wealth-insight - Dec 2022

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December 2022
Volume XVI, Number 6 COVER STORY
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4 Wealth Insight December 2022

Columns
INSIGHT
EDIT
by DHIRENDRA KUMAR The
Winning by not losing deep-diver
One of the basic tenets of Aditya Shah
Followers
investing is that avoiding mistakes is Twitter page @AdityaD_Shah 61.7k
far more important than making brilliant choices
MARKET MOVES MARKET COMPASS

Market Reporter Market barometer
Monthly Agenda: IPO tracker
Quarterly Institutional moves
STRAIGHT TALK
by ANAND TANDON result update
Change in promoter stake
Beating the Street Stock Story: Divi’s Labs
Pledging tracker
Indian markets and companies Big Moves
have done well lately amid
Index Watch:
the global weakness. What’s next?
S&P BSE PSU ANALYST’S DIARY
Dyed in black
Our ever-growing love
PASSIVELY YOURS for SUVs
Time to redeem
your passive fund?
EVERYDAY ECONOMICS
by PUJA MEHRA STOCK ADVISOR
The population WORDS WORTH WISDOM A game of percentages
problem How to think like a
Equity investments are never
India will soon replace China as perfect – it’s always a matter of
business owner working to improve your
the most populous country.
percentages
How concerning is that? ANAND SRIDHARAN
Investor, Nalanda Capital

MAIN STREET
by SAURABH MUKHERJEA
The rise of STOCK SCREEN

Indian women Blue-chip and value
As India reaps the benefits of stocks
economic reform, Indian women – more than
Indian men – are emerging as gamechangers WORDS WORTH NOW
DISCLAIMER
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
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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
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to the jurisdiction of Delhi courts only. ALL RIGHTS RESERVED
December 2022 Wealth Insight 5

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EDIT
Winning by not losing

One of the basic tenets of investing is that avoiding mistakes
is far more important than making brilliant choices
DHIRENDRA KUMAR
It’s the season for all things football, Now let me tell you about a defender’s save. Someone
and YouTube, WhatsApp, Telegram, etc., are full of some pitches a stock to you. You think of buying it, do some
amazing videos of football action from the past. Obviously, research, find something dubious and then abandon the
the most numerous are those of great goals. A much idea. Soon, the stock crashes. That’s all. It was never
smaller number is that of great saves by goalkeepers. This even an investment – just a temptation in your head.
is understandable, as the part of football that is easiest to However, stopping yourself from making that investment
enjoy is the goals, with saves being a distant second. I is actually worth as much as making one which gets
came across one, which was a compilation of some truly good returns. To paraphrase a bit: a rupee not lost is a
great saves at the mouth of the goal by defenders. To my rupee earned.
(admittedly untrained) eye, these look much more The idea is simple, ‘Winning by not losing’. It means
remarkable than goalkeepers’ saves because, obviously, that one of the basic tenets of investing is that avoiding
these are done without hands. mistakes is far more important than making brilliant
Saving one’s side from a sure goal is just as much of choices. Far too many investors, whether when they are
value in football as scoring a goal and there are similar choosing stocks to invest in, are obsessed with finding the
situations in most sports. In cricket, there’s a saying that absolute top performer and then sticking to it.
‘a run saved is a run scored’. Of course, all these great Unfortunately, unless you are a genius and lucky, this
saves are basically lost to history. They don’t show up in doesn’t happen. What does happen is that such investors
any scoreline and are not really remembered after a while. flit from idea to idea, generally chasing past performance
As with many things, I’m constitutionally unable to and buying into yesterday’s winners in an effort to spot
move past any such thing without seeing an obvious the greatest winner. Once in a while, it works out.
analogy to investing, so let’s talk about that. You buy a At Value Research, our team keeps these principles
stock and later sell it for profit – that’s a part of your close to heart. Our entire process of analysing stocks,
investing story. The returns you make will forever be a whether for this magazine or for our premium Value
part of your investing track record and you will be proud Research Stock Advisor, is strongly rooted in an
of them, and you will feel the pride when you spend the elimination process. Whenever we are making any kind
money you made. That’s a goal. of selection, first we eliminate those stocks that have
So, what’s a save? Here’s a scenario. You buy a stock anything negative about them. It does not matter what
and it goes up a bit but then you find that actually, the the positives are, there are a set of no-go signals that
company is not a good investment and it might be better to really are no-go. The checklist of negatives is sacrosanct.
get out and redeploy the money. You sell and after that the Later in the process or after investing, this provides
stock falls and falls a lot. If you had kept your belief in your great comfort. Even if an investment thesis is wrong,
original thesis, you would have lost a lot of money. In our there is no great disaster. One can always sell a stock if it
football analogy, that’s a goalkeeper’s save. It’s not part of turns iffy or some better alternative comes along.
your scoreline but it’s there in the record and you can The important thing is to recognise the danger and
justly feel proud of it. make the save in time.

INSIGHT
INSIGHT
Aditya Shah
@AdityaD_Shah
61.7k | Followers
The deep-diver
Why Follow
Zero interest rates gave rise to:-
A
z15-Minute Delivery
CFA charter
zBuy Now Pay Later Mania
holder,
zCrazy Ed-tech Mania
Aditya Shah
Now as Cost of Money becomes crazily expensive The start-up market
is the founder of implodes:- Only businesses with real+good products will survive!
JST Investments (a
financial-advisory
Every company has its strength and weaknesses! If u cant hear
firm). On his Twitter negative facts about ur own holdings! U are not ready for direct equity!
page, he discusses
various sectors, trends
As inflation cools, prices of many commodities have come down!
and companies in Many companies are now stuck with higher-cost inventories....which
detail, focusing on will lead to write-down of the inventories and a temporary loss! A
the pharma, banking phenomenon seen especially in specialty chemicals and FMCG
companies!
and NBFC sectors.
From time to time,
he also advises on When the upcycle in a sector is very strong Poorly managed
companies also make returns 2021 steel cycle- SAIL went up from 30
personal finance. He
to 120 Now in the current credit upcycle:- PSU Banks are making
strongly advocates money! But does this mean credit culture has changed for PSU Banks?
understanding No evidence of that
businesses deeply and
often discusses business Scale of HDFC Bank- The bank last raised equity capital in 2018
models. He firmly 10,000cr of profits has helped the company to not dilute equity
believes that patience IDFC First Bank- Equity dilution- Raised 3000cr in 2021 Again raising
4000cr Big dilution of equity
and conviction are the
Scale helps big banks to not dilute equity fast
path to wealth creation
in stock investing.
MARKET
MOVES MARKET REPORTER
Sensex makes a new Big Tech sees

lifetime high massive layoffs
On November 16, 2022, the Sensex Amid challenging business
reached its all-time high of 61,981, conditions, tech companies,
as the US reported lower-than- including Amazon, Alphabet,
expected inflation of 7.7 per cent Meta and Twitter, announced
in October. Lower inflation in layoffs. Twitter’s CEO Parag
the US is expected to encourage Agarwal was the first to be fired
the US Fed to ease monetary following Elon Musk’s $44 billion
tightening. The Sensex had made takeover. The company’s CFO,
its last high on October 18, 2021. head of legal, head of ad sales and
around 90 per cent of Indian
employees were fired. Following
in its footsteps, Amazon and
US Fed and BOE hike Google have planned to lay off
around 10,000 employees. Meta
rates has let go of 13 per cent of its
The US Federal Reserve’s (Fed) employees.
fourth consecutive 0.75
percentage-point rate hike lifted
the US benchmark federal-fund
rate to a range between 3.75 and 4
per cent. The Fed plans to keep
raising it, albeit in smaller
increments. Meanwhile, with 0.75
percentage points, the Bank of
England undertook its largest
rate hike in 30 years, thus taking
Global economic
the benchmark rate to 3 per cent outlook gets
gloomier, says IMF
(the highest since 2008).
The International Monetary
`14,752cr
Fund (IMF) said that the global
economic outlook is worse than
what was projected earlier,
owing to inflation, monetary CONSOLIDATED NET
tightening, supply disruptions
and food insecurity because of
PROFIT REPORTED BY SBI
the Russia–Ukraine war. Last IN Q2 FY23, SURPASSING
month, IMF cut down the 2023 EVEN THE Q2 NET PROFIT
growth forecast to 2.7 per cent
from 2.9 per cent previously.
OF RELIANCE INDUSTRIES
FTX files for bankruptcy

FTX, one of the biggest cryptocurrency exchanges, filed for bankruptcy. FTX also
had a hedge fund that traded cryptocurrencies for profit. Following a report by
CoinDesk (a cryptocurrency news site) that brought to light potential solvency
issues at the hedge fund, customers made a run on the exchange looking to
withdraw their funds. The company owes its 50 biggest creditors nearly $3.1 billion.

MARKET
MARKET REPORTER MOVES
Lock-in period of recently listed

start-ups ends
As the lock-in period for promoters and
early investors of Paytm, Nykaa,
Delhivery and Policybazaar expired in
November, all eyes were on whether
there would be a mass exodus. So far,
Adani Group in action only Paytm and Nykaa have seen
Adani Power will sell a 100 per their early investors paring down
cent stake in Support Properties their stake. Shares of Paytm touched
(a wholly-owned subsidiary) to an all-time low after SoftBank sold 2.9
AdaniConneX (a data-centre pro- crore shares in a block deal. SoftBank
vider and a joint venture between (SVF India Holdings) held a 17.5 per cent
Adani Enterprises and stake before the sale and this brings its stake
EdgeConneX) for `1,556 crore. down to around 12.9 per cent. The stock has now fallen 77 per cent
Adani Ports, on the other hand, from its issue price of `2,150.
acquired a 49.4 per cent stake in Meanwhile, Mohit Gupta, co-founder of Zomato, resigned from
Indian Oiltanking (an operator of the company. This is the third high-profile exit from Zomato within
liquid-storage facilities) for a month.
`1,050 crore.
Adani group is also acquiring a
51 per cent stake in West
Container International Terminal
Nirav Modi loses
(a port in Colombo, Sri Lanka) for appeal against
`5,700 crore. This will make the
group the first Indian port opera- extradition
tor in Sri Lanka.
`15,952cr
Nirav Modi lost his appeal
The group has also received against extradition to India.
approval from the market regula- He will be facing fraud and
tor SEBI to acquire an additional money-laundering charges
26 per cent stake in NDTV in the `11,400 crore PNB PROFIT POSTED BY LIC IN
through an open offer at `294 per loan scam.
Q2FY23, 11 AND 23 TIMES
share. The open offer was delayed
by a month due to the lack of reg- MORE THAN ITS Q2FY22
ulatory approval. Adani Group AND Q1FY23 PROFITS,
already holds 29.2 per cent and fol- RESPECTIVELY, ON THE
lowing the successful completion
of the offer, the group will hold a BACK OF AN ACCOUNTING
55 per cent stake in NDTV. CHANGE
NCLT approves Reliance Industries’ acquisition of

Reliance Infratel
The National Company Law Tribunal (NCLT) has approved the resolution plan submit-
ted by Reliance Projects & Property Management Services (a subsidiary of Reliance
Industries) for the resolution of the debt-laden Reliance Infratel (an Anil Ambani group
company that holds the tower and fibre assets of Reliance Communications), thus clear-
ing the decks for the acquisition of the latter by the former. The NCLT has directed the
company to deposit the resolution amount of `3,720 crore in an escrow account.

MARKET
MOVES MARKET REPORTER
ECONOMIC METRICS
`1,708cr .:;JVSSLJ[PVU
200000
150000
In ` cr
AMOUNT TO BE PAID BY RHI

MAGNESITA FOR THE 100000
ACQUISITION OF DALMIA 50000
BHARAT REFRACTORIES 0
(DBRL) October 2020 October 2022
0UMSH[PVU!*VUZ\TLY7YPJL0UKL_
Hinduja Brothers 8 % change YoY
announce truce 7
6
In a bid to end a long family
dispute, the Hinduja family 5
brothers have announced a
4
truce. The move was in view of
October 2020 October 2022
Jet Airways struggles to the health and welfare of S P
Hinduja. According to reports,
launch; Air Asia exits S P Hinduja’s family has 0UK\Z[YPHSHJ[P]P[`!0UKL_VM
Jet Airways’ plan to resume its alleged that his three brothers 0UK\Z[YPHS7YVK\J[PVU
operations has been delayed as the cut them off financially, while 180 % change YoY
National Company Law Appellate the brothers have alleged that
120
Tribunal (NCLAT) has directed the the family misappropriated S P
Jalan-Kalrock consortium to settle Hinduja’s money. The brothers 60
the unpaid gratuity and provident- (S P Hinduja vs others) are yet
0
fund obligations. On the other to reach a settlement over
hand, Air Asia has ended its tough business feuds. -60
September 2020 September 2022
journey in India as it sold the
remaining 16.7 per cent stake in its
India venture to Air India. As 059]Z<:+
revealed by Air India, the process
84
of merging Air Asia India with Air
India Express and creating a single 81
low-cost airline has begun.
78
75
Government releases the fourth 72

November 2020 November 2022
draft of data-protection bill
After revising its earlier version, the government *Y\KLVPS
released the new Digital Personal Data Protection
150 Brent $/barrel
Bill. The bill focuses on regulating the collection,
maintenance and process of a citizen’s personal 120
information and data. It lays out rules for those
90
entities that collect and manage user data and
gives individuals the right to know exactly what 60
data of theirs is collected and how it is processed.
30
November 2020 November 2022

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MARKET
MOVES MONTHLY AGENDA
Quarterly result update

How various sectors have performed in Q2 FY23 in terms of revenue,
profit and margins and which companies stand out
To find out which companies are included in each of the sectors, visit https://vro.in/stocks/selector/
Change in median operating

2EVENUE GROWTH /PERATING PROÜT GROWTH 0!4 GROWTH PROÜT MARGIN PT
Sector QoQ YoY QoQ YoY QoQ YoY QoQ YoY
Automobile 9.4 31.1 62.7 57.1 170.0 128.7 1.3 -0.8

Banking 9.3 18.7 10.5 22.3 32.3 56.0 0.4 0.5
Capital Goods 6.2 12.0 23.1 12.7 -8.0 32.6 1.1 1.0
Chemicals 5.2 35.1 -12.0 20.3 -22.0 17.3 -1.6 -1.3
Communication 6.5 17.0 21.2 38.4 -7.4^ 8.1^ 2.0 1.6
Construction 6.0 18.7 2.8 15.1 15.4 67.9 -2.8 -1.7
Cons Discretionary 31.1 60.1 -5.6 5.7 -12.1 -7.3 0.1 -2.2
Consumer Staples 1.7 18.4 -1.3 12.5 12.5 27.5 0.0 -0.7
'LYHUVLÀHG -3.0 24.7 -32.0 7.0 -31.7 26.8 -1.7 -1.6
Energy -5.4 35.8 -20.8 -24.0 -25.9 -43.2 -2.0 -4.4
Financial 25.0 13.0 20.0 22.8 19.9 21.1 2.6 0.7
Healthcare 4.2 9.5 -6.2 -8.4 -12.0 -23.4 1.3 -1.6
Insurance 29.2 18.5 – – 610.0 367.3 – –
Materials -7.8 17.4 -47.4 -17.6 -43.0 -11.9 -4.1 -4.3
Metals & Mining -1.0 12.1 -53.4 -64.4 -62.0 -75.1 -2.1 -6.0
Services 0.8 52.8 -3.9 47.4 43.0 -24.6 -0.9 2.1
Technology 5.2 20.9 8.5 9.1 8.5 7.0 1.0 -0.9
Textiles -1.9 4.3 -22.6 -39.4 -25.3 -43.6 -1.4 -5.3

Operating profit is represented by EBIT or earnings before interest and tax (excluding other income). ^ Indicates increase or decrease in loss. For the banking sector, net interest income
and net interest margin in place of operating profit and operating profit margin, respectively. Q2 FY23 data available for 1,268 companies as on November 18, 2022. Min m-cap `500 cr.

MARKET
MOVES
;VWJVTWHUPLZI`8YL]LU\L ;VWJVTWHUPLZI`87(;
2,33,014 2,32,863 15,854
In ` cr In ` cr
14,752
13,656
1,68,656 11,125
10,431
1,32,632 1,28,356
Indian Oil Reliance ONGC LIC BPCL LIC SBI Reliance HDFC Bank TCS
Industries Industries
;VWJVTWHUPLZI`8YL]LU\LNYV^[O ;VWJVTWHUPLZI`8YL]LU\LJVU[YHJ[PVU
2,17,633 Raghuvir Vardhman National Sterling & Wilson
In %, YoY Synthetics OMDC Holdings Standard Renewable
-78.3
48,400 In %, YoY
35,275
18,547 -84.4
4,733 -85.2
-87.0
RattanIndia Cressanda Aurum Eureka SG
Enterprises Solutions Proptech Forbes Finserve -88.6
;VWJVTWHUPLZI`87(;NYV^[O ;VWJVTWHUPLZI`87(;JVU[YHJ[PVU
45,932 Uttam Capital India Sanghi Tata Steel
In %, YoY Sugar Mills Finance Industries Wockhardt Long Products
28,350
-656 -579
-1,096
In %, YoY
8,581
-1,570
5,857 5,445
Lloyds Metals Zen Binny GMR Airports Liberty

& Energy Technologies Infra Shoes -2,382

MARKET
MOVES STOCK STORY DIVI’S LABORATORIES
Indian pharma’s crown jewel

Over the years, Divi’s Laboratories has emerged as a leading
IP-compliant contract manufacturer. Here is its story.
I
n the 80s and 90s when Indian pharmaceutical companies.
pharma companies were fighting Over the years, Divi’s has
for a spot in the US generic emerged as the preferred partner
market, Murali Divi, the founder of to many pharmaceutical giants,
Divi’s Laboratories, had a different such as GSK, Pfizer, Abbott and
idea. In 1990, the company came into more. To this day, Divi’s has never
being as a consulting firm, selling lost a client on account of IP
the most innovative way for API infringement. Even in 2021, Merck
(active-pharma ingredients – key & Co selected Divi’s as the
raw materials in drug production) authorised API manufacturer for
manufacturing to its clients. Then its oral COVID drug.
the company ventured into Over the last 10 years, its
manufacturing APIs two years later. revenue and profits have grown at
During that period, western 17 and 19 per cent per annum,
companies were hesitant about respectively, while it maintained a
outsourcing production as Indian median operating margin, net
companies were trying their best to margin and ROE of 34, 27, and 26
replicate the former’s intellectual per cent, respectively. In the last
property (IP). Against this 10 years, Divi’s has given 19 per
backdrop, Divi’s positioned itself as cent returns per annum as
an IP-compliant and non-competing compared to 13 per cent by the
contract manufacturer. This Sensex. But due to the receding
strategy, coupled with India’s entry pandemic, which has affected its
into the TRIPS agreement (Trade- revenues from the COVID drug,
Related Aspects of Intellectual and having to wait till FY24 for the
Property Rights – an international expiry of the next big patent (after
agreement between all member which it can start manufacturing
nations of the World Trade that drug), the stock is down 30
Organization) in the 1990s and its per cent year to date.
strong regulatory compliance, By Udhayaprakash
attracted various western Sensex rebased to Divi’s stock price
Divi’s Laboratories Sensex
4H` 1HU (WY

The USFDA inspects Increases The USFDA inspects Announces setting up
Divi’s Choutuppal shareholding limit of the Vishakapatnam of a manufacturing 1HU
plant and reports no FIIs from 24 per cent plant for the first time unit in Vishakapatnam Announces plans to set up
violation of prescribed to 30 per cent a third manufacturing facility
standards in Kakinada
Sep 11, 2012

`
Aug 8, 2007
`
Mar 12, 2003
`

MARKET
STOCK STORY MOVES
5HYHQXHDQGQHWSURÀW Company vs industry

Revenue (` cr, left side) Operating margin ROE ROCE
Net profit (` cr, right side) Operating margin (%) ROE (%) ROCE (%)
10000 3500 Median industry operating margin (%) Median industry ROE (%) Median industry ROCE (%)
50 35 40
8000 2800
40 30 32
6000 2100
30 25 24
4000 1400
20 20 16
2000 700 10 15 8
0 0 0 10 0
Mar-13 Mar-22 Mar-13 Mar-22 Mar-13 Mar-22 Mar-13 Mar-22
Industry constituents include pharma companies in the BSE Healthcare Index
Oct 14, 2021

`
4H`
FY22 revenue
4H`
crosses $1
Merck & Co. selects
billion
Divi’s as the
authorised API
manufacturer for
molnupiravir
Jan 6, 2021
`
May 26, 2022
`
4HY
Its Vishakapatnam Mar 18, 2021 Nov 17, 2022
plant receives an ` `
import alert from the (\N
USFDA Receives
environmental
clearance for the
modernisation of its
bulk drug unit
May 24, 2019

6J[ `
Completes 25 years Sep 26, 2016 Mar 18, 2020
in operations ` `
Aug 31, 2015
`
4H`
Announces $250
million expansion
plans in both
May 25, 2017 manufacturing plants

`

MARKET
MOVES BIG MOVES
Large caps Price to earnings Net profit (` crore)

3M returns (%) 3Y avg RoE (%) 3Y earnings growth (%) 3M price (`) movement
314
36.1 0.9* 8,252

Canara Bank
Q2 net profit jumped 106 per cent YoY.
3.3 25.4 231
162
34.5 0.9* 9,748

Bank of Baroda
The stock hit a 52-week high after a 57 per cent jump in Q2 net
profit. 4.1 15.1 120
564
34.2 62.4 2,182

Ambuja Cements
The Adani family was allotted warrants worth `20,000 crore.
13.5 -13.9
420
4,001
27.8 372.9 1,006

Adani Enterprises
A 261 per cent YoY jump in Q2 profits and its inclusion in Nifty
50 augured well. 3.9 12.2
3,130
50
25.1 1.5* 2,874

IDBI Bank
The government and LIC decided to sell their stakes, while its
Q2 profits jumped 32 per cent. -10.1 18.3 40
6,526
18.9 1.7* 281

Bajaj Holdings
Q2 profits jumped 69 per cent YoY and the company announced a
dividend of `110 per share. 0.4 16.4
5,487
2,569
18.2 57.3 1,155

Tube Investments
Its subsidiary launched an electric three-wheeler, while its Q2
profits jumped 21 per cent YoY. 23.6 56.7
2,173
1,103
11.7 49.8 1,501

Varun Beverages
Q2 revenue and profits jumped 33 and 53 per cent YoY,
respectively. 15.9 49.4
987
1,210
7.7 53.3 822

Patanjali Foods
While its four group companies are coming up with IPOs,
it set up a palm-oil mill. 12.1 83.0
1,123
-17.0 375.2 886

Adani Transmission
3,019
Q2 profits slipped 33 per cent YoY.
18.7 5.6 3,636
*Price to book value. Our large-cap universe has 104 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 on November 21, 2022.

MARKET
BIG MOVES MOVES
Mid caps Price to earnings Net profit (` crore)

774
152.7 19.2 757

Mazagon Dock
A stealth frigate was launched and its Q2 profits jumped
55 per cent YoY. 13.8 6.2
306
76
89.4 0.8* 5,999

Union Bank of India
Q2 net interest income and profits jumped 17 and 23 per
cent YoY, respectively. 1.2 40.9 40
77
54.7 0.6* 2,971

Bank of India
The board approved the issue of AT-1 bonds to raise up to
`2,500 crore. 1.8 3.9
50
470
54.4 10.9 1,029

Allcargo Logistics
The stock soared as the Blackstone deal is expected to be
completed soon. 15.7 58.7
304
54.3
2,337
Tata Investment Corp 46.1 250
Q2 profits increased by 32 per cent YoY.
1.2 25.2
1,514
268
51.1 0.7* 4,162

Indian Bank
Q2 net interest income and profits jumped 15 and 14 per cent
YoY, respectively. 7.6 35.9
178
26.2 – -79
Tejas Networks 617
The company received the approval for the PLI scheme and
will invest `750 crore. -7.2 -204.2
489
13.9 4.3 2,333

Suzlon Energy 8
The launch of the `1,200 crore rights issue pushed
the stock up. – 53.4 7
-6.1 – -1,171
Tata Teleservices
106 99
While the share rose because of its partnership with Renesas
Electronics, it fell as the company posted a loss in Q2. – 14.7
-25.8 – -909
PB Fintech 555
412
Tiger Global sold a 3 per cent stake in the company.
-24.6 -174.9
*Price to book value. Our mid-cap universe has 246 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 on November 21, 2022.

MARKET
MOVES BIG MOVES
Small caps Price to earnings Net profit (` crore)

304
117.7 153.4 8
Axiscades Technologies
Q2 net profits increased by 662 per cent YoY.
3.5 10.0
140
359
113.9 36.5 17
Liberty Shoes
It posted a profit of `6 crore as opposed to a loss of
`11 lakh in Q2FY22. 2.4 16.7
168
1,088
109.4 27.4 40
Tanfac Industries
A 7 per cent YoY jump in Q2 revenue and general market
conditions pushed the stock up. 34.2 24.1 519
178
91.9 36.4 22
Nikhil Adhesives
It announced a capacity expansion for its new product
re-dispersible polymer. 26.8 49.1
92
591
88.1 2.7 386

Jindal Poly Inv
Institutional investors increased their stake, while general
market conditions augured well. 42.6 53.5
314
454
82.1 27.6 49
Lancer Containers
Q2 profits jumped 164 per cent YoY, while it signed an MoU
with the African Peace and Security Union. 31.9 48.8 249
970
81.7 – -417
Inox Wind Energy
It sold three SPVs to Adani Green and its subsidiary is
RXWZLWKDQΖ32b – – 534
149
78.0 58.4 22
Kuantum Papers
Q2 net profits jumped 401 per cent YoY.
3.0 -35.5 84
77.6
97
DB Realty 3.2 1,055
News about the merger with Adani Realty and a 267 per cent
YoY jump in Q2 profits acted as catalysts. -11.0 121.0 55
54.3 22.4 46
Vinyl Chemicals 558
Q2 net profits jumped 191 per cent YoY.
24.2 59.6 362
Our small-cap universe (minimum market capitalisation `500 crore) has 929 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 on November 21, 2022.

MARKET
MOVES INDEX WATCH
S&P BSE PSU

With returns of 11.0 per cent, the BSE PSU index is one of the best performers over the last
three months. However, it has underperformed the Sensex over the last five years. It is trading
around its five-year median P/B and at a discount to its five-year median P/E. Its dividend yield
is at a premium to its median. So, valuation-wise, it appears to be attractively placed.
2LÙ\TILYZ 0UKL_TV]LTLU[ ):,7:<:LUZL_4LKPHU

19,000
9.1
Price to earnings
1.2
Price to book
16,000
13,000
10,000
3.97
Dividend yield (%)
26.0
Market cap (`lakh cr)
7,000
4,000
Sensex rebased to index
Nov ’17 Nov ’18 Nov ’19 Nov ’20 Nov ’21 Nov ’22
0UKL_^LPNO[Z 7YPJL[VIVVR]HS\L7)
4.0
3.2
:)0 2.4
5;7* 1.1
1.6
7V^LY.YPK
0.8
65.*
06* 0
Nov ’17 Nov ’18 Nov ’19 Nov ’20 Nov ’21 Nov ’22
*VHS0UKPH
),3

)7*3 7YPJL[VLHYUPUNZ7,
)HURVM)HYVKH 40
.(03
32

6[OLYZ
24
Valuations, dividends and returns 16 11.9

Dividend 8
Company name P/B P/E yield (%) 1Y return (%)
0
Bank of Baroda 0.9 8.9 1.8 68.2 Nov ’17 Nov ’18 Nov ’19 Nov ’20 Nov ’21 Nov ’22
BEL 6.1 27.9 4.3 51.7
Coal India 8.2 11.5 7.4 49.6
NTPC 1.2 10.0 4.3 21.6 +P]PKLUK`PLSK
6.0%
SBI 1.9 14.5 1.2 18.7
Power Grid 2.3 9.7 6.7 13.8 4.5
GAIL 1.0 5.7 11.2 -4.6 3.3
3.0
ONGC 0.7 3.7 3.0 -12.2
IOC 0.8 10.3 18.0 -18.8 1.5
BPCL 1.5 – 5.2 -23.5
0
Data as on November 21, 2022 Nov ’17 Nov ’18 Nov ’19 Nov ’20 Nov ’21 Nov ’22

WORDS
WORTH
WISDOM ANAND SRIDHARAN, Investor, Nalanda Capital
How to think like a business owner

Thinking like a business owner is the bedrock of successful stock
investing. But what does it really entail? Anand Sridharan explains.
A
nand Sridharan is an investor at Understood in the right spirit, it covers
Nalanda Capital (a hedge fund based everything: timeframe, nature of business,
out of Singapore). He has been with the priorities of investor, how to think about
fund since it was launched in 2007. An IIT stock-price.”
Chennai and IIM Ahmedabad alumni,
Sridharan has over 15 years of investing
experience. His blog, called ‘Buggy Humans
SRIDHARAN’S SIX-POINT APPROACH FOR
in a Messy World’, is a great source of
INVESTING LIKE A BUSINESS OWNER
investing wisdom for long-term investors. First, “own” suggests an indefinitely
Here’s a blogpost by him titled ‘Business long timeframe, if not permanence.
owner, not value investor’ (https://bit. Second, this in turn implies a very high bar on
ly/3GrNvJy) where he highlights businesses that are worth owning. If a
how the term ‘value investor’ is business isn’t sustainably safe and good, it
incorrectly understood and is impossible to own for an extended
suggests his own term ‘business period… An owner is limited to far fewer
owner’. He then goes on to businesses than an investor, whether
explain how to approach an ‘value’ or otherwise.”
investment like a business
owner. Third, focus is entirely on
business, not stock-price. Before
owning, we spend all our time
THE TERM ‘VALUE INVESTOR’
understanding the nature of the business,
IS MISLEADING
the context it operates in, what
The term has makes it sustainably good and
become an what risks can spoil the
oversimplified party. Many businesses
label for formulaic will drop off our list,
buying and selling either because they’re
of cheap crap with clearly not worth
little regard for owning or it’s simply
the nature of the too hard to reliably
underlying establish these traits.
business. While Likewise, after
this isn’t illegal, it owning, our focus
is a misnomer… is entirely on
What is called value whether the
investing is often business
neither value nor continues to be
investing.” worth owning.
Owners lead a
…If allowed sedate life tracking
only two words to pass business
on my investment performance, not
approach, I’d go with a frenzied one following
“Own businesses”. price action.”

WORDS
WORTH
WISDOM
Fourth, for the few businesses that On an ongoing basis, the question on an
are worth owning, owners seek a owner’s mind is ‘how’s my business doing’,
rational valuation not a cheap one… While no not ‘what’s it quoting at today’.”
one knows exactly what any business is
worth, it’s not hard to set rough limits above Business owners are value investors,
which business purchase becomes just not in the formulaic, commonplace
unreasonable.” usage of the term. We obsess a lot more about
what to own than about what to pay, though
Fifth, this automatically puts in the latter also matters.”
perspective the relative importance of
stock-price vs business fundamentals. Stock-
HOW TO SPOT A BUSINESS OWNER?
price matters, but only occasionally. Except
on rare occasions when markets offer a Way more investors claim to be
rational price for owning a business, squiggly business owners than are business
lines can be ignored. This is surprisingly good owners… my preferred metric for spotting a
for sanity and sleep.” business owner is actual holding period (or its
inverse, turnover ratio). I view any investor
Lastly, without a ‘business owner’ with turnover ratio in the 20% ballpark or
mindset, it is impossible to give time lower as a business owner… If an investor is,
for compounding to do its thing. A business on average, owning stocks for over five years,
owner’s mind isn’t preoccupied with selling it’s likely that there is selectivity about what
out, much like the owner of a farm or a home. to own. At the least, they’re likely to avoid
He isn’t even looking for a quote on most days. crap as it’s hard to hold those for years. One
While a business owner may occasionally can also check on tangible business metrics
consider parting with his interest in the face across portfolio (return on capital, free cash
of an absurdly irrational offer, he is generally flow), but it’s not uncommon to find good
indifferent to valuations across a broad businesses held for short periods. Hold period
spectrum of stock-prices that fall short of it. is harder to fudge.”
Learn from the

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

MARKET
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Market barometer
Here are some charts that will help you make sense of the current
market in terms of valuations and return potential
Sensex’s movement
In ’000 The Sensex is the most convenient
65
Max 61,981 indicator to tell the state of the Indian
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
market. The 10-year graph presented
55 alongside shows the secular run in the
Current
markets. However, this rally was
61,981 punctuated by several bearish phases. The
45
most prominent ones include the following:
Chinese growth concerns in 2015,
35
demonetisation blues in 2016, the sell-off
in 2018 due to US–China trade war, and
25 the March 2020 COVID-19 shock. After
staging a remarkable recovery from the
15
Min 17,906 lows of March 2020, the markets yielded
Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov to the Russian invasion of Ukraine and
’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 rising interest rates. With recessionary
fears easing, Sensex is at an all-time high.
Sensex’s price to earnings

40 The price-to-earnings ratio of the Sensex
is a simple market-valuation ratio. A
35
Max 35.1 general guideline to help understand the
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
valuation is:
P/E > 24 = Dangerously
30
overvalued
P/E > 20 < 24 = Overvalued
25 Current 23.2 P/E > 16 < 20 = Fairly valued
Median 22.5 P/E > 12 < 16 = Undervalued
20 P/E < 12 = Highly underval-
ued (mouthwater-
Min 16.8 ing valuations)
15
Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov This graph is based on standalone data of Sensex companies.
’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 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
Max 3.83 many times an investor is ready to pay
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
for a rupee of net assets.

3.6
Current 3.42 Since book value is stable and less
volatile than earnings, some consider it
3.2
better than the P/E as a measure of
Median 2.97 valuation.
2.8
If
P/B > Median P/B = Overvalued
2.4 Min 2.36 P/B < Median P/B = Undervalued
2.0
Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov
’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22

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Sensex’s dividend yield

1.7% Max 1.62 Dividend yield is nothing but the return
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
an investor gets in the form of dividend
on his investment. It is measured as
1.5 dividend per share divided by price
per share.
1.3 Generally speaking, when stocks are
Median 1.23 cheap, dividend yields are high.
Current 1.17 If
1.1
Dividend yield >
Median dividend yield = Undervalued
0.9
Dividend yield <
Median dividend yield = Overvalued
0.7 Min 0.72

Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov
’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22
Market cap to GDP

115% This measure is Buffett’s personal
Max 111 favourite. He said, “It is probably the
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
single best measure of where valuations

100 Current 105 stand at any given moment.”
Here we have considered the market
85 capitalisation of all the listed companies
Median 80 on the BSE.
If
70
Market cap > GDP = Overvalued
Market cap < GDP = Undervalued
55 Min 56
Considering market cap of all the listed companies on
the BSE, provisional estimate of FY22 nominal GDP and
advance estimate of FY23 nominal GDP
40
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
10Y G-sec yield vs Sensex’s earnings yield

4.0% Max 3.97 The spread between G-sec yield and
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
Sensex’s earnings yield is another

Current 2.96 valuation measure. G-sec yield is the
3.2 yield of the 10-year government bond.
Median 2.85 Sensex’s earnings yield is the inverse of
the Sensex’s P/E ratio. The greater the
2.4 deviation from the median in either
direction, the greater the degree of
overvaluation or the undervaluation of
1.6
the Sensex.
If
0.8
Min 0.94
Spread > Median = Overvalued
Spread < Median = Undervalued
0
Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov All data as on November 16, 2022
’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22

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Tracking IPOs
Here is how the S&P BSE IPO index has performed over the last one
year and how the biggest IPOs have fared
HIGHEST 076PUKL_]Z[OL:LUZL_ HIGHEST
LISTING-DAY GAIN The IPO index has corrected significantly over the last few months. SUBSCRIBED IPO
LatentView Analytics Latent View Analytics
169.0% 110 z IPO index z Sensex 326.5 times
HIGHEST 105
LISTING-DAY LOSS LOWEST
100 SUBSCRIBED IPO
Shriram Properties
Five-Star Business Fin
-20.3% 90 0.7 times
HIGHEST
POST-LISTING GAIN BIGGEST
Adani Wilmar 80
IPO
188.3% 67
LIC
HIGHEST
70
`20,557 cr
POST-LISTING LOSS
Rebased to 100 TOTAL SUM
AGS Transact 60 RAISED
-57.7% November 2021 November 2022
`66,970 cr
;VW076ZI`PZZ\LZPaL
Listing Subscription Issue Issue List Current Listing Change post Sensex Current
Company name date ratio (times) size (` cr) price (`) price (`) price (`) gain (%) listing (%) change (%) P/E
LIC 17-May-2022 3.0 15,381 949 867 626 -8.6 -27.8 13.2 14.6*
Star Health 10-Dec-2021 0.8 6,401 900 849 617 -5.7 -27.3 4.6 5.5*
Vedant Fashions 16-Feb-2022 2.6 3,149 866 936 1,319 8.1 41.0 6.1 84.8
Delhivery 24-May-2022 1.6 3,046 487 493 335 1.2 -32.1 13.8 –
Adani Wilmar 08-Feb-2022 17.4 2,819 230 221 637 -3.9 188.3 6.4 121.0
Five-Star Business Finance 21-Nov-2022 0.7 1,593 474 450 493 -5.1 9.6 0.6 3.7*
Rainbow Children's Medicare 10-May-2022 12.4 1,581 542 506 760 -6.6 50.2 13.1 59.0
Global Health 16-Nov-2022 9.6 1,571 336 398 436 18.5 9.4 -0.8 61.6
Paradeep Phosphates 27-May-2022 1.8 1,502 42 44 55 3.7 26.5 12.1 11.6
Archean Chemical 21-Nov-2022 32.2 1,462 407 449 455 10.3 1.3 0.6 30.4
Campus Activewear 09-May-2022 51.8 1,400 292 355 424 21.6 19.5 12.9 121.0
Medplus Health 23-Dec-2021 52.6 1,399 796 1,015 655 27.5 -35.4 7.3 201.5
Metro Brands 22-Dec-2021 3.6 1,368 500 436 800 -12.8 83.4 8.0 62.3
RateGain Travel 17-Dec-2021 17.4 1,336 425 365 275 -14.2 -24.8 7.9 92.6
Fusion Micro Finance 15-Nov-2022 2.9 1,104 368 361 342 -2.0 -5.3 -0.6 1.4*
Price data as on November 23, 2022. *Price-to-book value.

Price
`1,095
72%(38%/,6+(',17+(),567:((.2))(%58$5<
3OHDVHUHVHUYHP\FRS\DWDSUHSXEOLFDWLRQSULFHRI`
0DLOLWWR9DOXH5HVHDUFK&6HFWRU1RLGD,QGLD
%X\RQOLQHDWKWWSVVKRSYDOXHUHVHDUFKRQOLQHFRP

MARKET
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Institutional moves
Top five companies across market
caps in which mutual funds and
foreign institutions have
significantly changed
their holdings (in
terms of per cent
of equity) between
June and September
2022
Increase in stake
Mutual funds FIIs
Large caps Change Change
Company name Sector Sep ’22 Jun ’22 (% pt) Company name Sector Sep ’22 Jun ’22 (% pt)
Infosys IT 17.6 15.0 2.6 Zomato Retailing 25.5 10.0 15.5

Zomato Retailing 4.6 2.4 2.2 Infosys IT 36.2 31.7 4.5
Hero MotoCorp Automobiles 11.0 9.7 1.3 Bharti Airtel Telecom 21.9 18.5 3.4
Maruti Suzuki Automobiles 10.6 9.4 1.2 TVS Motor Automobiles 12.6 9.9 2.7
Apollo Hospitals Healthcare 8.8 7.6 1.2 Wipro IT 8.9 7.0 1.9
Mid caps Change Change

Sona BLW Auto Ancillaries 21.0 14.2 6.8 Max Healthcare Healthcare 49.3 23.3 26.0
GR Infraprojects Infrastructure 15.1 9.1 6.0 HDFC AMC Finance 12.3 7.3 5.0
Gland Pharma Healthcare 18.5 15.5 3.0 CAMS IT 33.2 29.3 3.9
Tata Motors (DVR) Automobiles 27.5 24.6 2.9 AU SFB Bank 38.5 34.8 3.7
KIMS Healthcare 20.5 17.8 2.7 City Union Bank Bank 21.3 18.2 3.1
Small caps Change Change

Rolex Rings Auto Ancillaries 30.7 21.8 8.9 Salasar Techno Capital Goods 12.2 0.9 11.3
Kirloskar Pneumatic Capital Goods 24.6 17.0 7.6 Parag Milk Foods FMCG 13.0 3.4 9.6
Sapphire Foods FMCG 9.8 4.1 5.7 Can Fin Homes Finance 9.3 0.0 9.3
Butterfly Gandhimathi Cons. Durables 5.2 0.5 4.7 Hinduja Global Solutions IT 15.4 8.1 7.3
Triveni Turbine Capital Goods 16.0 11.5 4.5 Choice International Finance 14.1 7.0 7.1

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Decrease in stake
Mutual funds FIIs
Large caps Change Change
BPCL Crude Oil 8.8 11.9 -3.1 Bajaj Finance Finance 17.1 20.0 -2.9
Tata Steel Iron & Steel 7.3 9.2 -1.9 IndusInd Bank Bank 43.1 45.8 -2.7
GAIL Gases & Fuels 6.8 8.5 -1.7 Tech Mahindra IT 28.2 30.4 -2.2
Bharti Airtel Telecom 10.7 12.2 -1.5 Ambuja Cements Cement 11.1 12.8 -1.7
Dr. Reddy’s Labs Healthcare 12.8 14.2 -1.4 Kotak Mahindra Bank Bank 39.3 40.6 -1.3
Mid caps Change Change

Voltas Cons. Durables 15.1 17.3 -2.2 Bandhan Bank Bank 30.2 35.6 -5.4
Ashok Leyland Automobiles 12.8 14.9 -2.1 IEX Power 15.8 20.8 -5.0
KEI Industries Electricals 14.9 16.9 -2.0 Gland Pharma Healthcare 6.1 9.4 -3.3
City Union Bank Bank 29.3 31.0 -1.7 Piramal Enterprises Healthcare 32.1 34.5 -2.4
Motherson Sumi Auto Ancillaries 15.3 17.0 -1.7 Chambal Fertilisers Chemicals 11.1 13.5 -2.4
Small caps Change Change

Oriental Hotels Hospitality 0.3 6.4 -6.1 Hexa Tradex Trading 0.0 21.0 -21.0
Kirloskar Oil Engines Capital Goods 9.8 13.4 -3.6 Nureca Trading 1.7 12.0 -10.3
ITD Cementation Infrastructure 8.3 11.6 -3.3 Rainbow Children’s Healthcare 15.9 23.0 -7.1
Sterlite Technologies Electricals 1.3 4.1 -2.8 Zensar Technologies IT 9.2 16.0 -6.8
Capacit’e Infraprojects Realty 2.5 5.0 -2.5 V-Mart Retail Retailing 11.5 18.2 -6.7
Top 10 holdings of mutual funds Top 10 holdings of FIIs

Market % of Amount % of Amount
cap equity invested Market cap equity invested
Company name Sector (` cr) held (` cr) Company name Sector (` cr) held (` cr)
Kalpataru Power Infrastructure 7,194 35.1 2,528 HDFC Finance 4,86,991 67.8 3,29,985
Federal Bank Bank 28,750 34.8 9,999 Shriram Transport Fin. Finance 33,866 50.6 17,150
Gateway Distriparks Logistics 3,670 34.0 1,247 Max Healthcare Healthcare 42,019 49.3 20,703
CG Consumer Cons. Durables 23,334 33.1 7,730 Apollo Hospitals Healthcare 66,279 49.1 32,536
MCX Finance 7,849 32.8 2,577 IRB Infrastructure Infrastructure 15,451 48.8 7,534
Greenply Industries Const. Materials 1,957 32.7 639 Kiri Industries Chemicals 2,485 48.4 1,203
KNR Constructions Infrastructure 6,723 32.3 2,171 Axis Bank Bank 2,63,827 46.1 1,21,651
Equitas Holdings Finance 3,493 30.8 1,074 ICICI Bank Bank 6,35,911 44.9 2,85,778
Rolex Rings Auto Ancillaries 5,011 30.7 1,536 IndusInd Bank Bank 89,297 43.1 38,505
Ipca Laboratories Healthcare 22,048 29.7 6,551 CG Consumer Cons. Durables 23,334 39.7 9,257
M-cap as on November 15, 2022. Other data as of September 2022.

MARKET
C MPASS
Change in promoter stake

Companies that have seen a rise or decline in promoter stake in Q2 FY23
M
any investors track the change in corporate actions also. For instance, a rights
promoter holding. A significant issue, a merger, a reclassification of
rise in promoter holding may promoter can all cause the reported
mean that the promoter is bullish promoter holding to change. Hence,
about his company. That may dig deep to make sense of the change
translate into good returns for the in promoter stake.
shareholder as well. On the other The tables below list companies in
hand, a significant fall in promoter which the promoter stake has gone
stake is taken as a negative up/done notably over the last quarter.
development. We have considered companies where
However, while tracking the change in the promoter stake in the previous
promoter stake, one should also be mindful quarter was at least 25 per cent and has
that promoter holdings can be impacted by risen/fallen by at least 3 percentage points.
9PZLPUWYVTV[LYZ[HRL
Companies where the promoter stake in the previous quarter was at least 25 per cent and has risen by at least 3 percentage points
Promoters’ stake (%)
Company name Sector M-cap (` cr) Sep-22 Jun-22 Increase in promoter holdings (% pt) 3M return (%)
Responsive Industries Plastic Products 3,693 58.9 49.6 9.3 3.5
Sangam Textile 1,203 70.3 61.4 8.9 -0.3
RPSG Ventures IT 1,394 59.1 54.6 4.5 3.8
Satin Creditcare Network Finance 1,092 40.0 36.7 3.3 31.3
-HSSPUWYVTV[LYZ[HRL
Companies where the promoter stake in the previous quarter was at least 25 per cent and has fallen by at least 3 percentage points
Company name Sector M-cap (` cr) Sep-22 Jun-22 Decrease in promoter holdings (% pt) 3M return (%)
Max Healthcare Institute Healthcare 41,204 23.8 50.6 -26.8 13.4
Kirloskar Pneumatic Capital Goods 1,035 39.1 53.6 -14.5 35.4
Sona BLW Auto Ancillaries 26,177 53.6 67.2 -13.6 -18.3
Triveni Turbine Capital Goods 9,235 55.9 67.8 -11.9 50.8
Patel Engineering Infrastructure 1,117 43.5 54.6 -11.1 -5.8
Ujjivan SFB Bank 5,404 73.7 83.3 -9.6 45.6
Lancer Containers Lines Logistics 1,520 55.1 64.0 -8.9 52.8
DB Realty Realty 3,477 58.1 65.3 -7.2 102.5
Genesys International IT 1,992 40.7 47.6 -6.9 -3.4
GR Infraprojects Infrastructure 11,231 79.7 86.5 -6.8 12.4
Hindustan Construction Infrastructure 2,353 26.0 32.6 -6.6 13.4
"UTTERmY'ANDHIMATHI #ONSUMER$URABLES
HDFC AMC Finance 44,212 62.8 68.8 -6.0 3.0
Kesoram Industries Construction Materials 1,782 43.4 49.2 -5.8 22.5
Syngene International Miscellaneous 24,385 64.9 70.3 -5.4 0.0
Rama Steel Tubes Iron & Steel 1,524 65.4 70.5 -5.1 39.7

MARKET
C MPASS
Company name Sector M-cap (` cr) Sep-22 Jun-22 Decrease in promoter holdings (% pt) 3M return (%)
Parag Milk Foods FMCG 1,173 36.2 40.8 -4.6 64.0
JTL Infra Iron & Steel 1,943 49.9 54.0 -4.1 28.4
Aditya Vision Retailing 1,563 69.9 73.7 -3.8 87.4
M-cap more than `1,000 crore as on November 15, 2022. Returns as of September 2022.
Pledging tracker
Companies that have seen a rise or decline in promoter pledging in
Q2 FY23
P
romoter pledging is an important ugly turn when the pledged stake is high and
analytical parameter. When the promoter is unable to pay back the dues.
promoters pledge shares, they keep This may force the financing institution to
shares as collateral with a financial sell the pledged stake, which can result
institution, such as a bank, to raise in a sudden fall in the stock price and
money. It’s just like mortgaging the dilution of promoter stake in the
something for money. company.
Pledging is not always bad. Many Generally speaking, a high pledged
times promoters pledge their stake for stake also indicates a bad management.
sound business reasons and later release Investors should stay away from compa-
their pledged shares. But pledging takes an nies that have high levels of pledging.
0UJYLHZLPUWSLKNPUN
Companies in which promoter pledging has gone up by 10 percentage points and the minimum promoter stake is 25 per cent
M-cap Pledged stake (%) Increase Promoter 3M stock Debt to
Company name Sector (` crore) Sep-22 Jun-22 (% pt) stake (%) return (%) Z-Score F-Score equity
Ambuja Cements Cement 1,14,602 100.0 0.0 100.0 63.2 40.3 12.6 8 0.0
ACC Cement 46,303 100.0 0.0 100.0 56.7 11.1 11.4 8 0.0
Cigniti Technologies IT 1,551 34.4 9.9 24.5 36.8 17.7 13.6 3 0.1
#ONlDENCE0ETROLEUM )NDS'ASES&UELS
Triveni Engineering Agri 6,756 14.4 0.0 14.4 68.3 10.5 3.9 4 0.3
+LJYLHZLPUWSLKNPUN
Companies in which promoter pledging has come down by 10 percentage points and the minimum promoter stake is 25 per cent
M-cap Pledged stake (%) Decrease Promoter 3M stock Debt to
Company name Sector (` crore) Sep-22 Jun-22 (% pt) stake (%) return (%) Z-Score F-Score equity
Eureka Forbes Capital Goods 9,518 0.0 87.1 -87.1 73.2 57.2 839.0 3 0.1
Sagar Cements Cement 2,655 10.9 84.8 -73.9 45.2 18.3 2.8 4 1.0
India Power Power 1,276 0.0 67.2 -67.2 59.5 13.0 3.9 4 0.2
SEPC Infrastructure 1,069 28.6 64.5 -35.9 47.6 1.3 0.6 2 0.4
Optiemus Infracom Trading 1,947 5.4 23.8 -18.4 74.9 -10.1 12.3 7 0.2
Ahluwalia Contracts Realty 2,817 12.9 26.4 -13.5 55.3 -2.9 7.5 8 0.0
Min m-cap ` CROREASON.OVEMBER 2ETURNSASOF3EPTEMBER: 3CORE0REDICTSACOMPANYmSÜNANCIALDISTRESSORTHEPOSSIBILITYOFITSGOINGBANKRUPTWITHINTWOYEARS
!: SCOREOFMORETHANTHREEISDESIRABLE& 3CORE(IGHLIGHTSÜNANCIALPERFORMANCEASCOMPAREDTOTHATINTHEPREVIOUSYEAR!N& 3COREOFSEVENORABOVEISGOOD

ANALYST’S
DIARY
Dyed in black
Bombay Dyeing’s shareholders have been defrauded due to its
management’s deceitful attempt to exploit a legal loophole
S
EBI’s recent penalty on Bombay
Dyeing is an eye-opener for
investors on how companies can
take advantage of seemingly legal
routes to distort financial results and
inflate sales figures blatantly.
On March 29, 2012, Bombay Dyeing
sold around 30 per cent stake in its
unlisted associate company Scal
Services and this resulted in the
former’s stake coming down to 19 per
cent. While this appears to be a very
normal business activity, things
started taking an interesting turn
when the very next day the real-estate
segment of Bombay Dyeing started
selling flats and other real-estate rights
to Scal for the purpose of business
development.
So far so good. Or at least that’s
what shareholders thought. But as
revealed by SEBI’s investigation, these
transactions were actually a part of a But the fraudulent aspect of this
deliberate scheme that was designed to deal was that the entities who
fool investors. What was actually purchased Bombay Dyeing’s stake in
transpiring behind the scenes was that Scal were actually associate companies
the management was seeking to find a of Bombay Dyeing. SEBI’s
way around certain accounting rules investigation revealed that the
which required the elimination of shareholding of many group companies Through the
intra-group sales in the consolidated of Bombay Dyeing was restructured in
financial statements of an entity such a manner that even after reducing
SCAL structuring,
having significant shareholdings in its stake in Scal to just 19 per cent, Bombay Dyeing
other companies. Bombay Dyeing effectively retained its was able to sell
4VK\ZVWLYHUKP
ownership and control in Scal. This
was achieved through a complex web
flats to itself
According to the provisions of the of interconnected companies having and claim that it
Companies Act, 2013, a parent company substantial amounts of cross holdings made profits!
needs to consolidate the financial among them.
results of its subsidiary company only In a nutshell, through this move,
if it has a shareholding of more than 20 Bombay Dyeing was able to sell flats to
per cent. Thus, by reducing its stake to itself and claim that it made profits!
just below this threshold, Bombay
Dyeing was able to recognise `2,492 >OH[KPK:,)0ZH`&
crore of revenue and `1,302 crore of In a 100-page order, the regulator found
operating profits out of sales to Scal two flaws in Bombay Dyeing’s financial
over a period of seven years. statements. First, SEBI held that

ANALYST’S
DIARY
statements and operating a fraud on

:JHSHUK[OL^LIVMJYVZZOVSKPUNZ The direction investors. Consequently, SEBI
of the arrow
Scal 19 Bombay Dyeing & denotes the punished the perpetrators by levying a
Services Manufacturing holding (%) fine and barring the directors of
of the former
45.5 in the latter Bombay Dyeing from being directors
19 on the board of any other listed
49
company. But on appeal, the Securities
5 Havenkores Appellate Tribunal (SAT) gave the
0ENTAlL 45 40
Textile 19 Real Estate company and its directors a temporary
19
47 reprieve by suspending SEBI’s penalty
100 and the final verdict is pending.
Bombay Dyeing
Real Estate 3PRINGmOWER 0TWSPJH[PVUZMVY[OLZOHYLOVSKLYZ
Investments Interestingly, while the news of this
15 development promptly pulled down the
19
BDS Urban Infra share price of Bombay Dyeing by around
12 per cent, investors have largely
9LJLU[TV]LTLU[PU>HKPHNYV\WZ[VJRZ]PZH]PZ[OL:LUZL_
z Britannia z National Peroxide z Bombay Burmah Trading z Bombay Dyeing z Sensex ignored its impact on the group’s other
110 three listed companies. Perhaps
investors were enthused by SAT’s
100 interim verdict and aware that a final
order might take years. But what is clear
90 is that if the company and its directors
lose in the end, the biggest impact would
80
fall on Britannia Industries, the group’s
14 Oct 15 Nov largest and most profitable business, as
Rebased to 100
both the promoter directors (Nusli and
Bombay Dyeing was indeed required to Ness Wadia) would have to step down.
consolidate the accounts of Scal This could turn out to be a positive
(despite a low shareholding in it) since development for the company’s shares in
the control of Scal was indirectly held the long run, as investors may now be
by Bombay Dyeing. The second flaw willing to pay a premium for better
If the company was that Bombay Dyeing could not corporate governance.
and its directors have recorded sales to Scal because it
never actually sold the flats to Scal. ;HRLH^H`ZMVYPU]LZ[VYZ
lose in the end, SEBI held that the memorandum of The most significant takeaway for
the biggest understanding (MoU) signed between inventors is that there is no substitute
impact would fall Bombay Dyeing and Scal had not for management integrity. In fact, the
on Britannia as technically resulted in a “sale” and eight-year delay in the regulator
that the recorded sales were “dubious” passing an order to hold people
both its promoter in nature. In other words, despite accountable makes it abundantly clear
directors (Nusli Bombay Dyeing having never actually that investors can’t solely rely on law
and Ness Wadia) sold the flats (not even to itself), it enforcement to ensure the integrity of
recorded profits! financial statements.
would have to This, in the words of SEBI, was Besides, this episode also reinforces
step down evident from the fact that Bombay the importance of investors doing
Dyeing received only `186 crore from thorough research, deep digging and
Scal, i.e., 7 per cent of the revenue going through all the disclosures with a
recognised and even this was after fine-toothed comb. While the dust is yet
certain group companies of Bombay to settle on the issue, what is very clear
Dyeing lent money to Scal. Thus, SEBI is that unless investors remain sceptical
held Bombay Dyeing and its of what management says, such
management guilty of deliberately incidents may occur in the future.
misrepresenting its financial By Arul Selvan

ANALYST’S
DIARY
Our ever-growing love for SUVs

SUVs now account for one out of every two passenger cars sold in India
W
hen Maruti launched March 2012, the share of mini
Gypsy, India’s first-ever passenger cars was 25.2 per cent, 7HZZLUNLY]LOPJSLZ!7LYJLU[VM
utility vehicle (UV), while that of compact passenger [V[HS\UP[ZZVSK
over three decades ago, it cars was 32.5 per cent. Over the 60 % Mini Compact Utility vehicles Others
struggled to make a mark. Fast years, the gap has widened. In
forward to now, the reception of September 2019, compact vehicles 50
Maruti Suzuki’s latest SUV had a share of 47.3 per cent,
Brezza 2022 exceeded its whereas that of mini vehicles was 40
management’s expectations, with only 8 per cent! And this is where
over one lakh bookings within UVs have entered. 30
two months of the launch. During that period, the sale of
Recently, the auto industry compact vehicles peaked but there 20
posted the highest-ever quarterly onwards, its share started falling
sales in the domestic passenger- and SUVs started occupying that
10
vehicle segment. But what space. While the growth of SUVs
interested us more was the rapid was observed in 2017 itself, its
0
rise in the share of SUVs (utility present growth rate is astonishing.
Mar 2012 Sep 2022
vehicles) in overall sales. According to a CRISIL report in
Despite providing relatively March 2022, the share of SUVs is
less mileage and costing more, the expected to reach 53 per cent by <[PSP[`]LOPJSLZ!<UP[ZZVSK
SUV segment has been posting FY23 and it has already crossed 50 6 lakh
record sales for three consecutive per cent in Q2FY23.
quarters (see the graph Quarterly 5
UV sales). A careful look at the (Z[PMMJVTWL[P[PVU
4
long-term trend reveals that from While Maruti Suzuki remains the
having a mere 13.6 per cent share market leader at the overall level 3
in March 2012 (SUV sales as a % in passenger-vehicle sales
of total passenger-vehicle sales), it (domestic), Tata Motors rules the 2
is now at 50.5 per cent! It means SUV segment with 18.5 per cent
1
that one out of every two cars sold market share in H1FY23, followed
now is an SUV! by Mahindra & Mahindra at 17 0
and Maruti at 16.7. Korean auto Mar 2015 Sep 2022
;OLSVUNTPNYH[PVU major Hyundai has a market
For more than a decade, share of 15.5 per cent. The
consumers have been steadily competition is stiff as Maruti’s 3PZ[LKJVTWHUPLZ!4HYRL[ZOHYL
preferring bigger cars even in the Brezza has been the bestseller for PU[OL<=ZLNTLU[
smaller segments. For example, in the past two months, while the 18.5
delivery of Mahindra’s XUV700 In % Data for H1FY23
will start soon. Given this,
frequent changes in market share
can be expected going 17.0
forward. The SUV 16.7
segment is projected to
grow at 14–18 per cent
per annum till FY26 and
remain the fastest- Tata Mahindra & Maruti
growing car segment. Motors Mahindra Suzuki
By Udhayaprakash
36 Wealth Insigh December 2022

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COVER
STORY
BEST TECH
ST CKS
TO BUY NOW
Profit from the opportunity
to buy them at their lows
COVER
STORY
By Karthik Anand Vijay and Udhayaprakash Tech stocks, which had seen a rally on steroids, were also
A
the ones to see the deepest correction.
fter a spectacular run between March 2020 and Soon high rates brought back the spectre of an
January 2022, the technology sector across the economic slowdown. Also, in October 2022, the US
globe has been sent into a maelstrom. The BSE government brought in measures to limit/cease the
IT index has fallen 22.2 per cent in 2022 (as of export of advanced computer chips (semiconductors) to
November 11, 2022). On the other hand, the China. This announcement did not go well with the
tech-heavy Nasdaq 100 is down 28.4 per cent. As the semiconductor stocks. Added to this, subdued consumer
readers of ‘Wealth Insight’ already know, the worst of demand is affecting the advertising revenues of many
times in the stock market are also the best of tech companies.
opportunities. Hence, we decided to do this cover feature In India, IT stocks were hit due to the high dependency
to bring to you the best stocks to buy now. But first let’s of these companies on the US and Europe. Also, Indian IT
understand what has caused this fall. companies have been suffering from high attrition rates.
Many companies had to raise salaries to hold on/attract
The story of the rise and the fall talent. This has impacted their operating margins.
When the pandemic hit the world and everything came to
a standstill, governments across the world announced What will you get from this cover story?
huge stimulus packages in order to revive the economic To help you take advantage of the current situation, we
engine. Central banks put in place a loose monetary have covered a few Indian IT companies that have cleared
policy to drive demand and to ensure that individuals and the following filters:
companies don’t fumble. This led to a significant bull run 1. Market cap of over `500 crore (to remove micro caps)
in equity markets across the world. The BSE IT index 2. Year-to-date fall of at least 25 per cent
rallied from its March 2020 low of 10,937 to a peak of 3. The current P/E should be less than the 5Y median P/E
38,713 in January 2022. That is a 254 per cent return (i.e., In the following pages, you will find a brief
more than tripling) in just under two years! Similarly, in introduction and outlook on each of the companies
Average Good
the US, the Nasdaq 100 more than doubled from its March clearing these criteria. We have also
Poor Very
2020 low of 6,772 to 16,607 in December 2021. given an invest-o-meter for each good
However, as a consequence of the mega stimulus to company to denote its investment Invest-o-meter
support the economy, inflation started going up. proposition. However, do note that the stocks discussed
Developed economies, where inflation had all but in this article are not our recommendations. Use this list
vanished, started reporting high inflation. To counter as a starting point for your research. For the savvy
that, central banks around the world started to raise investor, we have also devoted a section to US tech
interest rates. In general, high rates are negative for companies. Not only will you get our perspective on
businesses as they increase the cost of capital for them. investing in them, but we have also curated a list of
So, as the rates started to go up, the markets began to fall. companies that cleared filters 2 and 3 above.

COVER
STORY
Average Good
;(53(73(;-694: Poor Very
3L]LYHNPUN[OLULÛVYTHS
good
T
anla Platforms is one of the FY19, it acquired the market leader
largest cloud-communication YTD return (%) (Karix) in the enterprise segment
providers in the world. It is for `340 crore and in FY20, it
the market leader in India, with a acquired Gamooga (a marketing-
P/E | 5Y median P/E
market share of 42 per cent (as of automation platform) for `48 crore.
FY22). Tanla has two core c With the acquisition of Karix, the
businesses: enterprise (92 per cent company emerged as the dominant
of FY22 revenue) and platform (8 player in the industry. Following
per cent). In the enterprise these acquisitions, its revenue
segment, it helps businesses swelled to `3,206 crore in FY22 from
communicate with their `792 crore in FY18, while its net
consumers. It is the market leader profit was pegged at `539 crore in
in this segment in India (a market FY22 from `19 crore in FY18. And
share of more than 30 per cent as its ROE improved to 48.2 per cent in
of FY22). On the other hand, the FY22 from 4.3 per cent in FY18.
platform business, which was The company has adopted a two-
launched two years ago, offers an pronged strategy to leverage the
enterprise-grade communication digital trend accelerated by the
platform and a digital platform pandemic. It intends to gradually
where businesses can discover and emerge as a platform company
collaborate with global suppliers customer stickiness as compared to while deepening its long-standing
for their communication needs. It the enterprise business. relationships with existing
operates at a gross margin of more Prior to FY19, Tanla mainly enterprise customers.
than 90 per cent and has greater catered to telecom operators. In
A,5:(9;,*/5636.0,: Average Good
+YP]LUI`KPNP[HSZLY]PJLZ Poor Very

good
P
art of the RPG Enterprises
YTD return (%)
Group, Zensar Tech provides
digital services, comprising
experience services, advanced P/E | 5Y median P/E
engineering services, data c
engineering and analytics and
digital foundation. Of its FY22
revenue, hi-tech and manufacturing
industries accounted for about 54
per cent; banking, financial services
and insurance for 31 per cent; and
consumer services for the rest.
Over the last five years, its sales margin has increased in each of MD Ajay Bhutoria experienced
growth has been only 6.8 per cent the last five years, barring one, health issues and would continue
per annum. However, during the with FY22 recording the highest his services only after the
same period, its profits have grown margin of 14.4 per cent. However, recovery. So, the board approved
at 12.1 per cent per annum on the attrition is quite high at 26.3 per the appointment of Anant Goenka
back of the increasing share of cent (as of September 2022 TTM). (MD at CEAT, a group company)
digital offerings in the product mix In a bid to drive profitability, as the interim MD. Zensar strives
(from 38.1 per cent of revenue in the company has added five to remain focused on providing
FY18 to 70.8 per cent in FY22) and senior-management positions digital offerings and acquiring
the disposal of the low-margin (including the CEO) in the last two smaller companies to improve its
segments. The operating profit years. Recently, however, CEO and propositions.

COVER
STORY
4(:;,2
(OLHS[O`\W[PJR
T
his 40-year-old company provides turnkey
digital and cloud-transformation solutions. It
mainly operates in four major segments:
digital application and cloud engineering (45.5 per
cent of FY22 revenue), Oracle cloud and enterprise
apps (33 per cent), digital commerce (11.8 per cent)
and data automation & AI (9.7 per cent). Almost all
of its revenue comes from overseas, with 68 per cent
coming from the UK and Europe. Notably, 38 per
YTD return (%)
cent of its total revenue comes from government
and educational institutions, with the UK
P/E | 5Y median P/E contributing the most.
c In the last five years, its revenue and profit have
grown by 31 and 56 per cent, respectively, while it
has maintained a median
return on equity and operating Average Good
)093(:6-; margin of 16.4 and 14 per cent, Poor Very
7V^LYLKI`HTLYNLY
good
respectively. Over the years,
the company’s acquisition
A
part of the CK Birla Group, Birlasoft provides drive aimed at complementing
enterprise and IT solutions to its clients. In its existing services (Indigoblue, Taistech and
2019, Birlasoft (unlisted) was merged with Evosys), coupled with the UK government’s
KPIT Technologies and the name of the resultant increased spending, has acted as a growth catalyst.
entity was changed to Birlasoft. Following the However, the company has some near-term
merger, the auto engineering division of the new concerns in its major market in the UK, owing to
company was demerged. The company caters to macroeconomic factors and political instability. On
four major sectors: manufacturing (44.8 per cent of a positive side, it has recently acquired MST
FY22 revenue), life sciences solutions, a Salesforce-consulting partner which
(22.8 per cent of revenue), Average Good has a commanding presence in the healthcare and
BFSI (17.6 per cent of revenue) Poor Very public sectors. It also launched a platform Glide 4.0,
good
and energy (14.8 per cent of which will help clients in cloud transformation and
revenue). innovation. More importantly, it has won some
Revenue growth both overall and post-merger has major orders recently in the healthcare segment
been abysmal at 5 and 2 per cent, respectively. and as of March 2022, it had an order backlog of
However, profit growth has been impressive at 14 per $193.8 million (about `1,563 crore). A 46 per cent fall
cent overall and 17 per cent post-merger. This merger year to date has resulted in the company trading at
also improved the company’s operating margin and a P/E of just 16 times.
return on equity from 9 per cent and 16 per cent in
FY18 to 15 per cent and 20 per cent in FY22,
respectively. The merger also increased the
company’s exposure to the Americas, with its
revenue contribution going to 82 per cent in FY22
from a mere 3 per cent in FY18.
As of September 2022, the company had 301 clients,
with 76 being million-dollar clients. In the last one
year, it has added 21 clients. In FY22, the company
signed deals worth $696 million (around `5,600 crore). YTD return (%)
Its deal wins have been improving every quarter,
with strong traction from all the segments. While

P/E | 5Y median P/E
high client concentration and a slowdown in the US
economy are some concerns, a P/E of 16 times makes c
it attractive.

COVER
STORY
5,>.,5:6-;>(9,;,*/5636.0,: Average Good
;OYP]PUNVUUL^HNL[LJOUVSVNPLZ Poor Very

good
H
eadquartered in Delhi, licence based to annuity based.
Newgen Software YTD return (%) While its revenue has grown at
Technologies offers a 12.8 per cent per annum, annuity-
digital-transformation platform P/E | 5Y median P/E
based revenue has increased by
(NewgenONE unveiled in FY22)
that takes care of billions of c about 22 per cent per annum,
taking its share to 59 per cent of
documents and millions of revenue in FY22 from 43 per cent
transactions. Used by enterprises in FY18. During the same period,
to rapidly develop and deploy net profits grew by 26.2 per cent
complex and critical business per annum. The five-year median
applications, this cloud-based ROE and operating profit margin
platform offers process were pegged at 22.4 and 22.9 per
automation, content services and cent, respectively.
communication-management Newgen aspires to achieve an
capabilities. The company’s share annual revenue of $500 million
of revenue is skewed towards (around `4,000 crore) in the next
banking, financial services and five to six years. Its next phase of
insurance (accounted for 72 per growth will be driven by artificial
cent in FY22). Geographically, the intelligence/machine learning-
revenue split is well diversified based digital automation. In a bid
among the US (27 per cent in to bolster its capabilities, the
FY22), India (28 per cent), Europe, company acquired Number
the Middle East and Africa (31 per Over the last five years, it has Theory in January 2022.
cent) and Asia-Pacific (14 per cent). shifted its revenue source from
05;,33,*;+,:0.5(9,5( Average Good
(Z[YVUNNYV^[OWPWLSPUL Poor Very

good
A
leading provider of fintech
YTD return (%)
solutions, Intellect Design
caters to BFSI companies. It
derives its revenues from the sale P/E | 5Y median P/E
of products (56 per cent of c
revenues) and the implementation
of its suite of products (44 per
cent). Revenue from the sale of
products can further be divided
into three categories: licensing (19
per cent of the total revenue),
subscription revenue (20 per cent)
and annual-maintenance contracts spending decreased and revenues since the former has better
(17 per cent). increased, thus leading to a 16 visibility and generates more
The company had a difficult times jump in profits for the year. revenues. These efforts have
time in its early stages due to high This transformation also already started paying off, as
R&D expenses and low economies improved its operating margins (a subscription revenue has more
of scale. But once it figured out five-year median of 11 per cent) than doubled in the last three
the right product mix and and return on equity (a five-year years, while the growth in licence
economies of scale improved, it median of 15 per cent). revenue has been flat. The
started reporting profits from Intellect is trying to switch to a management is confident about the
FY18. In FY21, it went through a subscription-based business model growth going forward on the back
financial transformation where from the enterprise-based model of a pipeline of `6,500 crore.

COVER
STORY
*@0,5;
*YHM[PUNNYV^[O
YTD return (%)

A
P/E | 5Y median P/E pure-play engineering-research and
c development-services-providing company,
Cyient helps its clients design, build, operate
and maintain their products and services. It operates
through two segments, including services (83 per
cent of FY22 revenue) and design-led manufacturing
(DLM; 17 per cent). The services segment comprises
offerings across aerospace and defence,
transportation, semiconductor, medical and
healthcare, communications, energy and utilities
and portfolio business. DLM, on the other hand,
represents electronic-manufacturing solutions used
in medical, industrial, automotive,
?*/(5.05.:63<;065: telecommunications, defence and aerospace.
9PKPUN[OLJSV\KHUK
Although the aerospace and defence industry has
historically been the biggest contributor to its
KH[HIVVT
revenue, recent headwinds in the industry have
reduced its share (about 21 per cent of FY22 revenue).
Communications, on the other hand, contributed
X
changing Solutions is the Indian subsidiary about 23 per cent to its revenue. However, the
of US-based DXC Technology. Like its parent cyclical nature of these two industries impacts
company, the company’s operations can be Cyient’s performance. Revenue and net profit have
divided into two segments: Global Business grown at a CAGR of 4.8 and 8.7 per cent, respectively
Services (GBS) which constitutes analytics, over FY17–22.
engineering, applications and Cyient has expertise in Average Good
business process and Global Average Good mechanical design, data Poor Very
Very good
Infrastructure Services (GIS) Poor services and build-to-print
good
which constitutes cloud, manufacturing. Leveraging
security and IT outsourcing. these areas, the company is all
The company derives 93 per cent of revenue from set to transform from a services organisation into a
overseas and just 7 per cent from India, with the solutions organisation. It is focusing on five key
US being the major contributor at 63 per cent. pillars of growth: digital, embedded, geospatial, very
Further, of its total revenue, 98 per cent comes large-scale integration and network. It has recently
from time and material contracts and 2 per cent made four acquisitions to add/bolster capabilities.
from fixed-price contracts. The management projects to achieve a revenue of $1
Over the last five years, its revenue fell by 11 billion (around `8,000 crore) in FY24.
per cent per annum, while its profit jumped by 24
per cent. However, during the same period, the YTD return (%)
company maintained a five-year median operating
margin of 33 per cent and a five-year median

return on equity of 11 per cent. P/E | 5Y median P/E
The company expects to benefit from the boom c

in the cloud and data segments. Both these
segments are competitive in nature and have
multiple players around the world. Although the
company can leverage the brand of its parent
company, macroeconomic instability and the
general downtrend in the IT sector are expected to
put some short-term pressure. While the
valuations seem attractive at a P/E of 16.7 times, a
lack of adequate management commentary makes
it difficult to ascertain the prospects.

COVER
STORY
*,05-6:@:;,4:
(ZTVV[OYVHKHOLHK
P
opularly known as MapMyIndia, CE Info
Systems is a leading provider of advanced
digital maps, geospatial software and location-
based internet of things (IoT) technologies. It has
two product segments: maps and data (41.5 per cent
of FY22 revenue) and platform and IoT (58.5 per
cent). The company serves two distinct market
YTD return (%) segments: automotive and mobility tech (56 per cent
of FY22 revenue) and consumer tech and enterprise
digital transformation (44 per cent).
P/E
Despite facing competition from Google Maps,
the company has navigated a profitable route,
5Y median P/E owing to its focus on the B2B segment as against
B2C. This has resulted in the company enjoying an
80 per cent market share in automobile navigation
systems. Moreover, it has continued improving its
offerings by creating detailed
Average Good
3(;,5;=0,>(5(3@;0*: maps, developing proprietary
Poor Very
(Z[LHK`WLYMVYTLY
technologies and integrating good
them with its existing
offerings. It has a three-year
A
pure-play analytics company, LatentView median ROE and operating profit margin of 27 and
Analytics provides consulting services, 53.4 per cent, respectively. Revenue and net profit
business analytics and insights, data have grown at a CAGR of 14 and 37.4 per cent,
engineering and digital solutions. It primarily respectively, in the last three years.
caters to four sectors: technology (66 per cent of In India, the market for digital maps and
revenue), consumer-packed goods and retail (15 location-intelligence technology and services is
per cent of revenue), industrial (13 per cent of expected to grow at a CAGR of 15.5 per cent between
revenue) and BFSI (6 per cent of revenue). It 2019 and 2025 (according to a report by Frost &
generates 95 per cent of its revenue from the US Sullivan). The company aims to increase the scale
and has worked with 30 of Fortune 500 clients in of its operations (both domestically and globally).
the last three years. The introduction of geospatial guidelines by the
Over the last five years, the company has posted government and the increasing use cases in the
excellent financials, with revenue growth of 19 per corporate sector augur well for the company.
cent per annum and profit growth of 39 per cent However, the valuation seems to be very stretched.
per annum, all while
maintaining a median Average Good
operating margin of 33 per Poor Very
good
cent. This also helped it post
an excellent return on equity
with a median of 27 per cent.
Its expertise in analytics and strong client
relationships acted as growth catalysts.
In FY22, the company added 18 clients and as of
September 2022, LatentView had 58 clients and it YTD return (%)
received 71 per cent of its revenue from clients
worth above `10 crore. With a steady increase in
P/E

the demand for data analytics, the company is
confident about a growing client base. While the
stock has fallen 28 per cent from its list price after 5Y median P/E
the blockbuster opening in the IPO, it still
continues to trade at a P/E of 50 times.

COVER
STORY
/(770,:;405+:;,*/5636.0,:
YTD return (%) .YV^[OSLKI` Average

Poor
Good
Very

HJX\PZP[PVUZ
good
P/E | 5Y median P/E
c
I
ncorporated in 2011 by industry veteran Ashok
Soota, Happiest Minds enables digital
transformation for enterprises. It has three
business units: product-engineering services (PES; 47.8
per cent of FY22 revenue), digital-business services
(DBS; 30.1 per cent) and infrastructure management &
security services (IMSS; 22.1 per cent). Under PES, the
company engineers smart, secure and connected
digital products. DBS helps improve customer
experience, productivity and business outcomes
46:*/07;,*/5636.0,: through digital-application development and
:PS]LYSPUPUNZHTPK[OL
modernisation. IMSS offers end-to-end management
and monitoring of clients’ infrastructure and
applications. The company has developed expertise
JSV\KVMKHYRÄUHUJPHSZ across the digital spectrum – internet of things,
artificial intelligence, cloud, robotic process
A
semiconductor and system designer, Moschip automation, etc., which contributed 96.5 per cent to
Technologies mainly caters to two segments: FY22 revenue.
semiconductors comprising semiconductor IP The company has always focused on creating
& design and ASIC (88 per cent of revenue) and software that is used by its clients’ customers. Given
embedded system design & IoT engineering that software development requires more focus on
comprising product design and IoT products (12 per design and architecture, the company can charge a
cent of revenue). Its client base comprises defence, premium. Its operating margin increased from 4.2 per
consumer electronics, automotive, medical and cent in FY19 to 23.4 per cent in FY22. Similarly, its
telecom sectors. ROE increased from 11.8 per cent in FY19 to 30.1 per
Over the last five years, its cent in FY22. Revenue and net profit have grown at a
revenue has grown by 32 per Average Good CAGR of 20.5 and 111.9 per cent, respectively, over
cent pa, however, it posted Poor Very FY17–22.
good
losses every year until FY22. The management aims to grow the revenue at a
Hence, its five-year median CAGR of 20 per cent over the next five years and after
operating margin and return on equity were at -12 that, at one and a half times the industry growth. A
per cent and - 34 per cent, respectively. This also key driver of this growth would be acquisitions. Its
resulted in negative operating cash flow for four out current value proposition and its investments in
of the last six years and it had to borrow money for emerging technologies augur well. But, at the current
working-capital needs. Over the last five years, its valuation, the same might not hold true for investors.
median short-term borrowing as a percentage of
shareholders’ funds was at 99.8 per cent!
YTD return (%)
Following COVID, the demand for semiconductors
shot up and the industry posted the highest-ever
annual production and sales. This trend is expected P/E | 5Y median P/E
to continue, with the share of locally manufactured c
semiconductor components expected to grow at 17 per
cent per annum till 2026. In October 2022, the
company joined a design-centre alliance with TSMC.
While growth prospects are attractive, the company’s
financials have been volatile and the topline growth
may not necessarily be reflected in the profits or cash
flow. Despite a 26 per cent fall year to date, the
company still trades at 190.3 times its earnings.
All year-to-date (YTD) return and P/E data as on November 11, 2022

COVER
CO
SSTORY
T
Best US tech stocks to buy now

Stocks with the steepest fall on a year-to-date basis and available at a discount to their five-year median P/E
REVENUE GROWTH PROFIT GROWTH ROE (%) P/E
M-cap TTM 5Y TTM 5Y 5Y 5Y YTD
Company ($ bn) (%) (% pa) (%) (% pa) Current median Current median return (%)
Meta Platforms 300 5.2 33.7 -25.7 30.4 22.4 27.2 9.3 27.1 -66.4
Zoom Video Comm. 26 18.1 132.1 -22.6 485.6 18.6 28.5 23.8 25.3 -52.0
PayPal Holdings 104 10.1 18.8 -41.3 23.7 10.9 15.2 42.0 55.0 -51.7
Advanced Micro Devices 117 53.7 30.9 -21.7 57.3 7.4 35.9 38.9 83.8 -49.7
NVIDIA 407 35.8 31.3 36.1 38.8 34.4 44.8 43.8 47.9 -44.5
Intel 126 -11.4 5.9 -65.9 9.5 14.0 26.4 9.4 11.2 -40.9
Adobe 159 13.9 21.9 9.7 32.1 33.4 29.7 29.5 40.3 -39.8
Skyworks Solutions 15 13.3 9.2 -7.2 5.9 23.7 22.5 12.3 18.4 -37.9
ANSYS 22 8.1 14.0 3.9 6.1 10.6 11.6 46.7 52.8 -36.3
Cognizant 30 8.1 6.5 15.2 3.8 20.0 16.4 13.0 21.8 -34.2
Qualcomm 136 31.7 14.7 35.9 23.5 92.9 94.6 10.6 22.9 -33.6
Alphabet 1,250 17.9 23.3 7.6 29.8 26.9 18.6 19.8 29.5 -33.4
Lam Research 68 14.2 16.6 14.9 23.0 73.3 45.5 14.4 18.3 -30.4
Cisco Systems 184 3.5 1.4 2.7 2.1 29.2 29.1 15.9 16.2 -29.3
ASML Holding 229 -0.4 23.7 -10.4 31.1 57.4 20.2 40.7 41.5 -27.6
Microsoft 1,842 15.2 15.5 14.2 19.9 42.9 42.5 26.6 33.1 -26.5
NXP Semiconductors 44 22.8 3.1 64.1 52.7 38.5 12.1 17.0 32.1 -25.4
Stocks from the Nasdaq 100. Price data as on Nov 11, 2022. Considered profit before tax and exceptional items for profit growth. Three-year median ROE for Zoom Comm.
0ZP[[PTL[VL_P[<:[LJO&
T
he quick and steep correction in US tech sector, the tech story is far from over.
stocks has made many investors wonder if Investing in US tech giants is actually broad-
the tech story is sputtering and if it’s time based global investing as these companies have
to exit US tech stocks and funds investing in a worldwide presence. Moreover, well-run tech
them. At Value Research, we firmly believe that companies can pivot and add activities much
tech companies are going to be central to the faster than conventional companies can.
world’s economy in the decades to come and As an Indian equity investor, not only is
being invested in them is absolutely the correct diversifying a part of your equity exposure in
thing to do. While the winners may change over this manner is a must, maintaining that
time, given that this is a famously volatile allocation makes sense too.

COVER
STORY
Meta Platforms losing market share in data-centre (Google Cloud) and many other
Operates social-media processors to AMD and restrictions on smaller businesses. An uncertain
platforms Facebook, Instagram, sale of processors to China. macroeconomic environment led to a
Messenger and WhatsApp. Rising slowdown in advertising and thereby
Adobe
costs due to its metaverse bet and slowed revenue growth to its lowest in
Whether you want to create
multiple litigations around the world 10 years in the recent quarter.
and edit PDFs or edit photographs,
regarding user privacy have resulted
this company can take care of all your Lam Research
in a fall in the stock price.
digital media needs. While the stock A supplier of wafer-
Zoom Video Comm. has fallen in line with other tech fabrication equipment and
Provides a communication platform stocks, recently investors have services to semiconductor
focusing on video conferencing. Work reacted negatively to the manufacturers. With China forming
from home powered it from $0.6 announcement of the $20 billion about 30 per cent of its revenue, the
billion in sales in 2020 to over $4 acquisition of Figma. impact of the US government’s
billion in 2022. However, with the restrictions on the sale of
Skyworks Solutions
return to normalcy, growth has semiconductor technology to China
A maker of analog
slowed down. would be material. This, along with
semiconductors, the company caters
deterioration in computer demand,
PayPal Holdings to the wireless-networking market.
has hit the stock.
Enables payments for its customers With Apple (which accounts for 55–60
(merchants and consumers) through per cent of revenue) planning to Cisco Systems
its platforms. A challenging manufacture all critical components Sells a broad range of
macroeconomic environment and by itself and tailwinds from 5G yet to networking-technology products. The
slowing e-commerce trends have led materialise, the stock has taken a hit. stock has fallen as the company
to low growth in active accounts, witnessed slowing growth, along with
ANSYS
slowing transaction volume growth pressure on margins, in recent
The global leader in
and falling margins. quarters.
engineering-simulation software and
Advanced Micro Devices services that enable cost-efficient ASML Holding
A semiconductor product development for its This Netherlands-based
manufacturer that offers the broadest customers. While it has been affected company is the largest manufacturer
portfolio of high-performance and by the general decline in tech stocks, of lithography machines used for
adaptive processor technologies. The its operating margins have also come manufacturing semiconductor chips.
weakening demand for processor down below historical levels. Supply constraints and the slowdown
chips in the personal-computer Cognizant in personal-computer and smartphone
market and the restrictions on the It is the fifth largest (based sales have affected the stock.
sale of high-end processors to China on FY22 revenue) IT services and Microsoft
have taken a toll. technology consulting firm in the A software company
NVIDIA world. A weak macroeconomic known for its operating
Provider of graphic outlook, leading to lower revenue system (Windows), productivity tools
processor units (GPUs) for various guidance, and a strong dollar have (MS Office), gaming console (Xbox)
applications. The slowdown in the impacted its growth. and cloud-computing platform
personal-computer gaming market, Qualcomm (Azure). It has taken a hit due to lower
lower demand by cryptocurrency It is involved in designing personal-computer sales and lower
miners, restrictions on the sale of and manufacturing integrated circuits guidance by the management.
high-end processors to China and (semiconductors) for smartphones and NXP Semiconductors
increasing competition in the GPU wireless telecommunication products.
Headquartered in the
market have hit the stock hard. Deterioration in demand due to
Netherlands, it focuses on
lockdowns in China and restrictions
Intel mixed-signal and analog
on the sale of chips to China have
It is the world’s largest semiconductors primarily for
impacted the stock.
semiconductor manufacturer (by automotive and industrial segments.
revenue) and develops Alphabet Supply constraints and the looming
microprocessors that power Home to the leading threat of new export restrictions on
computers. The stock has fallen due to internet-search provider sale to China have affected the stock.
weak demand for personal computers, (Google), a cloud-computing platform z Poor z Average z Good z Very good

INTERVIEW
Outlook for IT NOW

Three IT fund managers share their outlook for
the IT sector, how they pick stocks and the
recent changes in their portfolios
A
fter a dream run between among the worst performers year framework for your IT fund? What
March 2020 and January to date. do you avoid? When do you sell a
2022, the US tech sector Amid this scenario, we speak stock? (Heading: Investment
has been on a downhill with three IT fund managers to framework)
journey. While a rise in interest understand where the IT sector is z What changes have you made to
rates is the main cause for this, headed. We asked them the your portfolio over the last six
there are other business reasons following questions. In the pages months? Which pockets are you
as well, including restrictions on that follow, you won’t find the full bullish on? Which are you
tech companies on trading with questions repeated but just the avoiding? (Heading: Portfolio moves)
China, a slump in advertising short headings, as given in the These three IT funds together
revenues and demand concerns. brackets below. manage about `19,000 crore as of
Since the Indian IT sector is z After a volatile 2022, what’s your October 2022. Combined with the
heavily dependent on the western near- to medium-term outlook for cover story, these interviews will
countries for its income, problems the IT sector? Is there more pain provide you the complete package
there have reverberated here as in the offing? (Heading: Outlook for IT) on revisiting or adding IT stocks
well. This has put the IT sector z What’s the investment in your portfolio.
KUNAL SANGOI VAIBHAV DUSAD MEETA SHETTY

ADITYA BIRLA SUN LIFE DIGITAL INDIA FUND ICICI PRUDENTIAL TECHNOLOGY FUND TATA DIGITAL INDIA FUND

INTERVIEW
ADITYA BIRLA SUN LIFE DIGITAL INDIA FUND KUNAL SANGOI
‘We do not expect large

Fund Manager,
Aditya Birla Sun Life AMC
cuts in tech spending’

Outlook for IT basis the business model and
The IT sector has had a management team. In the mid-
phenomenal performance until market space, the fund also looks
February 2022 from mid-2020 as to benefit from a combination of
COVID-induced tech spends took earnings growth coupled with
accelerated precedence. Year 2022 valuation re-rating, which drives
has seen impacts from the COVID- significant outperformance and
led supply-chain disruptions and multi-bagger returns. The fund
Russia–Ukraine war. The result also invests in international
has been a steep surge in inflation, technology stocks. Over the
tightening of rates by the central medium term, the intent is to
banks and a sharp slowdown increase exposure to them to
in global GDP growth. Against 10–12 per cent of net assets.
this backdrop, tech spending is The fund tries to avoid
expected to see moderation and companies that have a me-too Portfolio moves
will impact the sector growth kind of business model with no During the past six months,
over the next year (from about specific niche skills. IT being a in the wake of a softening
13-14 per cent in FY23 to 8-9 services business, management macroeconomic scenario, the fund
per cent in FY24), even as the and leadership team is of extreme has increased exposure to large-
transformation intention of importance. The fund looks to sell cap stocks to 71 per cent plus
clients remains high. stocks when the investment thesis versus about 66 per cent. Large
However, given that changes or valuations become very companies can better absorb
transformation is a multi-year expensive and beyond comfort. any financial shock and these
journey, we do not expect large stocks tend to be more resilient
cuts in tech spending, as in the 0UJYLHZPUNKLJYLHZPUNJVU]PJ[PVU during soft times. Secondly, the
past cycles. Long-term prospects Top companies in which the fund’s investments international stock exposure,
and proposition of the IT sector have gone up/down in the last six months which stood at about 5 per cent of
remain strong and intact, the fund, was reduced to about 2.5
which will ensure reasonable 0UJYLHZPUNJVU]PJ[PVU In ` cr per cent currently. The domestic
compounded returns. technology/platform companies
157
are one segment I am bullish on
Investment framework 113 in addition to the select telecom-
The investment objective of 62
services segment. The digital
53 42
ABSL Digital India Fund is to ecosystem in India has been
invest in companies belonging Infosys Tech MindTree TCS ZEE Ent scaling up rapidly, enabling
to the technology, internet, Mahindra significant scale-up of start-ups
telecommunication, media and also helping them list on
+LJYLHZPUNJVU]PJ[PVU
and entertainment sectors and the stock exchanges. Over the
Wipro KPIT Route Oracle Bharti
business services. Our strategy Tech Mobile Financial Airtel next few years, we will see more
to manage this fund is to apply a such companies being higher
combination of growth and value. -16 part of the portfolio. The fund is
-23 -22
The fund is actively managed -29 avoiding/reducing exposure to
with no market-cap restriction companies that have very high
and has a long-term track record. -47 client dependency/concentration
It looks to buy companies with in the IT space or have a high
Estimates based on monthly portfolio disclosures and
a reasonable margin of safety as of October 2022 exposure to the troubled segment
and has strong levers for growth of the global economy.

INTERVIEW
ICICI PRUDENTIAL TECHNOLOGY FUND
‘Cloud migration would remain a strong

growth driver over the next several years’
Outlook for IT VAIBHAV DUSAD
Global macro continues to remain 0UJYLHZPUNKLJYLHZPUNJVU]PJ[PVU
Fund Manager,
uncertain driven by inflation Top companies in which the fund’s investments
ICICI Prudential Mutual Fund have gone up/down in the last six months
challenges in the US and EU
markets. This could potentially 0UJYLHZPUNJVU]PJ[PVU
have an impact on the large In ` cr
1,139
corporate technology budgets in
2024. However, we believe that this
impact would likely be a
temporary one which could be 164 100 64 54
visible in 1HFY24.
We believe that we are in the TCS Infosys HCL Tech eClerx PVR
Services
middle of a technology-cycle
upgrade. This journey started +LJYLHZPUNJVU]PJ[PVU
slowly in 2018 but picked up great Tech Mphasis Persistent Coforge LTI
pace post COVID. It typically takes Mahindra Systems
four-five years for the upgradation -90 -78 -58
-90
cycle to complete and therefore
from a medium-term perspective
(two to four years), the growth
-279
runway should be better vs what it utilisation, wage rationalisation,
used to be pre-COVID. Cloud, big price hikes, along with INR Estimates based on monthly portfolio disclosures and
as of October 2022
data analytics and automation depreciation, are all multiple
would be central to the growth levers on the margins front.
theme. Cloud migration, along From the medium-term important. The fund could
with cloud penetration, would perspective, Indian companies allocate some weights in
remain a strong growth driver continue to hold a global turnaround stories as well.
over the next several years. advantage in the form of their cost Finally, right entry valuation is
Indian IT companies have competitiveness when it comes to the key to the creation of alpha.
swiftly upgraded themselves in this client delivery. So, we believe these High-conviction names would
new digital era since 2015. They are companies would continue to gain typically have higher weightage
in fact at the forefront of this market share in the worldwide representation in the fund.
global tech transformation and technology-services market.
their business models are largely Portfolio moves
disruption-proof and robust. Investment framework In a challenging macro, we become
The challenge exists in the form Majority of the fund investments more risk-averse and prefer large
of some growth moderation in the are in the Indian IT services caps over mid and small caps.
next few quarters but on the sector. Capital allocation and However, whenever outlook on
positive side, we should see dividend-distribution policy are technology spending improves, we
pressure on margins to gradually very important to our stock would refocus on mid- and small-
ease off, which should benefit selection. Overall quality of cap names. It is interesting to see
operating margins. During the last management, including tier 1 that in last four-five years, most
few quarters, we have seen a huge leadership on both sales and India IT mid and small caps have
challenge in terms of a rise in delivery front, is the second factor. continued to improve the quality
delivery costs. Going forward, a End-market technology niche, of delivery and fortified sales
higher share of junior employees, good delivery model and ability to engine to effectively compete in
elevated offshoring, improving mine existing clients are equally global markets.

INTERVIEW
TATA DIGITAL INDIA FUND
‘The digitisation wave may keep the

momentum strong over the coming years’
Outlook for IT MEETA SHETTY
0UJYLHZPUNKLJYLHZPUNJVU]PJ[PVU
The Indian IT sector has seen a Fund Manager, Tata Mutual Fund
sharp correction this year and Top companies in which the fund’s investments
is the second worst-performing have gone up/down in the last six months
sector, the first being realty. The
correction was largely due to the
0UJYLHZPUNJVU]PJ[PVU In ` cr
concerns on global economies 380 363

going into a recession and a
round of interest-rate hikes. Both 194
of these do not augur well for the 127 101
Indian IT sector. The increase
TCS Infosys HCL Tech Tech Bharti
in the rates impacts valuations, Mahindra Airtel
which were already running high
for the Indian IT services sector. +LJYLHZPUNJVU]PJ[PVU
And the recessionary scenario Coforge L&T Persistent Mphasis Sonata
will eventually lead to budget Tech Systems Software
cuts on the IT spending. The -33

-45
concern over the budget cuts is
yet to play out and can lead to -78
-90
some volatility or time correction
-115
in the near term. services companies to keep inching
From a medium- to long-term higher in their market share vs Estimates based on monthly portfolio disclosures and
as of October 2022
perspective, the spends on the IT the global peers and hence add an
services may continue to grow incremental layer of growth.
well and the digitisation wave strategy, inferior capabilities
may keep the momentum strong Investment framework vs peers or poor cash-flow
over the coming years. The cloud The strategy is to have a healthy conversion. Stocks which have
penetration at industry levels still mix of steady compounders and run ahead of time and are trading
stands at about 25 per cent from alpha-generating opportunities at extremely high valuations
about 20 per cent in the pre-COVID based on growth and value. There or where there is a change in
year, despite very strong growth can be times when the portfolio strategy/outlook vs what we
seen over the last two years. The might be skewed towards either would have envisaged are the ones
growth for the hyper scalers like of the bucket, depending on we may part ways with.
Microsoft Azure, Google Cloud the outlook and the valuations.
Provider, Amazon Web Services, Around the pandemic times, we Portfolio moves
which is a lead indicator for saw alpha opportunities in the Over the last one year, the
cloud migration, continues to mid–small space and started portfolio has gradually skewed
remain healthy at over 25 per cent, positioning accordingly. As these towards compounders. We have
validating a strong spend on cloud opportunities played well, it helped moved towards large caps and
migration over the coming years us generate alpha for our investors. trimmed small- and mid-cap
by clients. Spends on areas like We prefer companies with names. Apart from the valuation
cybersecurity, internet of things, track record of both management comfort, we also expect large
AI are increasingly becoming the and financials, ability to manage caps to be better positioned in the
core and add more legs of growth through cycles and a strong current scenario, as the clients
for the IT services companies. visibility for growth. We would shift their focus on cost in the
Apart from the market-level want to avoid stocks with high near term, leading to more cost
growth, we also expect Indian IT leverage, bad-capital allocation takeout deals in the market.

STOCK
ADVISOR
A game of percentages
Equity investments are never perfect – it’s always a matter
of working to improve your percentages
DHIRENDRA KUMAR
I’m not sure how many of my readers the Chinese virus, we have all had a lot of recent
here are cricket fans but if you have watched any experience of how external events can bowl a googly,
cricket at all, you may have heard the term ‘percentage turning the surest boundary into a low-percentage shot.
shot’. Conventionally, the way cricket used to be played, Many of us chose good companies but the lockdowns did
most batsmen would play only shots where as far as tremendous damage to those businesses. Then, as we
they knew, they were safe. If something unexpected adjusted our expectations to this set of events, came a
happened, they could get out but that was never part of strong but uneven recovery, which brought a further set
the plan. Nowadays, especially in limited-overs cricket, of surprises and again upended some calculations. At
it’s the time of percentage shots. The batter knows that the end of the day, the lockdowns were something
there is a certain percentage risk of getting out and unexpected, something that can be ascribed to pure bad
that risk is acceptable. Not doing anything and wasting luck, a genuine black-swan event.
a ball is itself a risk.
In equity investing, everything is a percentage shot. In equity investing, everything is a
We like to fool ourselves, especially in hindsight, that percentage shot. There is always a
something was a sure-shot investment but in reality,
there is always a probability, with every single
probability, with every single
investment, that something can go wrong. In this sense, investment, that something can
equity investing is essentially a percentage shot. There’s go wrong.
always a chance of failure. Not just that, as you invest in
a number of stocks and buy and sell over the years, there There are other kinds of investing failures that have
is a zero chance of not failing and actually a chance of occurred to many of us where it was something wrong
failing often. Most investors who are choosing carefully with our own evaluation of a stock. Currently, it is
would fail more than succeed. clear that money is going to be expensive for some
years to come. It appears inevitable. Now, it’s not
But then what? exactly rocket science to guess what happens to
So, everyone fails; everyone makes mistakes. I do, you businesses when rates increase and which kind of
do, Warren Buffett and Charlie Munger do, too. companies do worse and which do better or less bad.
The key question is, then what? What happens after Those of us who have been investors have been through
that? That’s the difference between investors who such situations and yet, we have made mistakes that
succeed and those who struggle. There are investments arise from this. The question is, are we going to make
that did badly because of something that we did wrong, such mistakes again or did we learn?
and there are those which were just a turn of events – As I said, everyone makes mistakes, the question is
something that no one could have predicted. Because of what we learn from them. It so happens that this is easy

STOCK
ADVISOR
to say but hard to implement. As an individual investor As a Stock Advisor member, you are
doing your own research, it’s a long process to make
enough mistakes, learn enough lessons, test them out as
no longer an individual who is trying
well as institute a process of always analysing mistakes to do an impossibly large and
and never letting them go. Can you do it? I can’t, at least complicated job of making decisions,
on a personal basis. There’s the problem of just the detecting failure and then trying to
workload and also just the psychological difficulty of
admitting to oneself that one was wrong.
learn from it. You have our entire
team doing that for you.
Improving the percentage
So, we have established four things by now. One, equity z Access to all our (currently 56) stock picks
investing is a percentage game. Two, the key to making z Best Buy stocks: 16 stocks selected from our
more money is to improve your percentage. Three, recommendations. Use this set to start building your
analysing failures is important in improving the portfolio right away!
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do this. So, where does that leave us? stocks so that you understand why you are investing
That’s where Value Research Stock Advisor comes z New recommendations as soon as they are released
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and then trying to learn from it. You have our entire Those are what we call ‘features’. On top of that,
team doing that for you. we have this invaluable ‘non-feature’ – seeing what
I’m not claiming that we do not make mistakes. Far has gone wrong and making sure that it does not
from it. Currently, we have 56 recommended stocks but happen again.
also eight stocks that we asked our members to quit.
Things didn’t work out as well as we had hoped for. Value Research Stock Advisor is a premium service where
That’s fine. Quit them, learn your lessons and move on you get promising stocks along with their full analyses.
to so many others that did work out. That’s how more We also actively track the underlying companies for you
and more of the percentage shots reach the boundary. and keep you posted on the major developments in them,
including when to sell a stock. Additionally, members
It’s a team game. Come and let our team play on get exclusive access to a range of tools and data which
your side. they can use to study any other stock. You can subscribe
And what will you get as a member of Value Research
to the service at www.valueresearchstocks.com.
Stock Advisor?

STRAIGHT
TALK
Beating the Street

Indian markets and companies have done well lately
amid the global weakness. What’s next?
ANAND TANDON
The Q2FY23 result season is now over seekers have become employed in lower-paying jobs.
and the outcome is better than the consensus. Nifty Stagnant rural wages, coupled with high inflation, imply
constituents delivered profit growth of over 9 per cent, that real wages have contracted. With food inflation
even as EBITDA margins contracted by almost 4 per cent remaining at elevated levels, lower-income households
YoY. Much of the 29 per cent increase in sales was largely are likely to be affected as their consumption basket is
absorbed by cost increases. more oriented towards food. The government’s policy to
MSCI Index for developed markets is down 18 per cent continue to supply foodgrains for free has undoubtedly
since January, while MSCI Emerging Markets has helped in alleviating stress but at the cost of rising fiscal
dropped 24 per cent over the same period. As against this, pressure on the government.
India is down only 3 per cent, making it one of the best-
performing markets in the world. Among comparable Interest-rate increase doesn’t suffice
economies, only Brazil (13 per cent) and Mexico (3 per Credit has witnessed 15 per cent growth over the past
cent) are in the black. Is the outperformance likely to year. Retail credit makes up 29 per cent of the total gross
sustain? It may, though it appears fragile. credit and is reporting 22 per cent growth, led by auto
loans (66 per cent growth) and credit-card spends (45 per
Employment recovery but with lower salaries cent growth). A 70 basis-point increase in loan rates will
After a sharp uptick in numbers, caused by COVID, increase the EMI on a small-car loan by less than 2 per
unemployment figures are finally dropping. MNREGA too cent. A 16-ton truck financed at a rate higher than the
reflects this trend, with job demands coming down in the lowest in the year by 120 basis points will have an effect of
past quarter. Despite this, the consumption trends, 2.8 per cent on the EMI. Both these increases are unlikely
especially in rural India, remain subdued. Many job to reduce demand meaningfully. Housing, however, can be
5PM[`7(;NYV^[O@V@PU8-@ 5PM[`,)0;+(THYNPUPU8-@
22.0
103
21.0
21.3
21.1
20.6
20.2
19.9
19.9
19.7
18.7
19.4
19.4
18.7
19.3
18.9
18.6
18.3
18.5
18.2
85
17.9
16.7
38
20 25 21 23
18 19
12 11 13 11 11
5 5 5 9 9
-24 -31
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Sep-17
Dec-17
Sep-18
Dec-18
Sep-19
Dec-19
Sep-20
Dec-20
Sep-21
Dec-21
Sep-22
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Sep-17
Dec-17
Sep-18
Dec-18
Sep-19
Dec-19
Sep-20
Dec-20
Sep-21
Dec-21
Sep-22
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
Source: Motilal Oswal, NSE Source: Motilal Oswal, NSE

STRAIGHT
TALK
<ULTWSV`TLU[YH[LPU0UKPH ,TWSV`TLU[KLTHUKLKIÒV\ZLOVSKZ
30 % 70 In mn Households Persons
25 60
50
20
40
15
30
10 20
5 10
0 0
Jan-19
Jan-22
Jan-18
Jan-21
Jan-20
Apr-18
Apr-21
Apr-20
Apr-19
Apr-22
Oct-19
Oct-22
Oct-18
Oct-21
Oct-17
Oct-20
Jan-19
Jan-22
Jan-18
Jan-21
Jan-20
Jul-20
Apr-18
Apr-21
Jul-19
Jul-22
Apr-20
Jul-18
Jul-21
Apr-19
Apr-22
Oct-19
Oct-22
Oct-18
Oct-21
Oct-17
Oct-20
Jul-20
Jul-19
Jul-22
Jul-18
Jul-21
-ARCHlSCALYEAR ENDS 3OURCE#-% +OTAK)NSTITUTIONAL%QUITIES -ARCHlSCALYEAR ENDS 3OURCE-.2%'! +OTAK)NSTITUTIONAL%QUITIES
impacted (albeit moderately), with rates having gone back pressure on its most-innovative sector – technology – is
up to levels last seen in 2018. From the low, it implies a 15 evident. Large-scale lay-offs have been announced not
per cent increase in EMIs. When coupled with an increase only in VC-funded start-ups but also in profitable,
in real-estate prices across major cities, as also the established market-leading companies like Meta. In such
increase in the cost of building material for self-built an environment, the demand for Indian IT companies –
homes, the overall impact may be measurable. already lower than the growth witnessed last year –
cannot be robust.
Crude prices – still a way to go Equally important, much of the private-sector
While crude prices have fallen since the peak earlier in the investment forecast for the years ahead was based on the
year, much of it is on account of the release from strategic ‘production-linked incentives’ (PLI) programme of the
reserves of the US and lower transportation cost. Russian central government – largely targeted to exports. A
production, though higher than immediately after the slowdown in export markets will bring down the planned
start of the war in Ukraine, is about 10 per cent lower than growth rates for these companies and consequently reduce
its longer-term average and is budgeted to fall by about 0.5 the investment plans as well as the exports.
million barrels per day in the next year. The global
demand will likely increase by 1.5 mb/d. Prices may Where is the earnings growth forecast to come from?
continue to see upward pressure. The direct impact on Over FY24 and FY25, 24 per cent of the earnings are
Indian CPI (Consumer Price Index) will be muted (it’s estimated to come from banks. On an incremental basis,
only 6.8 per cent of the CPI basket). But the cascading SBI alone should contribute 7 per cent of the increased
effect will carry through to prices. Diesel is already being profits in FY24. The auto sector too should be a major
priced lower than it should be to allow a positive marketing contributor, with a recovery in volumes as component
margin for oil-marketing companies (OMCs). In effect, if shortages ease and demand kicks in. Two-wheeler volumes
prices rise, very likely the government has to allow retail are estimated to grow after a couple of years of slowdown.
prices to rise as well. On the other hand, a fall in crude A large part of the incremental profits (17 per cent) is
prices will not be passed on in a hurry – to allow OMCs to anticipated to come in from Tata Motors. But its large
recover their losses. exposure to international markets makes the forecast
The positives can be that economic growth continues at more vulnerable. Other major contributors in earnings
a strong pace, leading to better-paying jobs and higher are the downstream companies – BPCL is expected to
prices for food trickle down to higher farm incomes. return to profitability. Reliance and other telecom
Inflation doesn’t rise further, allowing interest rates to companies too should have a significant impact on profits.
stay where they are. Oil prices don’t go back up, keeping As a portfolio strategy, asset allocation remains the
the WPI (Wholesale Price Index) in check and allowing most important factor. Rising domestic yields are likely as
companies to report better bottom-line growth. banks increase interest rates on deposits to make up for
the credit growth they are witnessing. Even for a die-hard
The negatives equity investor, it may be opportune to have some
Unfortunately, the other side of the argument is also easy allocation to debt investments in the portfolio.
to make. The US is still reporting robust numbers but Anand Tandon is an independent analyst.

EVERYDAY
ECONOMICS
The population problem

India will soon replace China as the most populous
country. How concerning is that?
PUJA MEHRA
The world’s population has grown to continue to create new ones and do not inspire
eight billion. Indians, since we are so many, have to confidence in their ability to agree with each other to
jostle for resources and opportunities, and have come work constructively on pressing issues.
to fear the growing population as a disastrous thing. Second, worries about overpopulation and paranoia
We blame all our problems on population growth, not about the Earth running out of food, mass starvation,
the incompetence, greed, corruption and lack of etc., have all proven overblown. On the contrary, the
professionalism in our systems. We are used to thinking population growth rate has been consistently slowing
about population in a way that is now outdated. down – hectically slowing down in the more developed
First, what does the population growth show? That parts of the world and slowing down a bit slowly
the human species, unlike dinosaurs for instance, is elsewhere. The growth rate of population had been 2
good at surviving. The human ability for science, per cent a year 50 years ago; it is now 1 per cent. In fact,
empathy and survival has successfully trumped the the worry now is that soon there won’t be enough
threats posed by natural calamities, humans in some parts of the
diseases, pandemics and epidemics, Japan is suffering from world. Populations are
droughts and wars, and the myriad what is called a national shrinking in Japan and many
European countries. China, the
weaknesses in human characters. The
shortage of heirs. most populous country as of
human ability for development and
progress has ensured ever-growing According to official 2022, will see its population
supplies of food, raw materials, goods data, every year nearly decline next year and is,
therefore, giving up its one-
and services for the growing population.
40,000 small businesses child policy and has begun
We have not run out of resources; we
have steadily learnt to tap newer ones require new successors asking – without much success
with progress in technologies. Agreed, but few find them. so far – the Chinese people to
we could have done a lot better had we have three children.
been less selfish and more sensible; many resources Why are countries worried
are scarce and stressed – water for instance. Many about shrinking populations? The reason is simple.
other species are endangered or extinct after suffering Ageing, dwindling populations imply a shrinking
the erosion of their habitats or game hunting by labour force. For all the technological advancement,
humans. Dividends of development are not equally artificial intelligence and automation, there can’t be
shared by all humans. Nothing demonstrated that we much economic growth without a sufficient number of
have created an unequal world more than the unequal thinking, creating humans, can there? A senior
access to COVID-19 vaccinations. Accelerated climate colleague articulated this wonderfully in a recent
change endangers the planet. The point is not that this article (https://bit.ly/3tJWNZT), explaining why we
is a perfect world but that humans have demonstrated have no reason to worry on account of the population’s
that they are capable of solving problems even if they growth. After a certain threshold of development is
have not already resolved all problems at hand, crossed, a child born is not merely a mouth to feed but

EVERYDAY
ECONOMICS
also two hands to work and a mind to create new macroeconomic challenges. When the number of
knowledge. If the child is educated and skilled properly, retirees and dependents in the population exceeds the
it would grow into an adult capable of producing far number of earners, everything gets stressed and
more than is required for its own survival. unsustainable: social security, public expenditure on
Japan’s case is instructive. About a decade back, health care and pensions.
Japan’s population began to shrink and it began to age. India will replace China as the most populous
More than a quarter of the Japanese are over 65. The country on the planet. How far is India from a
country has tried in vain to reverse the declining shrinking population? Population growth depends on
number of births. According to official data, only what economists call the total fertility rate (TFR),
8,40,000 babies were born in Japan in 2020, with the which is the maximum number of children a woman
birth rate down to 1.34 children per woman of can be expected to have over her lifetime. A TFR of 2.1
childbearing age. What this means is considered adequate for creating
is that Japan’s new adult cohort, or A total fertility rate a stable population: two children to
the proportion of 20-year-olds in the (TFR) of 2.1 is replace their mother and the father
total population, is down to 0.96 per on their death plus accounting for
cent. The new adult cohort is the
considered adequate the risk of some of the children not
working population, the future of for creating a stable surviving to adulthood. India’s
the Japanese economy. It is suffering population. India’s TFR TFR is two, lower than the
from what is called a national replacement level. India’s TFR has
shortage of heirs. According to
is two, lower than the been declining with socioeconomic
official data, every year nearly replacement level. advancement, but some backward
40,000 small businesses require new states such as Bihar, Uttar Pradesh,
successors but few find them. Thousands of businesses Rajasthan and Madhya Pradesh still have TFRs in
that had powered Japan’s post-war economic growth, excess of the ideal level of 2.1. Once the TFR in these
taking it to the position of the world’s third-largest states too reaches 2.1 and stabilises there for some
economy, are closing every year because their childless time for a few decades, India’s country-wide population
owners can’t find heirs or buyers. Such is the may also begin to shrink. There’s time. But it’s
desperation that there are apps similar to dating apps absolutely uncool to worry that India is a population
through which business owners of heirless businesses ticking bomb. We shouldn’t let such overblown fears
are mapped with potential sons and daughters they can prejudice us.
consider adopting.
Puja Mehra is a Delhi-based journalist and the author of ‘The Lost Decade
There are other policy implications of worsening (2008-18): How the India Growth Story Devolved into Growth Without a
demographics. Ageing, shrinking populations pose Story’

MAIN
STREET
The rise of Indian women

As India reaps the benefits of economic reform, Indian women –
more than Indian men – are emerging as gamechangers
SAURABH MUKHERJEA
Historically, as well as in contemporaneous production which has increased their income from
times, Indian women have been typecast as the primary virtually nothing to a level where they have some
caregivers in the household. As a result, they are degree of spending autonomy. Testimony to this effect
perceived as non-contributors to the economy as far as is the emergence of the local-business aggregator app
employment is concerned. This is reflected in the Meesho and its increasing popularity in tier 2 and 3
women’s labour-force participation rates (LFPR) in the cities in the country. Businesses listed on Meesho
country, which have been low and falling for more than mostly belong to local women entrepreneurs who
a decade (see chart ‘Indian women’s labour force engage in the cottage or micro industries producing
participation rate’). small artefacts and selling them in local markets.
However, anecdotal and other empirical data shows Furthermore, if we look at the LFPR data but with a
that more Indian women are venturing out today in different lens, namely age-wise stratification, a
greater numbers than ever before in search of a better completely new picture emerges. Whilst the LFPR for
life. According to Anirudha Dutta, the author of ‘Half a women in the age bracket 15–24 has gone down
Billion Rising: The Emergence of the Indian Woman’ substantially since 2010, the LFPR for 25–35 years has
(2015), “Women today spend lesser time, energy, and remained fairly stable and remarkably, the LFPR for
effort on the simplest of tasks for survival and can 35+ age bracket has actually gone up (see chart ‘Indian
invest their saved time in actually learning something female labour force by age’).
or building something.” Whilst researching the book, What is driving these positive changes for women
Anirudha observed that increasingly more women are in India? And secondly, what are the implications of
stepping out of the house and engaging in small-scale such changes?
0UKPHU^VTLU»ZSHIV\YMVYJLWHY[PJPWH[PVUYH[L 0UKPHUMLTHSLSHIV\YMVYJLI`HNL1\S`
35% 16 cr 15–24 25–34 35–44 45–54 55–64 65+
32
30
30 12
25 8
20 19 4
15 0
1990 2021 1990 2030
Source: Marcellus Investment Mangers, ILOSTAT, Our World in Data. Percentages Source: Marcellus Investment Mangers, ILOSTAT, Our World in Data. ILO-modelled
calculated from ILO modelled estimates which are calculated using the data calculated by estimate used, which is taken from each country separately. Therefore, numbers depend
each country. Percentage of female population ages 15+ considered. on how each country reports the employment numbers. Data after 2017 are estimates.

MAIN
STREET
Education and the rise of the service economy

Not only are more Indian women getting educated but -LTHSLLTWSV`TLU[PUZLJ[VYZ
they are also getting educated more rapidly than their As a % of total female employment
male counterparts. India’s female literacy rate in 2011 80 Agriculture Industry Services
was 64.6 per cent as compared to the male literacy rate
of 80.6 per cent. However, between 1961 and 2011, female 76 74
60 67
literacy in India has grown three times as fast as male
literacy (about 3 per cent p.a. vis-à-vis about 1 per cent). 40 55
Furthermore, if we look at the number of women per 28
one hundred men enrolled by the level of education, the 20 17
14
number has risen from being less than 40 to more than 12
16 17
90 across almost all levels of education (see table ‘Gross 0 12 12
enrolment rate across years’). This, coupled with higher 1991 2019
pass percentages for girls relative to boys in both 10th Source: Marcellus Investment Managers, ILOSTAT, Our World in Data. Percentages
calculated from ILO-modelled estimates which are calculated using the data calculated by
and 12th grade exams in the country, shows that more
each country.
women are getting educated and performing better at
exams than boys (source: https://bit.ly/3hAM4On).
In fact, this rising trend of more women getting done well. Unsurprisingly, therefore, if we look at
educated well into their twenties is partly the reason for how women’s employment has progressed by
the falling LFPR in the 15–24 age group (as seen chart different sectors over the years, their share in
‘Indian female labour force by age’) i.e., the entry of services has consistently grown (see chart ‘Female
women into the workforce is getting delayed. employment in sectors’).
Furthermore, given that the Indian economy is
dominated by services (which accounts for 53 per The impact of electricity and the internet
cent of India’s GDP), the growing educational prowess By 2018, every part of India (including every village)
of women positions them beautifully to thrive in that had access to electricity. The spread of electricity
part of the Indian economy which has consistently opens up a world of possibilities for people in general
but even more so for women. Thanks to access to
washing machines, general kitchen appliances,
.YVZZLUYVSTLU[YH[LHJYVZZ`LHYZ flowing water from taps, cooking gas and so on, the
amount of time, energy and effort that women typically
Elementary Secondary Higher Education
(6–13 yrs) (14–17 yrs) (18–23 yrs) had to spend on daily chores has gone down
significantly, freeing up a lot of their time. This effect,
Level/Year Male Female Male Female Male Female
in fact, has been seen around the world. Robert
2005-06 98.5 91.0 44.6 35.8 13.5 9.4 Gordon, in his book ‘The Rise and Fall of American
2006-07 100.4 93.5 45.0 36.8 14.5 10.0 Growth’ (2017), writes: “The life-changing implications
2007-08 102.4 98.0 49.4 41.9 15.2 10.7 of the revolution, especially in liberating American
2008-09 102.5 99.6 51.0 43.5 15.8 11.4
women, is a central aspect of the increase in the
standard of living between 1870 and 1940… A third
2009-10 102.5 100.4 52.5 46.1 17.1 12.7
cause (for increase in the female participation rate
2010-11 104.5 103.3 55.7 48.5 20.8 17.9 from 1920-1940) was the gradual diffusion of electric
2011-12 97.2 97.6 58.8 54.5 22.1 19.4 appliances, including the iron, vacuum cleaner, range,
2012-13* 95.6 98.6 57.0 56.5 22.7 20.1 refrigerator, and washing machine.”
Dr Piyul Mukherjee and Ipsita Bandyopadyay, who
2013-14* 95.1 99.1 62.5 62.6 23.9 22.0
represent Quipper, a market-research firm, note that
2014-15* 94.8 99.2 64.9 65.8 25.3 23.2 “Before the pandemic, smartphones were owned by the
2015-16* 94.5 99.6 67.6 68.7 25.4 23.5 person in the family who was the most outgoing. But
Source: Marcellus Investment Managers, Ministry of Human Resource Development,
during the pandemic, another one was added due to
Government of India. For school education: National Institute of Educational Planning educational requirements, and as a result, women got
!DMINISTRATION .EW$ELHIlGURESRELATEDTOSCHOOLEDUCATIONAREPROVISIONAL&OR access to it via their children’s needs. This has reduced
higher education: Department of Higher Education, MHRD, Government of India;
*numbers are provisional.
information asymmetry to a large extent, which has
opened new avenues for income generation.”

MAIN
STREET
With the growing ease of access to smartphones and money are increasingly becoming obvious:
thanks to low-cost broadband, Indian women are not z According to Rajiv Anand, Deputy MD at Axis Bank,
only accessing the financial system through bank “According to Axis Mutual Funds, they are seeing
accounts and traditional instruments like fixed deposits seven times increase in the number of women visitors
but also experimenting with new-age investment on their websites from January 2020 to October 2021.
avenues like cryptocurrency. Similarly, the number of women investors has also
increased in the same period by 30%.” (Source:
Local role models have a national impact ‘Sisterhood Economy’ by Shaili Chopra).
As more women build their own careers and businesses, z In the listed space, we at Marcellus are significant
they become role models for the generation behind shareholders in Titan, a $30 billion market cap company
them. Anirudha Dutta speaks from his experience of whose revenues, profits and free cash flows have grown
talking to women across the country, over the last five years at 17, 25 and 58
“Women and girls look up to their Businesses listed per cent pa, respectively (since free cash
immediate circle of people of importance
– be it their teachers or some girl from
on Meesho mostly flows were negative for FY22, FY16–FY21
period is used). Titan is India’s largest
their neighbourhood who went to a belong to local and fastest-growing jeweller.
larger city in search of a better life or women z Last year, Nykaa, India’s largest
their mothers. The girls treat such entrepreneurs who beauty and personal-care platform, went
women – mostly their mothers – as their
role models and the impact that this has
engage in cottage public and now has a market cap of $6.5
billion. As of June 2021, Nykaa had over
on them is immense.” or micro industries 15 million customers and now generates
In India, a similar revolution is producing small annualised revenues of $617 million
underway – a revolution that is almost artefacts and (source: Statista & Bloomberg).
z In the unlisted space, Mamaearth, a
never covered by the media. When one
travels to the smaller towns and villages,
selling them in D2C company selling beauty and baby
it is quite evident women are running local markets products, has signed 5 million customers
small businesses, for example, grocery within its first two years of operation
stores, beauty parlours, restaurants, etc., which give and generated revenue of $130 million for the fiscal
them economic freedom that they did not have even ending in 2022 (revenue for the parent – Honasa
until five years ago. Consumer; source: ‘The Times of India’, https://bit.
At the other end of the economic spectrum, more ly/3UIO5qr). In its January 2022 funding round,
women are being hired into leadership roles today than Mamaearth was valued at $1.2 billion (source:
eight years ago. In 2022, almost a quarter of women who Moneycontrol, https://bit.ly/3X1GSUd).
were hired were hired for leadership roles, a sharp The rise of India’s women is symptomatic of the rise
increase over the prevalent percentage in 2015 (source: of a new India – better educated, better informed
Business Insider, https://bit.ly/3OdlrLH). (thanks to broadband and the internet) and more
gainfully employed (thanks to a flourishing economy).
Economic and investment implications As ‘The Economist’ said in its May 13, 2022 edition, “…a
Shaili Chopra writes in her book ‘Sisterhood Economy’, novel confluence of forces stands to transform India’s
“Women contribute 17% of the GDP in India. And if economy over the next decade, improving the lives of
female labour force participation is increased, women 1.4bn people and changing the balance of power in
can add up to $700 billion to the country’s GDP by 2025.” Asia…As the country emerges from the pandemic,
Leaving aside the specific GDP boost that women can however, a new pattern of growth is visible. It is unlike
deliver, it is obvious that if almost the entire other half anything you have seen before… These changes…help
of the population of the country is currently not explain why India is forecast to be the world’s fastest-
employed and were to be included in the workforce (by growing big economy in 2022 and why it has a chance of
better measurement techniques when it comes to holding on to that title for years.”
employment and broader policy changes), the directional
implications on GDP would be transformational. Saurabh Mukherjea is part of the Investments team at
As women are increasingly well-educated and Marcellus Investment Managers (www.marcellus.in). He is
gainfully employed, investment opportunities the author of ‘Diamonds in the Dust: Consistent
associated with women investing and spending their Compounding for Extraordinary Wealth Creation’.

STOCK
SCREEN
Blue-chip and value stocks

Reliable front-line stocks at attractive valuations and quality stocks
available at a discount to their book value
A
stock screen filters out companies based on share, they are less risky than their smaller
certain criteria. Its main advantage is that it counterparts. However, these stocks have already
helps you generate stock ideas with just a few been ‘discovered’ (i.e., known to most investors). For
clicks. Once you have the list of ‘deserving’ this reason, they generally trade at a premium.
stocks, you can research them further to find the ones Discount to book value: This screen is an old-school
worth investing in. value investor’s dream. The usual belief is that
The Value Research website provides you many buying a stock for less than its book value will give
ready-made stock screens. Here we will be covering you a margin of safety. However, that might not be
two such screens: ‘attractive blue chips’ and ‘discount true. Therefore, we have applied additional filters to
to book value’. We have also given a concise stock list weed out poor companies.
from the other screens. To get the full list in real
time, visit www.valueresearchonline.com/stocks/ (^VYKVMJH\[PVU
selector. Note that mere inclusion in a stock screen does not
mean that a stock is investment-worthy. Consider the
>OH[KV[OLZLZJYLLUZVMMLY& output of stock screens as the starting point for your
This month we have got two stock screens for you. The research. You must apply your own analysis to select
first one will help you invest in blue-chip companies at companies.
attractive valuations and the second one can help you However, if you are interested in a list of stocks to
profit from companies at a deep discount. invest in right away, then subscribe to our
Attractive blue chips: Blue-chip stocks are the largest recommendation service at Value Research Stock
and the most consistently profitable companies. Advisor. You can access the details by visiting www.
Owing to their strong balance sheet and high market valueresearchstocks.com.

STOCK
SCREEN
Attractive blue chips

Investing in blue chips at reasonable valuations is one of the simplest
methods of wealth creation with limited pain
No. of companies that
CLEAREDTHElLTERS
REASONS TO INVEST THE FILTERS 347

Liquidity Market cap more than `9,851 cr
305
Large companies in respective businesses Debt-to-equity between 0 and 2
Strong balance sheets Interest-coverage ratio more than 2 252
Liked by institutions 5Y avg ROE more than 20% 100
5Y EPS growth more than 20% 33
5Y PEG between 0 and 1.5
20
5Y ROE consistency without losing 20%
year on year 7
Solid foundation
Company Stock Debt-equity Interest 5Y avg 5Y EPS Market cap Share 52-week
Industry style P/E PEG ratio coverage ratio RoE (%) growth (%) (` cr) price (`) high/low (`)
Aarti Industries
Organic Chemicals 19.1 0.60 0.4 14.4 22.3 30 24,380 669 1118-642
Coforge
Software 30.9 1.42 0.1 14.3 21.7 22 22,963 3,761 6135-3210
Coromandel International
Other Fertilisers 13.7 0.60 0.0 28.1 25.9 23 26,256 896 1094-709
Deepak Nitrite
Organic Chemicals 31.4 0.51 0.1 40.4 30.1 60 28,874 2,105 2690-1681
Divi’s Laboratories
Drugs & Pharma 29.1 1.28 0.0 1,842.8 21.6 23 87,192 3,266 5078-3195
Emami
Household & Personal Products 22.7 1.05 0.1 139.5 23.4 22 18,956 429 555-393
KPR Mills
Cotton & Blended Yarn 21.9 0.90 0.4 50.0 23.1 26 18,889 552 769-446
Data as of November 21, 2022
For lists of stocks in real time

and for customisable screens, visit
www.valueresearchonline.com/stocks/selector
STOCK
SCREEN
Discount to book value

Stocks available at a discount to their book value indicate bargain and
inherent value, provided the business fundamentals are sound
No. of companies that
CLEAREDTHElLTERS
REASONS TO INVEST THE FILTERS
1,307
Really cheap Market cap greater than Companies must have a five-year
Relatively undervalued `500 cr earnings growth of more than 1,137
Companies with assets Debt-equity ratio of less than 1.5 10%
Price-to-book should be between 780
times
Return on net worth of more than 0.01 and 1
481
10% in the most recent year
32
Bargain hunt
Company Stock 5Y EPS Dividend Debt-equity Market cap Share 52-week
Industry style P/E P/B growth (%) yield (%) ratio RoE (%) (` cr) price (`) high/low (`)
Balmer Lawrie Investments

Misc. Fin.services
7.7 0.7 11 8.1 0.1 12.5 818 367 434-353
Beekay Steel Industries

Stainless Steel
5.3 1.0 35 0.2 0.4 24.8 773 415 545-301
Century Enka
Synthetic Yarn 5.4 0.7 18 2.4 0.0 15.7 897 411 675-363
CESC
Electricity Generation 7.1 0.9 14 6.2 1.4 13.9 9,564 72 95-68
Elpro International
Electrical Machinery 1.1 1.0 176 0.0 0.0 151.3 1,247 73 86-53
GAIL (India)
Natural Gas Utilities 5.0 0.9 30 7.4 0.1 18.0 59,209 90 116-83
Garware Hi-Tech Films

Plastic Films 9.0 0.9 49 1.4 0.1 10.2 1,628 696 929-583
HEG
Refractories 7.1 1.0 65 3.8 0.2 10.5 4,032 1,036 2077-891
IFB Agro Industries

Liquors 10.1 1.0 10 0.0 0.0 12.4 526 561 867-478
Indian Metals
Ferro Alloys 3.1 0.7 15 5.3 0.3 34.3 1,282 236 513-230
Jindal Poly Films

Packaging & Containers 2.5 0.8 73 0.6 0.3 36.9 3,713 847 1449-815

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

Misc. Fin.services
2.8 0.2 32 0.0 0.8 127.9 630 587 653-205
J Kumar Infraprojects
Construction
8.2 1.0 20 1.1 0.2 10.4 2,162 284 352-152
Kirloskar Industries
Castings & Forgings 12.7 0.8 21 0.5 0.5 15.7 2,065 2,084 2169-1201
Manaksia
Stainless Steel 3.3 0.5 13 0.0 0.1 18.5 524 80 106-57
Nahar Polyfilms
Packaging & Containers 7.1 0.7 39 0.9 0.2 11.9 667 273 598-211
Nahar Spinning Mills

Cotton & Blended Yarn 2.6 0.6 65 1.3 0.6 40.2 969 270 690-266
Nava Bharat Ventures

Diversified 3.0 0.5 62 3.3 0.7 12.1 2,644 182 279-102
NMDC
Minerals 5.4 0.9 32 12.8 0.1 29.0 33,834 115 175-92
Oil India
Oil & Gas Exploration 2.7 0.6 31 7.1 0.5 24.4 21,601 200 306-168
ONGC
Oil & Gas Exploration 4.1 0.6 14 3.0 0.4 19.9 1,70,148 135 195-120
Data as of November 21, 2022. This is not the full list. For the full list, visit www.valueresearchonline.com/stocks/selector.
2L`[LYTZ +P]PKLUK `PLSK! Defined as the percentage of the dividend paid per
share to the current market price of the stock. Since the denominator in
<UP]LYZLJVTWHUPLZ! Should have traded on all the days for the last this ratio is the market price, a stock’s dividend yield changes every day.
two quarters and should have a market capitalisation of more than Rs +LI[[VLX\P[`+,! Calculated as the ratio of total outstanding bor-
500 crore, the lower cut-off for small-cap stocks as per the Value rowings of the company to its total equity capital. Tells us which compa-
Research criteria. nies use excessive leverage to achieve growth. Conventionally, a
4JHW! Stands for market capitalisation. Obtained by multiplying stock debt-to-equity ratio of less than two is considered safe.
price by the total number of shares. Shows a company’s market value 0U[LYLZ[ JV]LYHNL YH[PV 0*9! This indicator is generally used to
or size. gauge whether a company has the ability to service its debt. Calculated
7YPJL[VLHYUPUNZ7,! The ratio of the stock price and earnings per as the ratio of operating profit to interest outgo. For instance, a compa-
share (EPS). It shows in multiples how much investors are willing to pay ny with an ICR of more than two can service more than twice its current
for the earnings. The thumb rule of valuing a stock is that a high-growth interest charges.
stock will have a high P/E ratio, while a value stock will have a relative- 9L[\YUVULX\P[`96,! Measured by taking profit after tax as a per-
ly lower P/E ratio. centage of the net worth of the company. Indicates how efficiently the
7YPJL[VIVVR]HS\L7)! The ratio of the price of a stock to the book company has been able to utilise investors’
money. Growth Value
value per share of the company. It shows how much premium investors
are willing to pay for the underlying net assets of the company. :[VJRZ[`SL!Derived from a combination of the Large
7YPJLLHYUPUNZ[VNYV^[O7,.! Ratio of price to earnings to the EPS stock’s valuation – growth or value – and its mar-
Mid
(earnings per share) growth of a stock. Demonstrates how high a price ket capitalisation – large, mid and small. For
we are paying for the growth that we are purchasing. In all our analyses, example, here is the stock style of a large-cap Small
we have taken five-year historic EPS growth. growth stock.

STOCK
SCREEN
Want more? Here you go

Other screens available on the Value Research website, along with their
themes and some of their stocks
9LHZVUHIS`WYPJLK 1. Coal India 6. Coromandel International

NYV^[OZ[VJRZ 2. Oil India 7. JK Paper
3. Redington 8. Kama Holdings
Combines growth and value investing and 4. HEG 9. SBI
spills out companies with high earnings growth 5. Tamilnad Mercantile Bank 10. Deepak Fertilisers
trading at a cheap valuation
/PNOKP]PKLUK`PLSK 1. Hinduja Global Solutions 6. Tamilnadu Petroproducts

Z[VJRZ 2. REC 7. Visaka Industries
3. Power Finance Corp 8. Cosmo First
A screen for those looking for a steady stream 4. IRFC 9. Nava Bharat Ventures
of dividends 5. MOIL 10. Rail Vikas Nigam
8\HSP[`Z[VJRZ 1. Maithan Alloys 6. GAIL

H]HPSHISLJOLHW 2. Ambika Cotton Mills 7. Excel Industries
3. NALCO 8. LG Balakrishnan & Bros.
Companies that clear our essential checks on 4. GNFC 9. DCW
solvency, accounting, recent financial 5. Thirumalai Chemicals 10. Allcargo Logistics
performance and valuation
:THSSJHWNYV^[O 1. EKI Energy Services 6. Lux Industries

JVTWHUPLZ 2. KSolves India 7. Balaji Amines
3. Tips Industries 8. Mastek
Wades through the small-cap maze and gives 4. Apollo Tricoat Tubes 9. Astec Lifesciences
out fundamentally strong small caps that are
5. Rajratan Global Wire 10. Carysil
available at a reasonable valuation
=HS\L.\Y\ 1. Andhra Paper 6. LT Foods

ZJYLLUZ 2. Associated Alcohols & Breweries 7. Rubfila International
A set of five screens, these give you lists of 3. VST Industries 8. Vardhman Textiles
companies based on the criteria of legendary 4. TCS 9. Elpro International
investors, viz., Benjamin Graham, Joel Greenblatt, 5. Hindalco 10. IST
John Neff , Peter Lynch and Walter Schloss.
For the complete lists of stocks in real

time and for customisable screens, visit
www.valueresearchonline.com/stocks/selector
WORDS
WORTH NOW
We are seeing signs that Western firms are

diversifying their supply chains beyond
China. Technology companies like
Amazon and Google are investing in India
and Vietnam. Apple recently announced
that it was shifting some iPhone
manufacturing from China to India. The
US will continue to deepen our business
and commercial ties with India as we
pursue our friend-shoring agenda.
Janet Yellen US treasury secretary,
Mint, November 12, 2022
Arjuna was aiming at the eye
of the revolving fish during the
Swayamwar in Mahabharata;
surely he would have examined
the surroundings. No one can India’s energy
match Arjuna, but our target security is important
has been to keep Arjuna’s eye for global growth,
on inflation. as it is the world’s
Shaktikanta Das RBI Governor,
cnbctv18.com, November 2, 2022
fastest-growing
economy. We must
not promote any
restrictions on the
supply of energy and
stability in the energy
market should be
[On completion
ensured. of merger of L&T
Narendra Modi Infotech and Mindtree]
Prime Minister,, Financial Express
p , LTI-Mindtree wilwill
November 16, 2022
fifth-largest
be the fifth-larges
software company by
market cap, will have
h
employees
90,000 employee
on rolls, taking the
th
Credibility cannott be taken headcount of
overall headcoun
for granted and yesterday’s
sterday’s the group’s software
softwa
inflation figures [41-year
41-year high 120,000
businesses to 120
of 11.1 per cent] show we must (including that of L&T
continue a relentless
ess fight Services).
Technology Servic
to bring it down, including
ncluding A M Naik
an important commitment
mitment to Group Chairman, L&T and
a
LTI-Mindtree, Financial
Chairman, LTI-Mindtree
rebuild the public finances. Expresss, November 15, 2022
Jeremy Hunt UK finance minister,
Business Standard,
November 18, 2022

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www.franklintempletonindia.com
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seeking*: ra
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4 Wealth Insight December 2022

 MARKET MOVES  MARKET COMPASS

The rise of  STOCK SCREEN

December 2022 Wealth Insight 5

TBWJOHJOWFTUNFOUPQUJPOT UPC MBLITBZFBSJOUBYFTCZ

Subscription copy of [bauskarm1@gmail.com]. Redistribution prohibited.

Winning by not losing

December 2022 Wealth Insight 7

Sensex makes a new Big Tech sees

The International Monetary

FTX files for bankruptcy

10 Wealth Insight December 2022

Lock-in period of recently listed

NCLT approves Reliance Industries’ acquisition of

December 2022 Wealth Insight 11

AMOUNT TO BE PAID BY RHI

ACQUISITION OF DALMIA 50000

Government releases the fourth 72

12 Wealth Insight December 2022

A fund that gives you freedom from

www.kotakmf.com | Toll free Number : 1800 309 1490 |

It is suitable for investors who are seeking*:

Mutual fund investments

Quarterly result update

Change in median operating

Sector QoQ YoY QoQ YoY QoQ YoY QoQ YoY

Automobile 9.4 31.1 62.7 57.1 170.0 128.7 1.3 -0.8

'LYHUVLÀHG -3.0 24.7 -32.0 7.0 -31.7 26.8 -1.7 -1.6

Energy -5.4 35.8 -20.8 -24.0 -25.9 -43.2 -2.0 -4.4

Financial 25.0 13.0 20.0 22.8 19.9 21.1 2.6 0.7

Healthcare 4.2 9.5 -6.2 -8.4 -12.0 -23.4 1.3 -1.6

Insurance 29.2 18.5 – – 610.0 367.3 – –

Materials -7.8 17.4 -47.4 -17.6 -43.0 -11.9 -4.1 -4.3

Services 0.8 52.8 -3.9 47.4 43.0 -24.6 -0.9 2.1

Technology 5.2 20.9 8.5 9.1 8.5 7.0 1.0 -0.9

Textiles -1.9 4.3 -22.6 -39.4 -25.3 -43.6 -1.4 -5.3

14 Wealth Insight December 2022

Lloyds Metals Zen Binny GMR Airports Liberty

December 2022 Wealth Insight 15

Indian pharma’s crown jewel

4H` 1HU  (WY

Sep 11, 2012

16 Wealth Insight December 2022

5HYHQXHDQGQHWSURÀW Company vs industry

Oct 14, 2021

May 24, 2019

December 2022 Wealth Insight 17

Large caps Price to earnings Net profit (` crore)

36.1 0.9* 8,252

34.5 0.9* 9,748

34.2 62.4 2,182

27.8 372.9 1,006

MARKET MOVES MARKET COMPASS

The rise of STOCK SCREEN

TBWJOHJOWFTUNFOUPQUJPOT UPC MBLITBZFBSJOUBYFTCZ

4H` 1HU (WY

;OYP]PUNVUUL^HNL[LJOUVSVNPLZ Poor Very

The company expects to benefit from the boom c