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Biggest wealth-creators for shareholders
Rajesh Kumar, Outlook Money |
November 21, 2007
The Indian stockmarket is witnessing its biggest-ever bull run - high economic growth and favourable market conditions have allowed companies to grow at a very high pace and create wealth for shareholders.
Outlook Money awarded seven such companies across large, mid and small market capitalisations. The winners were determined after a rigorous number crunching exercise of all companies listed on BSE. The numbers of the last three financial years collated from CMIE Prowess were studied to arrive at the winners.
It was not only price appreciation that decided the winners, but also all fundamental indicators that go into building a company. Although market return got 35 points in weight distribution, the rest was divided among indicators, including topline and bottomline growth, return on capital employed, return on net worth, net profit and margins for the last three financial years.
It cashed in on india's future
Bharti Airtel [Get Quote], the third-most valuable company in terms of market capitalisation as on 30 September, is an established value creator. There are hardly any equity portfolios in India that do not have this scrip. Bharti Airtel is India's leading private sector telecommunication service provider in terms of the number of users.
At present, it had over 4.8 crore GSM cellphone and over 20.75 lakh broadband and telephone customers. Under the brand Airtel, the company has three individual strategic business units - mobile services, broadband and telephone services, and enterprise services. The company has been a clear beneficiary of the India growth story and the expansion of network and reach came at the right time for it.
This can be seen in its results. It has seen a net profit growth of over 2,000 per cent CAGR in the last three years, while the return on capital employed was over 33 per cent in the same period. On trading screens, Bharti Airtel has led major rallies in the last three years and rewarded shareholders with over 500 per cent returns.
Airtel continued its excellent performance in the September quarter, when it not only improved its financials, but also rea-ched a landmark in terms of reach of services. It now provides telecom services in 2,90,000 towns and villages with a total market share in mobile telephony at 23.4 per cent. It added 6.3 million customers in a single quarter. On the financial front, the revenue was up 45 per cent, while net profits up by 73 per cent.
Growing by leaps and bounds
The erstwhile Asea Brown Boveri, now ABB, has business interest in power and automation technologies. Capacity expansion in the Indian power sector hugely benefited ABB. Its net profits grew at 40 per cent CAGR in the last three years. While its average return on capital employed was 45.22 per cent, the stock has given a return of 732 per cent during the same period
Glenmark Pharmaceuticals [Get Quote] is a leader in discovery of new molecules and is focused in areas of inflammation and metabolic disorders. Glenmark's sales have grown at 34.24 per cent CAGR in the last three years, while its profit after tax went up by 47.51 per cent CAGR during the same period. The stock gave a return of over 1,000 per cent during the last three years.
Translating its vision into profits
Praj Industries [Get Quote] (PIL) was founded in 1985 by a team of technocrats with the objective of designing, fabricating and installing plants for producing ethanol from molasses, a by-product of the sugar units. The company's business line includes alcohol plants, fuel ethanol plants, bio-diesel plants, brewery plants, waste water systems, evaporators, and mashtone. With its presence in 40 countries across five continents, it is the single-largest supplier in this select markets.
Earlier this year, after understanding the need for bio-fuels, the company expanded its bio-fuel solutions offering and launched bio-diesel technology, plant and equipment services. These services, launched in April, encompass in-house developed turnkey solutions, including agriculture knowhow, technology, engineering, equipment and project management services.
The company understands that diesel will account for 60 per cent incremental growth in transport fuel. Bio-diesel can work as an alternative to conventional oil. With its superior understanding of agriculture-based raw materials, Praj offers plants that have the capability to process a wide range of feedstock.
The company has created a separate division to promote bio-diesel. It recently inaugurated its manufacturing facility at the Special Economic Zone (SEZ) in Kandla, Gujarat. Along with a commissioned area of about 75,000 square feet and a capacity of making 3,500 tonnes of equipment, the plant also enjoys close proximity to the port, which will reduce its transportation cost.
This vision of the company is translating well to its profit and loss account and balance sheet. Investors who showed confidence in the stock have been well rewarded. The sales for the company have grown at 77.26 per cent CAGR, while profits have grown at the rate of 119.88 per cent CAGR in the last three financial years. The stock has appreciated over 5,000 per cent during this time, with return on net worth standing at over 66 per cent.
Making a better future
Kalpataru Power Transmission is one of the leading companies in the field of turnkey projects for EHV Transmission Lines up to 800 KV in India and overseas. Its scope of work includes design, testing and fabrication, galvanising of towers and construction activities, including survey and civil work.
The stock returned over 5,700 per cent in the last three years as the company's sales grew at 63.58 per cent CAGR and the profit after tax rose by 124 per cent CAGR. It now has a $825-million order book, a clear indication of future earnings. In September, the company bagged its single largest order of Rs 997 crore for feeder separation from the Maharashtra State Electricity Distribution Company.
Reading the market pulse for returns
This Bangalore-based company is primarily in the very specialised and technology-oriented medical equipment industry. Opto Circuits (India) (OCI) has the status of being an export house and has been awarded two-star trading house status by the Government of India. The product range includes pulse oximeters, pulse oximeter sensors, fluid warmers and cholesterol monitors.
The company has four subsidiaries, two of which are based outside India. Mediaid Inc., a wholly-owned subsidiary incorporated in the US in 2002, has an established distribution network in the US, Latin America and Europe.
The second, Eurocor GmbH, is a 100 per cent subsidiary of OCI. It is a European life sciences technology company, which specialises in research, development and manufacture of interventional cardiology products.
The third, Altron Industries, is an ISO 9001 certified company and is in electronic manufacturing services with its manufacturing facility in Bangalore. The fourth subsidiary, AMDL, is a listed company in the business of manufacturing and marketing of critical cardiac-care and other equipment. The company has its manufacturing facility in Bangalore and marketing offices across India.
The net profit for OCI has gone up by 76 per cent CAGR in the last three years, while sales was up 51 per cent CAGR. During the same period the average return on capital employed was 46 per cent while the stock returned 4,600 per cent.
When small makes it big
Established in 1985, KS Oils [Get Quote] is one of the leading manufacturers of mustard and rapeseed oil in India. The key manufacturing facility of the company is situated at Morena in Madhya Pradesh. KS Oils is a leader in the edible oil industry. Its flagship brands are 'Double Sher' and 'Kalash' mustard oils. 'KS Refined Oil', and 'Crystal Clear' are soya vegetable refined oils, while 'KS Gold' Vanaspati Ghee and KS Gold Plus play in the vanaspati and ghee space.
The company's leadership position is reflected in its numbers. Its net profit has gone up over 193 per cent CAGR in the last three years. The stock has posted returns in excess of 18,900 per cent during the same period.