Search the Internet          Tips  Sites: Finance, Investment

Some lotuses bloomed, and some withered

B G Shirsat and Samata Dhawade

It seems fiscal 2000-01 has not been bad all the way at the bourses. There were around 200-odd stocks, including some old economy juggernauts, which proved to be wealth creators during the fiscal.

Sample this: The stock of a relatively unknown Hyderabad-based company, GDR Telefilms, which was quoting at 80 paise, showed an appreciation of 4555 per cent. The scrip moved up from 0.80 a year back to Rs 63.70 on February 5, 2001.

The fortune of Gufic Biosciences, formerly Central Finance, seems to have changed with the acquisition of a pharmaceutical company in May 2000. The stock zoomed by over 1000 per cent from Rs 14.30 on March 31, 2000, to Rs 170.10 on March 31, 2001, despite its not-so-good fundamentals. On sales of Rs 117 billion it earned a net profit of Rs 2.2 million during the six months ended December 2000.

The aggregate value of the 200 stocks rose by Rs 270 billion or 24.46 per cent between March 31, 2000 and March 30, 2001. In absolute terms, their market capitalisation increased from Rs 1103.82 billion to Rs 1373.85 billion.

Most of the stocks were in the news on account of buyback offers introduced by their parent companies above the prevailing market prices. Though there are some exceptions such as the old economy favourites -- Reliance Industries, IBP, E Merck and Nestle which have created wealth for investors by registering healthy growth in sales and profits. Refinery stocks was in demand as investors were expecting growth in these stocks following a complete decontrol.

Stocks in the paper sector too were in great demand, registering a smart turnaround during the nine months ended December 2000. Stocks of banks, pharmaceuticals, shipping and hotels gained during the period largely on the back of a robust performance during the nine months of the fiscal.

In the gainers list is also Sahara Media, the Hindi satellite entertainment channel, which gained 630 per cent. The company's performance for the three months ended December 2000 shows sales of Rs 166 million and net profit of Rs 62 million.

Sahara TV is a part of the Rs 100 billion Sahara India Parivar. It claims to have 70 per cent connectivity and is looking at a consolidation to improve upon its connectivity. The company is planning to expand in terms of Internet and broadband ventures.

Open offers made by parent companies over and above the prevailing market rates also created wealth during 2000-01. Hitech Drilling gained 116 per cent on Tatas' decision to sell its 22.7 per cent stake to Aban Lloyd Chiles at Rs 92 per share. Investors also gained from the deal as Aban Lloyd offered to buy back the remaining stake at the same price.

Centak Chemicals gained 67 per cent at Rs 188 as Dutch Chemical major Akzo Nobel made an open offer to buy back shares at Rs 200 a share.

Astra IDL firmed up by 73 per cent at Rs 395 as the Foreign Investment Promotion Board gave a go-ahead to Astra Pharmaceuticals AB to acquire an additional 25.75 per cent in Astra IDL. Raymond gained 76 per cent as promoters made an open offer to acquire 15 per cent from the market at Rs 160 a share. Tata SSl and G E Shipping also moved up on account of open offer by their promoters.

The fundamentally strong performer Amtek Auto gained by over 550 per cent largely on the back of a Rs 800 million export order. During the nine months ended December 2000, the company's sales turnover crossed Rs 1 billion with its net profit moving up to Rs 120 million from 69 million during nine months of December 1999.

IBP soared by 316 per cent on account of the government's willingness to divest 33.6 per cent. IBP, which has strong distribution network, was in fact, available at Rs 100 a year back.

However, uncertainty lies ahead for some not-so-good stocks in fiscal 2002. Gainers, which have registered over a 100 per cent increase could be the biggest losers if one goes by their fundamentals.

GDR Telefilms fell close to Rs 37.25 on March 30, 2001 following the meltdown in the information, communication and entertainment sectors. Further, fundamentally the company is skating on thin ice. The company's financial performance for the nine months ended December 2000 shows revenue of Rs 16 million on a net profit of Rs 8.7 million.

Take the case of Baffin Engineering, third on the list with a gain of 833 per cent. The stock increased from Rs 15 a year back to Rs 140 when the fundamentals of the company are not even available readily. Gujarat Fiscon rose by 375 per cent to Rs 372 and has recorded a trailing twelve months EPS of Rs 3.12.

The list is endless, Unistar Multimedia gained 247 per cent at Rs 79.75 as the company reshaped the business model to become a content development enterprise for all mediums of entertainment. During the nine months to December 2000, the company clocked sales of 59 million and earned a net profit of Rs 7.9 million.

Granite-turned-ICE company MOH was up 362 per cent, Soni Softech was up 194 per cent and IT Micro Systems with a 162 per cent rise are the other stocks which run the risk of losing steam in the current run.

The financial year 2000-01 saw a Rs 3943.81 billion erosion in terms of market capitalisation on the Bombay Stock Exchange. The year, which started with a total market capitalisation of Rs 9553.88 billion, ended at Rs 5606.07 billion, a drop of 41 per cent.

The BSE Sensex shed 1396.90 points, or 27.9 per cent, during the fiscal. The index opened the fiscal at 5001.28 level and closed at 3604.38.

The domestic bourses, which mimicked the international markets, especially the Nasdaq, went through a roller-coaster ride before the bubble burst with revelations of bear cartels and insider trading. Subsequently, market capitalisation of 1,146 scrips dropped. The value of 572 scrips more than halved compared with the previous year.

The 1,146 scrips had an erosion of Rs 4401.33 billion in market value, much higher to the total erosion in the total market capitalisation.

For investors it would not be a surprise that most of these were from the information, communication and entertainment (ICE) sector. As many as 168 ICE scrips accounted for a lion's share of 76 per cent of the total erosion of the 1,146 scrips.

A few ICE scrips, which had reached dizzy heights, were the major value destroyers. The top nine value destroyers in absolute value terms accounted for 56 per cent of the total 1,146 scrips' value erosion.

Thus the global erosion has placed the current market capitalisation of the ICE sector at Rs 1174.47 billion, a decline of Rs 3327.36 billion. The contribution of the ICE market cap to the total market cap slipped from 47 per cent in the previous year to 21 per cent.

Of the 1,146 scrips, current market capitalisation of 578 scrips is much lower than the total erosion they had during the year. The list has been heavily weighted to ICE scrips. For example, Wipro's market cap at present is Rs 310.21 billion compared with Rs 966.94 billion erosion it witnessed.

Similarly, media major Zee Telefilms' market capitalisation, which eroded Rs 371.32 billion, currently is Rs 50.15 billion. Infosys Technologies, HCL Technologies, Satyam Computer and VSNL are the others in the list.

The erosion did not spare the old economy scrips, too. Nirma's market capitalisation at Rs 34.84 billion witnessed an erosion of Rs 83.44 billion.

Similarly, Morepen Laboratories' market cap, at present at Rs 9.05 billion, had dipped Rs 10.87 billionj. Reliance Capital, Engineers India, India Cements and Adani Exports are the others which declined during the fiscal.

Powered by

ALSO READ:

ALSO READ:
The Capital Markets Crisis
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report