India Inc. and, indeed, the economy in general weathered the second wave of the pandemic much better than the first. This is reflected in the superlative returns on the domestic equity market in the 12 months ended September 30, 2021. While the benchmark BSE Sensex jumped 55 per cent during this period, the broader BSE MidCap and BSE SmallCap indices soared 72 per cent and 89 per cent, respectively.
The market sentiment, market watchers say, was boosted by hopes of a faster return to business normalcy, sustained foreign institutional investor inflows, better-than-expected financial results, the central bank’s liquidity measures such as maintaining low interest rates, as well as a series of government reforms such as the Rs 100-lakh crore ‘Gati Shakti’ infrastructure spending plan.
As a result, more than 91 per cent of the stocks on the BSE have risen in the 12 months to September. Of them, nearly 1,050 more than doubled in value. That resulted in 19 firms rising by more than 100 slots in the Business Today 500 rankings, which is based on the increase or decrease in a company’s average daily market capitalisation between the 12 months ended September 2020 and the 12 months ended September 2021. The 19 include Punjab & Sind Bank, Alkyl Amines Chemicals, Laurus Labs, Mastek, Hindustan Foods and Adani Total Gas.
But there were some notable decliners as well. Overall, more than 250 companies slid down the BT500 ranks. Some tumbled by as many as 100 places, including Godfrey Phillips, Gulf Oil Lubricants, Mishra Dhatu Nigam, Sterling and Wilson Solar, Ircon International and INOX Leisure.
But they weren’t the worst performers. Here are the five companies that recorded the biggest jumps and the steepest drops in the BT500 list.
CG Power and Industrial Solutions, formerly known as Crompton Greaves, notched the biggest climb of 426 spots to rank 320. CG Power makes a range of electrical products such as transformers, switchgears and traction electronics. Its stock jumped 413 per cent to Rs 123.15 as of September 30 from Rs 24 a year ago, while its 12-month average daily market capitalisation rose to Rs 8,076 crore from Rs 699 crore.
CG Power’s healthy results in the July-September quarter helped justify those gains. Its sales rose 119 per cent year-on-year to Rs 1,453.79 crore, net profit increased 71 per cent to Rs 188 crore, and Ebitda tripled to Rs 171.20 crore.
CG Power is in a sweet spot, IIFL Securities said in a research report. It is at the cusp of a capex recovery under a dynamic leadership but requires close focus on building technological competencies and sustaining its leadership stature over the longer term, the broking firm said.
Tata Teleservices (Maharashtra) was the next biggest gainer, rising 347 spots to the 468th position. Its stock surged 1,108 per cent to Rs 35.40 in the 12 months to September 30, despite the company’s quarterly losses and rising debt. The stock’s jump came largely after news reports in May said Tata Teleservices—the promoter of Tata Teleservices (Maharashtra)—will be revived in a new avatar called Tata Tele Business Services (TTBS). TTBS has since launched Smartflo, a cloud-hosted communication platform for small and medium enterprises with a hybrid work setup.
In third place is Tanla Platforms, earlier known as Tanla Solutions. The cloud communications firm gained 292 spots to rank 272 in the BT500 list as its share price nearly tripled to Rs 872.45 in the 12 months through September. Its revenue jumped 44 per cent to Rs 841.60 crore in the September quarter, while its profit after tax rose 67 per cent to Rs 136.20 crore.
“Our stellar performance was contributed to by a higher wallet share from existing customers and additional market share expansion from newer clients,” Uday Reddy, Tanla’s Founder, Chairman and CEO, said in a regulatory filing.
Closely following Tanla is Mumbai-based Poonawalla Fincorp, a non-banking financial company (NBFC) formerly known as Magma Fincorp. Its rank rose 275 places to 366, propelled by a 398 per cent surge in its stock to around Rs 163 as of end September. ICICI Securities noted in a report that Poonawalla Fincorp endeavours to be among the top three NBFCs for consumer and small business finance by 2025.
Rounding out the top five is Balaji Amines. The chemicals manufacturer rose 187 places to rank 350, powered by a 459 per cent jump in its stock price to Rs 4,516 as of September 30. Its revenue from operations doubled to Rs 451.94 crore in the April-June quarter, while its net profit attributable to shareholders jumped 174 per cent to Rs 90.38 crore.
Ashika Stock Broking is bullish on the prospects of not just Balaji Amines, but also the specialty chemicals sector. “Despite the sharp outperformance, we remain sanguine on the Indian specialty chemicals sector on the back of the China+1 strategy, wherein we expect a major chunk of chemicals manufacturing to be diverted to India as the global players tend to de-risk their supply chain,” it said in a report.
The biggest drop in the BT500 list was Future Retail’s, tumbling 289 places to rank 499. The consumer retailer’s shares have retreated nearly 43 per cent to Rs 52 in the 12 months through September. Future Retail’s losses have been mounting as the pandemic and resultant lockdowns hammered its operations. It posted a loss of Rs 1,147 crore in the first quarter of FY22, which was its sixth quarterly loss in a row. The planned $3.4-billion sale of its retail assets to Reliance Industries is also in legal limbo after Amazon challenged the deal, further denting the stock.
One place above Future Retail is Chalet Hotels, which slid 179 spots to 498. However, its stock price actually rose 75 per cent in the past 12 months to around Rs 241 as of September 30, while its 12-month average daily market capitalisation was Rs 3,446 crore. But that is lower than the average market cap of Rs 4,730 crore over the 12 months ended September 30, 2020, when the stock dropped 56 per cent.
Antique Stock Broking, however, believes the stock can hit Rs 400 in the next 12 months. It estimates Chalet Hotels—whose portfolio includes the JW Marriott and Lakeside Chalet in Mumbai—will top even its pre-pandemic revenue numbers “on the back of both cyclical and secular tailwinds. Over FY21-25, we see the company growing at CAGR of 55 per cent. We see the hotels segment bouncing back strongly and expect that by FY23-24, things will normalise”.
Spandana Sphoorty Financial recorded the third-biggest rank drop, falling 151 places to 452. Like in the case of Chalet Hotels, Spandana Sphoorty’s shares rose (11 per cent) between October last year and September this year, but its 12-month average daily market capitalisation fell (to Rs 4,176 crore from Rs 5,246 crore). The NBFC’s recent quarterly results have not made for pleasant reading. It swung to a loss in the third quarter of FY21, from a year-ago profit. Its profit slid 46 per cent in the fourth quarter, followed by a 13 per cent fall to Rs 47.52 crore in the quarter ended June 30.
Slipping 136 places to rank 441 was Engineers India Limited (EIL), which provides engineering, procurement and construction services mainly to oil and gas companies. The public sector undertaking is afflicted by a slowdown in orders. EIL secured business worth Rs 1,569.12 crore in FY21, less than the Rs 1,617 crore of orders in FY20 and well below the Rs 6,000 crore in FY19. “The current global pandemic crisis due to Covid-19 has impacted the entire Indian economy and EIL is no exception,” it said in its annual report.
Rounding out the top five is Ujjivan Small Finance Bank, which dropped 130 slots to rank 397. The stock has fallen 33 per cent in the 12 months through September and has been under particular pressure for the past few months. This is because the private sector lender swung to a Rs 233-crore loss in the June quarter, from a year-ago profit of Rs 55 crore, due to shrinking business and rising stress on asset quality. Then CEO and MD Nitin Chugh resigned in August for personal reasons. “The exit of the CEO and other senior management does not augur well for the bank with much higher credit costs and delayed recovery cycle. Return on equity normalisation and the new team will take 6-12 months to be in place, and the stock will continue to underperform during the period,” broking firm Axis Capital said in a note.
Although small banks and lenders like Spandana Sphoorty and Ujjivan Small Finance Bank had a tough year, their prospects seem healthy. As India moves towards full vaccination and its economic revival gathers steam, consumption-driven sectors will likely outperform, Shrikant Chouhan, Head of Research at Kotak Securities, said in a research note.
“Banks can be in focus led by demand revival in the retail sector such as housing, auto and unsecured loans. A low interest rate regime leading to improved affordability will continue to fuel sales momentum in the residential real estate sector. We also expect strong performance of construction companies over the next one year on account of the government’s impetus towards the infrastructure sector,” he said.
However, Joseph Thomas, Head of Research, Emkay Wealth Management, advises caution. “As the market continues with its upward trajectory, with rising prices, the probability of a corrective downward movement becomes higher compared to the potential to move up. Apart from the inflation factor, the likelihood of the US Federal Reserve initiating the tapering of bond purchases by November and the prognosis for the dollar to firm up further may have its consequences for emerging markets and their currencies. At this juncture, phased investments into large-caps and mid-caps, and also balanced advantage funds may be considered.”
That could well lead to even sharper changes in the BT500 ranks next year.
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