny econo- $18-$19 trillion. The world is growing much slower
mies like Bangladesh and Vietnam are snapping up than it used to, and that’s why India looks distinctly
market share, racing past India. good, but its economy is still very small, even if it is
But since 2014, India has allowed import duties to going to be the third largest soon.
creep up, which is not proving to be as supportive of
Puja Mehra is a Delhi-based journalist and the author of
export growth as it should be. Narratives can be easi- ‘The Lost Decade (2008-18): How the India Growth Story Devolved
ly verified on the ground. About 15 years ago, ‘Made into Growth Without a Story’

STOCK SCREEN
High-quality small caps

Using Value Research Stock Ratings to find promising small caps
T
ired of spending hours sifting through the vast This is where Value Research Stock Ratings can be
listed universe? You need a reliable stock your guide. Our Stock Ratings combine multiple
screener. It can help you get a list of metrics spanning quality, growth and
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your attention with just a click of a screen, we have chosen small caps
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list, you only need to research them moderately on growth and
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investing in. filters, we have created a good
Value Research offers several starting point for your research.
carefully curated stock filters that But don’t forget, small-cap
can pick the most attractive investing is not for the faint of
companies from the listed Indian heart. It requires considerable
universe. In this issue, we cover the groundwork and an appetite for
‘High-quality small caps’ screen in detail. volatility. So, pick companies that you
We have also given a concise list from the understand and research them in detail.
other screens. To view all the companies, visit: Also, be prepared for the unexpected. You will
www.valueresearchonline.com/stocks-screener/ need perseverance to deal with the frequent drawdowns
in your portfolio.
Good quality small-cap companies
A stock investor’s greatest joy is discovering a budding A word of caution
small-cap company and watching it grow into a These are not stock recommendations. Please do your
formidable large cap. However, it is easier said than done. due diligence before investing. If you are interested in
The small-cap arena is like the Roman-era Colosseum – a list of stocks to invest in, subscribe to Value
many fight, but only a few survive to tell their tale. Research Stock Advisor.
Key terms
4HYRL[JHW company has been able to utilise as revenue growth, operating cash :[VJR9H[PUN
Stands for market capitalisation. investors’ money. flow growth, Piotroski F-score, etc. Value Research Stock Rating
Obtained by multiplying the stock 8\HSP[`ZJVYL The score is based on absolute combines the three scores (quality,
price by the total number of shares. It assesses the quality of a company ranges and is driven by current growth and valuation) based on
Shows a company’s market value quantitatively, capturing two crucial performance and historical assigned weights to arrive at a holistic
or size. aspects, i.e., business efficiency and consistency of growth. Per share data Stock Rating. We have created a five-
balance sheet quality. It considers is considered for each parameter to star rating system. The higher the
7YPJL[VLHYUPUNZ7,
various metrics, such as return on calculate growth. The score is out of Stock Rating, the better.
The ratio of the stock price and
equity, return on capital employed, 10, and the higher the score, the
earnings per share (EPS). It shows in :[VJR:[`SL
debt-to-equity ratio, etc. The score is higher the historical growth.
multiples how much investors are Derived from a combination of the
willing to pay for a share in a based on the relative ranking of all =HS\H[PVUZJVYL stock’s valuation – growth or value –
company’s earnings. Note that a high- parameters after assigning certain It gauges if a stock is reasonably and its market capitalisation – large,
growth stock often will have a high weights to each. Both current values priced. This quantitative rating mid and
P/E ratio, while a value stock will have and historical values drive the ratings. considers the stock’s current and small. For Growth Value
a relatively lower P/E ratio. The score is out of 10. The higher the historical valuation parameters based example, here
Large
score, the higher the quality. on metrics such as P/E ratio, free is the stock
9L[\YUVULX\P[`96,
.YV^[OZJVYL cash flow yield, dividend yield, etc. style of a Mid
Measured by taking profit after tax as
It evaluates a business’s historical The score is out of 10. The higher the large-cap
a percentage of the net worth of the Small
growth and scale, using metrics such score, the more attractively priced it is. growth stock.
company. Indicates how efficiently the

Stellar small caps No. of companies that
CLEAREDTHElLTERS
4,070
Reasons to invest The filters 1,119
(IGH QUALITYCOMPANIES No. of small cap companies
#HANCESOFHIGHWEALTH Companies with a Stock Rating 180
creation Quality score more than 8 175
-ODERATETOHIGHGROWTH Growth score more than 4
2EASONABLYVALUATIONS 83
Valuation score more than 4
High-quality small caps

Company Stock Quality Growth Valuation 5Y avg. Market cap Share 52-week
Industry style Stock Rating score score score ROE (%) P/E (` cr) price (`) high/low (`)
Godawari Power and Ispat

Sponge Iron
Galaxy Surfactants
Organic Chemicals
Ion Exchange
/THER-ACHINERY
Gujarat Pipavav Port

-ARINE0ORT3ERVICES
KNR Constructions
Construction
Avanti Feeds
!QUACULTURE
JK Paper
0APER
Transport Corp. of India

2OAD4RANSPORT
Share India Securities

"ROKERAGE3ERVICES
Nesco
Commercial Complexes
GHCL
3ODA!SH
VST Industries
4OBACCO0RODUCTS
West Coast Paper Mills

0APER
Jamna Auto Industries

Auto Ancillaries
Advanced Enzyme Tech.

Organic Chemicals
LG Balakrishnan & Bros

Auto Ancillaries

STOCK SCREEN
Company Stock Quality Growth Valuation 5Y avg. Market cap Share 52-week
Industry style Stock Rating score score score ROE (%) P/E (` cr) price (`) high/low (`)
La Opala RG
Glass & Glassware
Kaveri Seed Company

/THER!GRICULTURE0RODUCTS
Nirlon
Commercial Complexes
Gulf Oil Lubricants

,UBRICANTS'REASE
Maithan Alloys
Ferro Alloys
Fiem Industries
Auto Ancillaries
Bajaj Consumer Care

(OUSEHOLD0ERSONAL0RODUCTS
Swaraj Engines
Diesel Engines
Cigniti Technologies
Software
INEOS Styrolution India

4HERMOPLASTICS
IOL Chemicals and Pharma

$RUGS0HARMA
Andhra Paper
0APER
Honda India Power

-OTORSGENERATORS
Tide Water Oil Co.

,UBRICANTS'REASE
Gujarat Themis Biosyn

$RUGS0HARMA
Seshasayee Paper
0APER
Cantabil Retail
2EADYMADE'ARMENTS
BF Investment
)NVESTMENT3ERVICES
Butterfly Gandhimathi
Kitchenware & Appliances
Aptech
Software
Indraprastha Medical Corp.

(EALTH3ERVICES
Stock Rating and price data as of January 16, 2024. This is not the full list. For the full list, visit: http://tinyurl.com/nzt8wcku

Want more? Here you go
Other screens available on the Value Research website, along with
their themes and some of their stocks
P/E P/E
5-Star Stocks IOL Chemicals and Pharma 15.6 Fine Organic Industries 31.1
Gives you companies that have received a VST Industries 18.2 Tanla Platforms 31.6
five-star Stock Rating Global Education 19.1 La Opala RG 31.9
Fiem Industries 21.4 Ion Exchange 39.6
Galaxy Surfactants 27.9 Nestle India 82.5
SBI 8.3 Tube Investments 73.9

High growth large
ICICI Bank 17.6 Solar Industries 77.9
caps
Axis Bank 26.3 Trent 178.8
These are large caps with a growth score of at
least 8 Bajaj Finance 35.2 Adani Total Gas 197.6
Indian Hotels Company 60.6 Adani Green Energy 202.2
Oil India 7.2 Gujarat State Petronet 12.0

Top value mid caps
Manappuram Finance 8.0 Godrey Phillips 13.8
This filter spills out attractively priced mid caps
Petronet LNG 10.2 Chambal Fertilisers & Chem 14.2
with reasonable quality
Mahanagar Gas 10.9 Sun TV Network 14.3
City Union Bank 11.8 Indraprastha Gas 16.8
Jindal Photo 3.6 Chaman Lal Setia 9.8

Reasonably priced
Ramky Infra 4.0 Nitta Gelatin 9.8
growth stocks
BPCL 4.1 Hercules Hoists 12.7
Combines growth and value investing and
spills out companies with high earnings Mangalore Chem & Fert 5.8 Mukand 13.8
growth trading at a cheap valuation Aditya Birla Capital 8.9 Nuvama Wealth Management 14.7
P/B P/B
The Karnataka Bank 1.04 Bandhan Bank 1.78

Top-rated banks
DCB Bank 1.06 HDFC Bank 2.91
Banks with a Stock Rating of four-star
The Federal Bank 1.26 Kotak Mahindra Bank 3.05
and five-star
City Union Bank 1.41 ICICI Bank 3.11
Karur Vysya Bank 1.52 AU Small Finance Bank 4.43
For all the screens and to customise them

as per your requirements, visit
z Stock Rating z Value Guru screens z Easy peer comparison
www.valueresearchonline.com/stocks-screener/

WORDSWORTH NOW
Shaktikanta Das
Governor of the Reserve Bank of India
On India’s stance on cryptocurrencies now that the
US SEC has approved Bitcoin ETF:
RBI’s position on cryptocurrency remains unchanged.
Traveling down that path will create huge risks. I don’t think
the world or emerging markets (EMs) can take a crypto
mania like the tulip mania.
Mint Annual BFSI Summit
January 11, 2024
On Charlie Munger’s death:

Warren Buffett
CEO of Berkshire Hathaway V Vaidyanathan
CEO & Managing Director
Berkshire Hathaway could not have e
of IDFC First Bank
been built to its present status
without Charlie’s inspiration, On digital public infrastructure
wisdom and participation. in India:
Berkshire Hathaway press release This whole ecosystem
November 28, 2023 coming together and the
government getting
Tim Cook involved in making digital
CEO of Apple infrastructure is a key
A titan of business and keen point. RBI getting involved
observer of the world around him, in innovation is a key
Charlie Munger helped build an point. The government
American institution, and through is actively creating all
his wisdom and insights, inspired a this—this I feel is a
generation of leaders. He will very big deal.
be sorely missed. Rest in Business Today
peace Charlie. January 21, 2024
X (formerly Twitter)
November 29, 2023
Narendra Modi
Prime Minister of India
On India’s resiliency during tough macroeconomic outlook:
We are all aware of the global circumstances. So, in times like these, if
the Indian economy is displaying such resistance, if the growth in India is
showing such momentum, a big reason behind this is our focus on
structural reforms in the last 10 years. These reforms have
enhanced the capacity, capability and competitiveness of
India’s economy.
Vibrant Gujarat Global Summit 2024, January 11, 2024

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24 Market Barometer The era of Bitcoin ETPs arrives

z A tale of diminishing returns 78 Stock Screen

February 2024 Wealth Insight 5

February 2024 Wealth Insight 7

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Maruti Suzuki, Eicher Motors announce

Tech giants declare their Q3 FY24 results

YoY growth (%)

10 Wealth Insight February 2024

HDFC Bank’s worst fall since COVID

Moody’s downgrades Vedanta

February 2024 Wealth Insight 11

Japan’s Nikkei 225 and TOPIX reach ECONOMIC METRICS

for `6,000 crore 6

Aarti Industries announced 5

L&T secures major

`3,300 crore investment

12 Wealth Insight February 2024

Suzlon Energy Sensex Sensex rebased to stock price

Jan 08, 2008

Mar 26, 2008

14 Wealth Insight February 2024

The path forward 15,000 1,200 1.0

Jan 05, 2024

February 2024 Wealth Insight 15

Adani Green  80.2 204.3 32.5 233.8

HPCL  75.2 3.9 10.1 29.3

Adani Total Gas  74.6 199.4 23.8 10.6

IRFC Unrated 70.5 3.6* 14.6 20.7

Adani Power  64.1 10.0 32.7 258.0

Power Fin. Corp.  62.6 1.4* 28.0 26.3

Suzlon Energy  55.6 103.0 - 35.0

HAL  54.4 33.3 26.4 33.3

BHEL  53.5 987.7 -2.1 26.1

Trent  51.6 178.3 3.2 78.6

REC Unrated 49.7 9.0 21.1 27.3

Adani Ports  49.3 40.9 15.1 18.1

Macrotech Developers Unrated 48.8 75.6 6.9 -12.9

Adani Energy  48.2 95.9 18.6 18.5

Yes Bank  44.9 1.8* -2.5 8.7

18 Wealth Insight February 2024

Inox Wind  121.8 - -38.2 -13.4

Angel One Unrated 88.3 27.0 43.2 78.4

Prestige Estates  87.4 30.9 22.8 67.7

Jaiprakash Power  79.6 - 2.0 26.0

Bharat Dynamics  75.3 76.9 12.9 11.0

Sun Pharma Advanced Research  73.6 - -47.9 -15.4

Alok Industries Unrated 70.9 - - 20.1

Swan Energy  70.2 46.5 -8.9 180.2

Sobha  69.9 120.1 4.6 -9.9

NLC India  69.0 16.6 9.2 14.2

Reliance Power  68.1 - -2.4 23.3

Engineers India  63.9 26.2 16.8 3.7

MRPL  63.8 8.1 22.8 46.7

Adani Green 80.2 204.3 32.5 233.8

HPCL 75.2 3.9 10.1 29.3

Adani Total Gas 74.6 199.4 23.8 10.6

Adani Power 64.1 10.0 32.7 258.0

Power Fin. Corp. 62.6 1.4* 28.0 26.3

Suzlon Energy 55.6 103.0 - 35.0

HAL 54.4 33.3 26.4 33.3

BHEL 53.5 987.7 -2.1 26.1

Trent 51.6 178.3 3.2 78.6

Adani Ports 49.3 40.9 15.1 18.1

Adani Energy 48.2 95.9 18.6 18.5

Yes Bank 44.9 1.8* -2.5 8.7

Inox Wind 121.8 - -38.2 -13.4

Prestige Estates 87.4 30.9 22.8 67.7

Jaiprakash Power 79.6 - 2.0 26.0

Bharat Dynamics 75.3 76.9 12.9 11.0

Sun Pharma Advanced Research 73.6 - -47.9 -15.4

Swan Energy 70.2 46.5 -8.9 180.2

Sobha 69.9 120.1 4.6 -9.9

NLC India 69.0 16.6 9.2 14.2

Reliance Power 68.1 - -2.4 23.3

Engineers India 63.9 26.2 16.8 3.7

MRPL 63.8 8.1 22.8 46.7

HBL Power Systems 63.5 72.0 8.0 195.3

Hindustan Copper 60.4 80.5 16.8 36.8

Newtime Infra 279.4 - -11.5 18.1

Cupid 276.6 96.1 19.3 -8.7

Oriental Rail Infra 148.9 204.0 12.6 -33.2

Integra Essentia 135.0 53.7 9.5 35.6

Veritas 121.3 11.4 5.0 -5.3

Kesoram Inds 101.2 - 72.7 4.8

Praveg 96.3 115.6 53.0 27.7

Gallantt Metal 92.7 26.2 9.9 166.1

Apollo Micro Systems 85.9 157.6 4.6 21.3

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Indraprastha Gas 22.8 9.1 -6.1 25.6 17.8