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Vol. XXVIII/04Apr 15 – 28, 2013www.capitalmarket.com

MOHAN M SULE

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Apr 15 – 28, 2013 CAPITAL MARKET

Crime and punishmentWhy is the market rewarding loose monetary policies of Japanbut is unimpressed with India’s promise of fiscal discipline?A stock’s price is supposed to fully value its historical earning at any given pointof time. Risk-averse pickers wait for correction to possess a long-desired scrip.The reversal in price could be due to company-specific hiccups. The countercould also slide on profit booking after a sharp run-up, deterioration in the healthof the industry due to factors beyond the company’s control, or because of thebroad market slide on muddied outlook for the economy. The small gains that thecautious investor makes through this incremental approach are blunted by limitedopportunities. The other class of risk takers prefers to look ahead to load theportfolio. The appeal of a stock is based on growth potential, estimated throughorder backlog or completion of ongoing projects. Last year, Maruti Suzuki wasbeaten on worker unrest at its Manesar, Haryana, unit as the valuation assigneddue to its bulging order book looked expensive in view of the imminent delays indelivery and cash flow. IT stocks swing to economic data from the US and therupee movement, which dictate the flow, pricing and realisation of contracts.The market crashed even as the UPA I government was being formed in May2004 as a partner indicated burial of the PSU divestment program, so vital fornarrowing the fiscal deficit and easing pressure on interest rates. Most firmstend to be conservative in their guidance. However, many are unnecessarilyoptimistic. The reason could be to convince the market to assign premium pric-ing to aid in fund-raising.

The exuberance is more pronounced in a bull market. In a downtrend, theconcern is the worst is still to come despite valuations that have already factoredin the sluggish growth and liabilities on the balance sheet. Of late, the marketseems to be going against logic. Take two recent instances. Equity investors hardlyflinched when rating agencies downgraded the UK and Japan due to their un-healthy balance sheets: Britain’s debt-to-GDP ratio is nearly 90% and Japan’sfiscal deficit is expected to balloon to more than 10% of GDP in the current year.As against a conventional response, the Nikkei index surged to a new high. Incontrast, the Indian stock market seemed unimpressed with the finance minister’sconfidence of lowering fiscal deficit to 4.8% from 5.2% last fiscal and boostinggrowth to an impressive 6.5% from an anemic 5% estimated for the March 2013year end. It remained flat in the month since the budget. If equities are supposed tobe forward looking, Japan should have shed value and India experienced a renewedsurge. There could be two explanations for this behavior. One, the market hadalready absorbed the two contrasting scenarios: growth pangs for Japan and aturnaround for India. Two, it was excited at the Bank of Japan’s aim to injectliquidity till inflation rose to 2%. On the other hand, the Indian finance ministerhad failed to spell out the roadmap to achieve his projections. PSU divestment hadfallen short of the Rs 30000-crore target. There was expectation of renewed policyparalysis due to the election season.

Yet stocks had responded heartily to the increase in FDI cap to 51% in the retailsector and to 49% in aviation in spite of the formidable obstacles at the ground leveland to the partial rollback of fuel subsidies despite the walkout of a key ally from thecoalition government. On the surface, it would appear that the market is discriminat-ing by ignoring Britain’s debt pileup and the danger to Japan’s health due to easymoney policy. India’s promise of prudent fiscal policies, in contrast, is not getting awarm reception. The inescapable conclusion is that foreign investors are assigninghigher discounting to growth and differentiating between good inflation (US and Ja-pan) induced to expand the economy and bad inflation (India) due to supply bottle-necks that is stalling output. The message is that India has to undertake deep reforms.The glimmer of structural shakeup late 2012 did more to propel the market thanbalancesheet jugglery to bridge revenue shortfall. Selling shares of PSUs to a state-owned insurer can at best be described as cash transfer. Instead of drastically slashingmarket borrowings for welfare spending and subsidies that keep interest rates high,the budget has passed the buck to the conservative investors, who will face lowerpayout from debt mutual funds that had become attractive due to higher return be-cause of the hike in dividend distribution tax (DDT) and from efficient companiesmaking more than Rs 10-crore profit due to the increase in surcharge on DDT.

3

4 Apr 15 – 28, 2013 CAPITAL MARKET

The cost of price riseThat inflation is at a three-yearlow is illusion (‘Stocks: Beatinginflation’, Mar 18 - 31, 2013).What has happened is that thepace at which prices have beenrising has moderated. Butinflation remains high. Not onlyfor poor, inflation could be taxingfor Corporate India as well. Thisis true for companies that are notin a position to pass on the risein prices of inputs to customers.Chintya Gourishetty, via e-ma il

Whether a company is able topass on the inflationarypressure to customers dependson a variety of factors such amarket share which, in turn,depends on brand, market reach,and so on. A company operatingin a niche segment with an edgein technology could be in abetter position to pass on theprice escalation to customers.Kanchan Manjrekar, via e-ma il

The pros and the consAs against the inbuilt uncer-tainty associated with exposureto equity including volatility inearning, debt is considereddependable for the stability in

ReadersReact

cash flow and protection ofprincipal (‘Changing equation’,Mar 18 - 31, 2013). Chances ofprojections about future earninggoing wrong are high for stocksbut so is the potential for return.P Seddon, via e-mail

A credit rating for a fixed-income product, is supposedto accurately predict thelikeliness of default by theborrower. The advantage isneutralized by barely-aboveinflation return and higher taxcompared with equity.Mini Sehgal, via e-mail

Mortgage-backed debt papercomprised securities ofdifferent profiles. Ratingagencies erred in not alertingsubscribers to the inherentvolatility due to the composi-tion. Instead, they clubbed itin the highest-safety category.The reasoning probably wasthat the mix of the dodgy withthe credit-worthy wouldeventually spread out the risk.Instead, these papers turnedout to be combustible.Giri Amdavadi, via e-ma il

Rating agencies that keep ahawk’s eye on countries’ fiscalhealth turned sloppy when itcame to monitoring their clients.Iyer Arun, via e-ma il

Most times, rating alerts comeafter the equity market haspassed its judgment. Forinvestors the lesson is thatfixed-income products couldturn out to be as unpredict-able as stocks.Maniraman S, via e-ma il

Budget mathsThe finance minister hasincreased the surcharge on

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corporate profitand alsoincreasedsurcharge ondividenddistribution tax(‘Budget 2013-

14: Neutral for equities’, Mar18 - 31, 2013). These are majornegative for equity investors.Bilaal T, via e-mail

The government is contemplat-ing inflation-indexed bonds toreduce demand for gold, whichis largely imported and putspressure on current accountdeficit. But these bonds areunlikely to meet this objective.The rural population is a maindriver of demand for gold. Doesthe government believe the ruralpopulation is going to invest ininflation index bonds?Kunaa l Sigwan, via e-ma il

Banks would be permitted toact as insurance brokers. Thiswould help to increase insurancepenetration. This would alsostrengthen position of insuranceindustry in the equity marketsas against other institutionalinvestors. Importantly, bankswould be in a position tosell policies of multipleinsurance companies.Badri Simkhada , via e-ma il

The surcharge on dividenddistribution tax (DDT) wouldincrease from 5% to 10%.With this, the effective rateof DDT will increase from16.22% and touch almost17%. This double whammywould hit investors hard ascompanies would hitdividend payout ratio.Sethuraman Potti, via e-mail

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Ripe for pickingGenerally stocks tend towitness correction once theygo ex-dividend (‘Dividend-paying stocks: Low-hangingfruits’, Mar 18 - 31, 2013).Therefore, investing in stockswith high dividend yield aheadof annual results makes sense.A rally in a stock postdividend announcement wipesout gains for investors.Ra ju Passi, via e-ma il

Growth pangsCredit sales or outstandingdebtors are actually interest-free loans extended tocustomers by a business(‘Stocks: Cashless growth’,Mar 04 - 17, 2013). A veryhigh debtors’ collection daysimplies companies have to putin that much of extra capital inthe business to finance thesedebtors. This could meanbearing additional interestburden if a company has optedfor borrowed funds to financeits working capital. Debtorsare part of current assets.M Savitendra , via e-ma il

Cleaning the booksChange in the depreciationpolicy would not translate intoinflow or outflow (‘InvestmentStrategy: Out of the ordinary’,Mar 04 - 17, 2013). Similarly,provision for diminution in thevalue of investments orimpairment of loans tosubsidiaries is cleaning thebooks without actual cashoutflow. Provisioning for slow-moving trade receivables andunbilled revenue is also puttingthe books of accounts in order.Manav Keva t, via e-ma il

5Apr 15 – 28, 2013 CAPITAL MARKET

12 | In Focus! FMCG companies! Indian rupee! Cox & Kings! Partial sugar decontrol

25 | IPO PerformanceLackluster show

27 | Sector SpecificSlim pickings amid setback

29 | OffFocusPacking the bagsHave will, will travel

68 | Stock WatchKPIT Cummins InfosystemsOn a sound footing

InSide

www.capitalmarket.comIPO RatingsYou can get a ll IPO ratings on our website .Due to short lead times, we are not able tocarry some of the IPO ratings in thefortnightly magazine . But our web site willgive the ratings of every IPO on the day itopens for subscription.

Keep Your Portfolio OnlineSeveral investors maintain their portfoliosonline at our site . Premium services(ApnaMoney) include alerts on all corporateactions like board meetings, dividends etc.Also ready output statements segregatingshort-term and long-term gains.

‘Hot Pursuit’ captures market action tick by tickEVERYDAY!

Sample some of the captions of 10th April 2013:

Reliance Communications leads gainers in ‘A’ group (10-Apr, 16:40 Hrs IST) More

HDFC spurts on bargain hunting (10-Apr, 15:18 Hrs IST) More

Bank of Baroda recovers after 5-day 8.5% slide (10-Apr, 14:42 Hrs IST) More

Sesa Goa drops to 52-week low (10-Apr, 14:31 Hrs IST) More

Volumes jump at VST Industries counter (10-Apr, 13:44 Hrs IST) More

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69 | Stocks in ActionVolatile movementsKite-flying

73 | Apna MoneyProcedural irritantsDressing upSweeping under the carpetWhat is the return on PPF thisyear?Flexibility v rigidityWhat is the liability for servicefrom an unregistered provider?

89 | Commodity WatchSilverMidsummer's price fall

Stocks: Worth the investmentRecording high and consistent return on equity is not the prerogative of MNCs.Many mid and small caps also belong to this category

07 | Cover Story

90 | Capitaline CornerBalmer Lawrie & CompanyWell diversified

07 | Cover Story

32 | Corporate Scoreboard61 | Consolidated Scoreboard62 | Company Index66 | Bulletin67 | Watch List


StocksCoverStory

Stocks

Worth the investmentRecording high and consistent return on equity is not the prerogative of MNCs.Many mid and small caps also belong to this category

FY 2010, 31.7% in FY 2009 and 29.2% inFY 2008. Indraprastha Gas is a similar case.The company reported ROE of 27.4% in FY2012, 28.4% in FY 2011, 28.5% in FY 2010,27.3% in FY 2009 and 33.4% in FY 2008.

The ROE of these companies may notimpress some investors. But both thesecompanies are among the top 100 companiesin by superior ROE. ROE in excess of 20%is considered good. The common featureamong these two counters is that both aremid-cap companies.

Mid- and small-cap stocks have reportedheavy offloading in the market correctionin March 2013. The BSE Small-Cap indextouched a 52-week low of 5,708 on 28March 2013. The index was at 6,048 on 3April 2013. Similarly, the BSE Mid-Capindex is at 6,258, which is not too far fromits annual low of 5,734 in June 2012. Theindex hit a 52-week high of 7,391 in January2013. From this level, the index has seen amassive correction in a matter of mere threemonths. Thus, this could be an opportunetime to focus on these categories,particularly companies that have reportedhigh ROE on a consistent basis.

To spot small- and mid-cap companies

CoverStory

The most important ratio for the sharehold-ers is return on equity (ROE) signifying thereturn a company manages to generate oninvested capital. Companies with consis-tently high ROE include Colgate-Palmolive(India), Nestle India, Hindustan Unilever,Castrol India, Kwality Dairy (India) andHero MotoCorp.

Among these companies, Kwality andHero MotoCorp are Indian firms, while theremaining four are multinational companies(MNCs). Moreover, Hero MotoCorp usedto have an MNC connection earlier as it wasa joint venture (JV) between the Hero groupowned by Munjal and Honda MotorCompany, Japan. The partner decided to partways in December 2010. Though it reportedcommendable ROE of 67.8% in thefinancial year ended 31 March 2012 (FY2012), Kwality scores low when it comesto consistency in recording high ROE. Thecompany reported financial turnaround inFY 2004 and has notched a fairly consistentincrease in ROE since then.

MNCs rule when it comes to deliveringconsistently high ROE. Colgate with ROEof 109% in FY 2012 is the best among thelisted companies on twin parameters of high

ROE and consistency. Its ROE is in tripledigits for the last five years. Nestle’s ROE,though, has witnessed a decline to 90.3%in the year ended 31 December 2011 from113.9% in 2010. It has reported ROE of over70% in the last 10 years. MNCs are knownfor disciplined approach to capitaldeployment and utilisation. Their strategyof prudent and cautious approach to capitalinvestment helps maintain healthy ROE.

Another striking feature about MNCs isthat they command premium valuation. Oneof the major reasons is the consistently highROE reported by these companies. (see box:What matters). Colgate (P/E 34.5), Nestle(41.6), Hindustan Unilever (27.6) andCastrol India (35.6) enjoy superior price toearning (P/E) multiple.

However, there are several Indian firmsthat have also shown remarkableconsistency in reporting high ROE. Thoughthe ROE reported by domestic companiesis certainly not comparable with the bestnumbers reported by MNCs, it is still notmeager to be sidelined. For instance, TorrentPharmaceuticals has reported outstandingconsistency in ROE. Its ROE stood at 29.7%in FY 2012, 29.1% in FY 2011, 31.2% in


StocksCoverStory

with high ROE, Capital Market started withcompanies listed on the Bombay StockExchange, with market cap above Rs 100crore and fairly liquid on the trading floor.Only domestic companies were considered.Companies with market cap below Rs 1000crore are classified as small-cap companiesand companies with market cap between Rs1000 crore and Rs 9000 crore categorizedas mid-caps. Only small- and mid-capcompanies were taken for further screening.Basically, large-cap companies with marketcap above Rs 9000 crore were ignored.

Small- and mid-cap companies weresorted based on the descending order ofROE for the latest financial year. Companieswith ROE greater than 25% in the latestfinancial year were taken into account. Apartfrom high ROE, consistency over the lastfive years was given preference. Therefore,companies with wild swings in ROE overthe last five years were weeded out.

As small- and mid-cap companies arerisky compared with large-cap companies,an additional safeguard of companies thathad paid dividend over the last five yearswas introduced. This was done to ensurehealthy cash-flow position and that reportedprofit is not merely book profit. Firms wheremutual funds held an equity stake werepicked. At last there were 20 companies.

Established in 1959, kitchenware playerHawkins Cookers mainly makes 65 modelsof pressure cookers in 10 different types andmarkets them under three brands: Hawkins,Futura, and Miss Mary. Cookers areexported to the US under the Futura brand,

Zydus Wellness has a focused business model

What matters

Investors should look at ROE over a long period of time for consistency

profitability, debt and rate of tax.If a company’s profitability isincreasing at a higher pace, it wouldpush ROE to a higher trajectory.Similarly, low cost of debt would boostprofitability. Lower corporate taxrate is boon for ROE. Even the dividendpolicy has an influence on ROE. If acompany returns excess cash notrequired by the business, the ROEwould receive a boost.

Ideally, investors should look atROE over a long period of time toexamine the consistency. Is the highROE part of a well thought-out corporatestrategy or a mere accident?

Return on equity (ROE), also known asreturn on net worth, is one of the mostimportant ratios as it reflects the returngenerated on funds belonging to theshareholders. ROE is determined asprofit after tax and preference dividendupon shareholders’ funds or net worth.The shareholders’ fund can be taken asan average, considering the opening andclosing shareholders’ fund. This ratio isexpressed in percentage terms. Share-holders’ fund includes paid-up sharecapital and reserves and surplus.Shareholders’ fund is exclusive ofpreference share capital.

ROE is primarily influenced by

while Hawkins is the major brand in thedomestic market. Besides three plants — oneeach at Thane in Maharashtra, Hoshiarpurin Punjab and Jaunpur in Uttar Pradesh —the firm has a network of 700 authorisedservice centers and largely focuses onmarketing its products through dealers withless reliance on wholesalers.

In a major breakthrough in October2012, Howkins received no-objectioncertificate from the Punjab PollutionControl Board (PPCB) for its Hoshiarpurfactory, which is largest plant of thecompany. In October 2011, the PPCB hadinstructed the company to cease operationson allegation that the factory was producingharmful effluents. Further, supply washindered by labour strike at the Jaunpur

factory. This was largely resolved with thesigning of a wage agreement with 85% ofworkers in October 2012.

Hawkins Cookers’s ROE over the lastseven years ranged between a low of 112.2%in FY 2010 and a high of 31% in FY 2006.Despite this volatility, the ROE is attractive(61.5% in FY 2012). One of the majorreasons for the high ROE is the low networth. The denominator (net worth) is onthe lower side because of a turnaround inFY 2005. However, the low base is not thesole reason as the net worth has risen sharplysince them. Sterling operationalperformance is another important factor forthe high ROE. The company reported thehighest ever turnover in FY 2012.

Zydus Wellness’s ROE of 41.6% in FY2012 and 41.9% in FY 2011 is not as eye-catching as that of Nestle or Colgate but iscertainly impressive among domesticcompanies. What is striking is the focusedbusiness model. In the wellness space,flagship brand Sugar Free enjoys 90%market share in the sugar substitutessegment. SugarFree Gold and SugarFreeNatura are popular sub-brands. A fieldforceof 500 takes these products to towns withpopulation of over 50,000.

Zydus markets skincare products likescrubs and peel-offs under the EverYuthbrand. Nutralite, an alternative to butter, isthe country’s largest selling brand in themargarine segment. It forayed in theneutraceutical segment by launchingActiLife, a nutritional milk additive foradults, nationwide in FY 2012 after testmarketing. The zero-debt company since thelast one decade has set a revenue target ofRs 500 crore by FY 2014 from a turnoverof Rs 331.4 crore in FY 2012.

However, Zydus faces multiplechallenges at the market place. First is theover-dependence on Sugar Free for toplineand bottomline growth. Second, is theincreasing competition in all the productsegments. EverYuth is on shaky ground inthe scrub and facewash categories due toaggressive new entrants including domesticand multinational firms that are investingserious money in brand-building. Similarly,the margarine category is fighting with low-priced competitors, particularly in theinstitutional segment.

Balkrishna Industries is a niche tyremaker with focus on off-highway specialtytyres, which find application in industrieslike agricultural, industrial, material

Venkata Ravuri


StocksCoverStory

IGL has reported consistent ROE

handling, construction, earthmoving,forestry, garden equipments and all-terrainvehicles. The product portfolio consists ofover 2,000 stock keeping units. Thissegment can be categorised as large variety,low volume and high price. As the tyres arecustomised, the business is capital-intensive.

With manufacturing plants at Bhiwadiand Chopanki in Rajasthan, Aurangabadand Dombivali in Maharashtra, and Bhujin Gujarat, Balkrishna exports to 120countries. About 90% of the revenue comesfrom exports to the US and Europe. Presentcapacity of 1,66,000 tonnes per annum isexpected to touch 2,31,000 tonnes by FY2014 and 2,76,000 tonnes by FY 2015. A25,000-tonne plant was commenced atBhuj, Gujarat, in August 2012. Further,65,000 tonnes will go commercial by FY2015. The total project outlay of thegreenfield plant at Bhuj is US$ 275 millionand will be funded through debt andinternal accruals. The revenue target is US$1 billion by FY 2015.

On the flip side, Balkrishna needs todeal with volatility in prices of naturalrubber, a key raw material. Further, it isexposed to currency risk. A major portionof its revenue comes from exports but rawmaterial imports form a significant quantum.Imports were Rs 1719 crore and exports Rs2570 crore in FY 2012.

Generally, it is perceived that companieswith high ROE have insignificant debt orare cash-rich. However, this is not true.Judicious use of debt could give a boost toROE. Balkrishna reported debt-to-equityratio of 1.18 in FY 2012 and 0.71 in FY2011. Despite this, ROE increased to 27.2%from 25.2% in this period. Exponentialgrowth in revenue and earning was a majorreason for the jump in ROE.

Torrent Pharmaceuticals has reportedimprovement in ROE banking on expandedprofitability margins over the last five year.Additional capacity has successful translatedinto enhanced turnover. The flagshipcompany of the Torrent Group is intotherapeutic segments of diabetology,cardiovascular, central nervous system,gastro-intestinal, anti-infective, painmanagement and gynecology.

Ranked number 2 in the cardiovascularsegment, number 4 in neuro psychiatrytherapies, and 17th by turnover in thedomestic market, Torrent has six brands inthe top 300 brands. The fieldforce stood at4,412 end FY 2012. Its research centeremploys 640 scientists and has various

discovery projects in pipeline. Thecompany has filed 450 patents for newchemical entities in several major marketsworldwide. Of these, 211 patents have beengranted so far.

The manufacturing plant at Chattral,Gujarat, has capacity of 5,500 million tabletsand 45,000 kilograms of bulk drugs. Thefacility has been approved by authorities fromregulated markets like the US, the UK,Germany, Australia and South Africa. Themanufacturing plant at Baddi, HimachalPradesh, commissioned in November 2005,has capacity of 3,300 million tablets and 350million capsules. The manufacturing plant atSikkim has capacity of 3,900 million tablets.Another manufacturing facility is being setup at the Dahej special economic zone foractive pharmaceutical ingredient andformulations at a cost of Rs 1000 crore.Phases I and II are expected to go commercialin Q1 of FY 2015 and Q1 of FY 2017.

Torrent has incorporated subsidiariesin various countries including Russia,Brazil, Germany, US and Philippines to tapthese markets. The company exports toaround 50 countries and recorded exportsof Rs 758.5 crore in FY 2012 and Rs 578.1crore in FY 2011.

Incorporated in 1998, IndraprasthaGas (IGL) is a JV between Gail and BPCL.The government of National CapitalTerritory (NCT) of Delhi holds 5% equitystake. In 1999, the company startedoperations in NCT with nine compressednatural gas (CNG) stations and 1,000 pipednatural gas (PNG) consumers. At present,it has operations in NCT of Delhi, Noida,Greater Noida and Ghaziabad, with 304CNG stations, 3.65 lakh residential

consumers, and 1,213 industrial andcommercial customers. IGL provides fuel toDelhi public transport buses, the largestCNG bus fleet in the world.

In FY 2012, IGL provided 87,920 newdomestic PNG connections, which is arecord. To strengthen the market position inDelhi and NCR, it has set a capitalexpenditure budget at Rs 500 crore for FY2013. Also, the company is looking at newgeographies through strategic alliance andso on for future growth.

IGL has managed to report consistentROE with capacity expansion on a continualbasis and corresponding increase in turnoverand profitability. CNG stations increased304 from 163 end FY 2008. Compressioncapacity is up to 60.8 lkpd from 20.76 lakhkg per day (lkpd).

The public transport system is going tosee major expansion. A fleet of 5,000 newbuses under the private bus cluster schemeis expected to be added by FY 2016. Apartfrom increase in private cars, issuance ofpermits to 45,000 new passenger autos bythe government will boost demand for CNG.

Supreme Industries has reported animpressive rise in ROE over the last fiveyears, to 37.4% in June 2012 from ROE of21.1% in the year ended 30 June 2008 (FY2008). Better profit margin and sales-to-assets ratio and prudence in use of debt incapital expansion were the major reasons.

Founded in 1942, Supreme is thecountry’s largest plastics processors. Itprocessed over 2.45 lakh tonnes of polymersin 2012 as against 2.24 lakh tonnes in FY2011. Over the last decade, the quantity ofpolymers processed has increased by over2.7 times and turnover by 4.2 times. Therange of plastic products are manufacturedin 19 advanced plants, powered bytechnology from world leaders. Thecompany has pioneered several products inthe domestic market including a wide varietyof films and piping systems. Plastics pipingsystem, with 46% revenue share, was thelargest contributor to sales in FY 2012,followed by packaging products (25%),industrial products (19%), and consumerdurables (10%).

To cater to the spurt in demand fromdomestic and international markets, Supremeis expanding capacity. It is in the process ofsetting up a plant at Halol, Gujarat. The firstphase of 12,000 tonnes is expected to beoperational by April 2013 and the secondphase of 8,000 tonnes by April 2014. Besides1,000 tonnes would be added through de-


StocksCoverStory

bottlenecking of existing plants. Turnover isprojected to touch of Rs 5000 crore by FY2015 from Rs 2965.6 crore in FY 2012.

Supreme Petrochem is an associatecompany in which Supreme holds 29.88%equity stake. It is a JV with the R RahejaGroup. Supreme Petrochem’s total installedcapacity of expandable polystyrene isaround 72,100 tonnes.

Part of the Murugappa Group,Coromandel International is into fourbusiness segments of fertilisers, specialitynutrients, crop protection and retail. Thecountry’s second-largest phosphaticfertiliser player manufactures and marketsaround 2.9 million tonnes (mt) of a widerange of fertilisers. Its specialty nutrientproducts include organic fertilisers. Thecrop protection business producesinsecticides, fungicides and herbicides. Thecompany is the second largest manufacturerof malathion and only the secondmanufacturer of phenthoate. Besides, theforay into the retail business has resulted inmore than 640 rural retail centers in AndhraPradesh and Karnataka.

Lately, Coromandel is in the thick ofaction with organic and inorganic growthinitiatives. The third complex fertiliser plantcommenced at Kakinada, Andhra Pradesh,in March 2013. Total capacity postexpansion will be around four mt.

In January 2013, a definitive share-purchase agreement was signed to acquire thepromoters’ stake up to a maximum of 56.28%in Liberty Phosphate (LPL) at Rs 241 pershare. Under a separate agreement, 100%stake will be acquired in Liberty Urvarak(LUL). A term sheet has been executed forbuying the business undertaking ofTungabhadra Fertilizers & ChemicalsCompany through slump sale. The total costof these purchases is expected to be aroundRs 348 crore-Rs 375 crore including openoffer for 26% of LPL shares. This will befunded through internal accruals. In May2011, it acquired Sabero Organics to emergeamong the top five players in the domesticagro chemical industry.

Coromandel’s ROE stood at 29% end FY2012 compared with 40.1% close of FY 2011.The debt-to-equity ratio is little over 1.

Over the last three years, EngineersIndia (EIL) reported an impressive ROE of38% in FY 2012, 40.1% in FY 2011, and34.3% in FY 2010. Since its inception in1965, the zero-debt company for the lastseveral years has emerged as Asia’s leadingdesign, engineering and turnkey contracting

company. With employee base of 3,450 inFY 2012, it offers a holistic range ofengineering services to the energy(hydrocarbons and petrochemicals) andinfrastructure sectors.

In the international market, EIL haspresence in the Middle East, North Africa,South East Asia and Latin America. Lately,the company has seen major traction in theoverseas business, which in FY 2012 wasat three times that of FY 2011. Orders werereceived from Venezuela and Kenya. A JV,Jabal Eiliot, has been formed inpartnership with IOTL and Jabal Dhahranfor tapping business opportunities inSaudi Arabia. A new branch office hasbeen established in Venezuela to explorethe South American market.

Apart from the core hydrocarbon sector,EIL is looking at business diversification insectors such infrastructure and watermanagement, solar and nuclear power, citygas distribution, and fertilisers. The firmreported an all-time high turnover of Rs3723.4 crore in FY 2012. Turnkey projectscontributed 67.3%, while the remaining32.7% came from the consultancy andengineering projects. FY 2012 has been achallenging year: Turnover declined 5.9%in the 12-months ended 31 December 2012,while profit grew a mere 4.3%.

Mirroring the tough businessenvironment, EIL plunged to a three-yearlow of Rs 150 in March 2013. Thoughfurther correction cannot be ruled out as theinvestment cycle remains weak world over,this could be a value buying opportunity.

Among small-cap companies, MayurUniquoters has an impressive ROE: 45.4%in FY 2012, 49% in FY 2011 and 45.6% in

FY 2010. The almost zero-debt company hasreported a consistent rise in turnover over thelast 10 years and paid dividend over the lastseven years. The top line and the bottom linehas grown exponentially over the last threeyears, which, in turn, has boosted ROE.Turnover increased 2.7 times and profit 5.5times between FY 2009 and FY 2012.

Mayur is one of the largestmanufacturers of artificial leather (PVCvinyl) in the country and has beenaggressively adding capacity since it startedoperations: 1.85 million linear meters permonth (lmpm) from 400,000 lmpm. It hasfour coating lines at Jaitpura in Jaipur inRajasthan. Running at full capacity, thecompany is in the process of installing a fifthcoating line, with capacity of six lakh lmpm.

Domestic and international originalequipment manufacturer clients includeFord and Chrysler in the US and MarutiSuzuki, Tata Motors, Mahindra &Mahindra and Honda Motorccycles inIndia. Business opportunities are beingexplored with BMW, Mercedes andGeneral Motors. It is also a supplier tofootwear makers Bata, Action, Liberty, andParagon among several others.

As part of backward integration, Mayurin September 2012 started commercialoperations at its new synthetic knitted fabricunit at Dodhsar, Rajasthan, which is 20 kmfrom the existing plant at Jaitpura. Knittedfabric is a key raw material in makingartificial leather. Raw material constitutesaround 70%-75% of sales. Suppliers’ holdthe pricing power in the value chain is oneof the major worries for the company.

Swaraj Engines (SEL) was set up tomanufacture engines for fitment into Swarajtractors of Punjab Tractors (PTL), which isnow part of Mahindra & Mahindra (M&M).Subsequently, SEL became supplier of hi-tech engine components to SML Isuzu,earlier known as Swaraj Mazda.

Since it started commercial operationsin 1989, SEL has supplied 4.6 lakh enginesto Swaraj tractors. The engine businessconstitutes around 95% of the productrevenue. Remaining 5% represents hi-techengine components supplied to SML Isuzufor assembly of commercial-vehicle engines.M&M holds 33.22% and KirloskarIndustries 17.39% equity stake.

SEL reported ROE of 31.2% in FY2012, 31.9% in FY 2011 and 34% in FY2010. The firm issued bonus shares twice:1:1 in FY 1997 and 2:1 in 2005. For thefirst time, the 50,000 mark in production and

Mayur Uniquoters is consistent in dividend


StocksCoverStory

sale of engines was crossed in FY 2012. Itreported volume of 55,239 units in FY 2012and 47,413 units in FY 2011, representing16.5% growth over the year. Capacityexpansion to 75,000 engines in two phaseswas completed recently.

Among the risk factors, SEL is solelydependent on M&M and SML Isuzu forgenerating business. However, investors candraw comfort from the fact that M&M is astrategic equity investor and customer aswell. Still, the company’s fortune swingsalong with the performance of M&M’sSwaraj tractors. The good part of theassociation is that M&M has sustained itsmarket leadership in the domestic tractormarket for over 29 years. The consolidatedmarket share of M&M’s farm equipmentsector is around 41% of the domestic market.

ConclusionMany companies reporting high ROE alsohave debt on their balance sheets. Optingfor leverage expansion or capital expendi-ture could be one of the ways to boost ROE.However, this could backfire during eco-

nomic slowdown. This is because interestcost starts hurting the moment the businessstarts underperforming compared with whatwas anticipated. Interest outgo could provea drag and put pressure on ROE.

Thus, companies need to do a balancingact in deploying debt in capital expansion.There are companies that avoid thisbalancing act by staying away from debt.Thus, the list of high ROE companiesinclude several companies with no orinsignificant debt on their balance sheets.Ten have zero or insignificant debt includingEIL, Kirloskar Pneumatic Company, LumaxAuto Technologies, Mayur, Nesco, SEL,Thermax, TTK Prestige, VST TillersTractors, and Zydus.

Holding too much of cash also can putdownward pressure on the ROE. One ofthe solutions is to drain out excess cashthrough payment of dividend. Out here,cash-rich companies like EIL have paidinterim dividend to the shareholders. Forcompanies in the high-growth trajectory, itcould be impossible to rely on internalaccruals to finance capital expansion

Shareholders’ delight

Mid and small caps with consistent ROE in the last five years and greater than 25% in the latest financial year

COMPANY CMP M-CAP 52-WEEK 52-WEEK NET- TOTAL DEBT ROCE RONW CHG IN CHG IN MF P/E P/BV DY

(Rs) (Rs cr) LOW HIGH WORTH DEBT EQUITY (%) (%) TTM NET TTM HOLD (%)

(Rs) (Rs) (Rs cr) (Rs cr) RATIO SALES (%) PAT(%) (%)

Balkrishna Industries 268.4 2594 241.5 317.9 1110.1 1709.2 1.18 17.8 27.3 25.1 42.2 19.9 7.5 2.3 0.6

Coromandel International 193.5 5477 181.2 304.8 2400.3 2943.4 1.03 23.1 29 17.1 -24.2 5.2 11 2.3 3.6

Engineers India 153.8 5182 150 266 1898.8 0 0 54.2 38 -5.9 4.4 2.1 8.1 2.7 3.9

Hawkins Cookers 2151 1138 1455 2485 51.6 12.2 0.24 75.5 61.6 11.2 7.6 5.8 35 22.1 1.9

IL&FS Investment Managers 20 417.8 19.1 30 233.4 61.4 0.35 34.6 35.2 4.8 3.7 1.4 5.6 1.8 7.5

Indraprastha Gas 280.3 3924 170 391.8 1228.9 389 0.3 30.9 27.5 39 18.6 7.8 11 3.2 1.8

Kirloskar Pneumatic Company 437.8 562.1 400 550 229.7 12.5 0.07 40.6 29.8 -9.7 -37 16.8 12 2.4 2.7

Lumax Auto Technologies 136.5 186.1 130 174 182.8 1.7 0.02 36.9 31.3 4.8 -17.6 0.9 4.1 1 4.4

Mayur Uniquoters 407.7 441.5 210.3 505.1 85.9 3.8 0.08 64.5 45.4 23.5 45 0.2 11 5.1 1.7

NESCO 766.4 1080 577.7 827 283.7 0 0 33.8 26.7 11.7 21.5 1.9 14 3.8 0.4

Supreme Industries 316 4015 199.6 331 695.4 351.1 0.7 38 37.4 16.9 27.4 8.7 16 5.8 1.9

Supreme Infrastructure India 215.5 360.7 174 346.7 351.3 1572.9 3.28 17.2 24.9 38.9 15.6 6.8 3.4 1 0.6

Swaraj Engines 397.5 493.6 385 528.5 186.3 0 0 45.3 31.2 12.7 8.7 11.6 9 2.6 3.3

Thermax 565.9 6743 401.6 684 1629.3 272.6 0.14 34.1 25.2 -9.1 -9.7 6 19 4.1 1.2

Torrent Pharmaceuticals 683.3 5782 580.8 766.6 1193.8 578.7 0.52 25.6 29.8 19.8 -2.7 9.4 18 4.8 1.2

TTK Prestige 3308 3744 2650 3996 283 59.7 0.13 61.7 48 24.2 13.2 3.3 30 13.2 0.5

Vinati Organics 102.6 506.3 84 180 187 172.7 0.75 31.3 33.2 30.9 31.6 0.4 7.5 2.7 2

VST Tillers Tractors 374.5 323.5 330 563.4 204.3 16 0.04 38.5 27.2 -1.1 -4.1 5.4 6.7 1.6 2.4

Zensar Technologies 242.5 1057 178.5 302.5 575.9 248.1 0.47 31.5 31.1 26.3 11.1 1.2 6 1.8 2.9

Zydus Wellness 431 1684 320 532.9 186.9 0 0 49.8 41.6 10.6 32 7 20 9 1.2

CMP (current market price) is closing as on 1 April 2013. Year end March 2012, execept for Supreme Infrastructure it is June 2012.TTM (trailing twelve months) is for the period ended 31 December 2012. Change in TTM net sales and PAT is over the corrosponding period of the previous year. Mutual fund holding (%) as on 31 December 2012Source: Capitaline Corporate Databases

projects. Moreover, expansion of capacitycould result in decline in ROE till the timethe capacity starts yielding full-scalebenefits. In turn, this could make ROEvolatile to a certain extent. Thus, investorsshould look at the long-term trend in ROEto arrive at appropriate conclusions.Further, they should also keep in mind theoverall economic and business situationwhile analysing swings in ROE. In short,it is a relative concept and should be seenin relation to markets and competition.

Companies with high ROE couldemerge as long-term winners. This is one ofthe most important ratios for equity investorsas it reveals how much a company generatesfrom risk capital invested in the enterprise.Apart from high ROE, investors shouldfocus on future opportunities for businessgrowth, which will eventually driveshareholders’ wealth. Last, maintaining highROE over a long term along with businessexpansion is an art. Companies with highROE over the long-term could be the onesthat have mastered this art.

— S Khedekar

1 2 Apr 15 – 28, 2013 CAPITAL MARKET

InFocus

unfavourable economic scenario have taken atoll on consumer demand.

Dabur India (8.2%), Godrej ConsumerProducts (GCPL) (8.2%), Britannia Indus-tries (2.8%) and ITC (1.5%) are the onlymajor stocks to have gained since January2013. ITC is favoured because of its strong

cigarettes business despite the excise dutyhike on cigarettes in the Union Budget for2013-14 and reducing losses of its FMCGbusiness. Dabur was sought after as it is aplay on the rural market and on expectedbenefits of a restructured distribution net-work. GCPL’s presence in emerging inter-national markets and decline in palm oilprices, its main raw material, grabbed atten-tion. Stock prices of other major playersHindustan Unilever (HUL), ColgatePalmolive, Tata Global Beverages, NestleIndia, Jubilant Foodworks, United Brewer-ies, United Spirits, and Marico fell in vary-ing degrees, from 1.5%-20.5%.

The FMCG pack is facing a dicey situa-tion. On one side, the market is under pres-sure. On the other side, valuations are fairlyrich. Though consumption volumes are drop-ping, these companies have pricing power toprotect their margin. However, the top linecould suffer. Still, these stocks are likely tocontinue to outperform the market.

The other positive is that sectors likemetals, cement and auto are expected tofare still worse, underperforming the mar-ket considerably. In the absence of lackof themes, the FMCG sector could justact as a clear defensive along with thepharma space.

Rural consumption will be a key driverfor the FMCG sector’s growth, going for-ward. There are significant mindset andlifestyle shifts taking place in rural Indiaover the last three-four years. These changes

FMCG companies

Rinsed, can they shine?Untouched till last fiscal, topline growth could weaken even ifprice increases protect the bottom lineThe financial year ended March 2013(FY2013) has been a mixed bag for inves-tors. Fifteen out of 30 stocks in the S&PBSE Sensex pack gained, while the other 15declined. However, defensive sectors suchas fast moving consumer goods (FMCG) ledthe performance charts buzzing in the vola-tile year. As against 8.1% return of theSensex, the BSE FMCG index rose 31.5%in FY 2013. FMCG major ITC was the sec-ond biggest gainer in the Sensex pack, clock-ing 36.2% return, second only to SunPharmaceuticals’s 43.7% return.

The FMCG sector was untouched bythe economic slowdown till last year. But ithas started feeling the heat of slowdown inconsumption. This is getting reflected in in-vestor interest in FMCG stocks. Along withthe Sensex’s decline of 5.8%, the BSEFMCG index, too, has fallen, but by a lessermagnitude of 3.7%, since the beginning ofcalendar year (CY) 2013.

The fall in volume growth of FMCG com-panies is despite the record amounts spend onadvertising and marketing. The price increasestaken by them in the earlier quarters to passon the rise in the input cost coupled with

InFocus

To remain outperformer

Being defensive and in a consumer-driven economy, the FMCG sectoris expected to fare comparatively betterthan other sectors

A M J J A S O N D J2013

F M A90

100

110

120

130

140

BSE FMCG

BSE Sensex

Base=100 as on 05 April 2012FV of BSE FMCG Rs 100.

Relative performance of BSE FMCGv BSE Sensex

* 05 April 2013

1 3Apr 15 – 28, 2013 CAPITAL MARKET

InFocus

are driven by rising household incomes, grow-ing awareness levels due to increasing mediapenetration, better rural infrastructure, in-creased mobile phone usage, and farmer-friendly government policies.

Government’s focus on the ruraleconomy through support and developmentschemes and substantial increases in theminimum support prices of agri commodi-ties have aided rural prosperity and im-proved the financial health of farmers. Overthe past few years, there has been a steadyshift of rural workforce towards non-agri-cultural sector (services and own enter-prises), which has further supplementedrural household income. Land sales (to gov-ernment in most cases) have also resulted inhigher capital flows to farmers.

Direct-to-home TV penetration anddeeper distribution thrust by national com-panies are leading to a demanding and sensi-tive rural consumer, for whom quality andbrand perception are becoming importantparameters for purchase decisions.

The urban-rural mix of the FMCG in-dustry is about 65:35. Except for HUL,Dabur and Colgate, the sales mix of mostothers including GCPL, Marico, P&G,Nestle and GSK Consumer is currentlyskewed towards urban markets. Companiesare adjusting existing strategies and adoptingnew strategies to meet the new reality.

Key actions being taken by the FMCGcompanies include direct servicing,affordability, higher advertising and bet-ter reach. Retailers are increasingly beingtapped by distributors as against the ear-lier practice of relying solely on wholesal-ers to improve stock fill and servicing lev-els. This helps companies to ensure avail-ability of wider product portfolio at theretailer’s end. Direct servicing also aids inunderstanding consumption patterns in a

particular catchment area in a better man-ner (see table: Outreach efforts).

Widening the product portfolios in ru-ral areas, FMCG companies have success-fully introduced low unit packs and lowprice offerings to enhance affordability and,in turn, gained share from local brands.

HUL has doubled its direct distribu-tion reach to two million outlets over thelast couple of years, with incremental gainslargely coming from rural areas. Dabur'snew initiative to deepen its direct rural reachhas resulted in the number of sub-stockistsmore than doubling in Uttar Pradesh. It hasnow rolled out this initiative in 10 morestates. For Marico, the share of rural saleshas risen 25% to 30% of domestic revenueover the past three years. It is about 25%of consolidated sales (see chart: The mar-ket is the village).

Meanwhile, modern retail is fast becom-ing a launch pad for premium and specialisedproduct launches in urban areas as this me-dium offers better mix and margin. Chem-

ists channel, which accounts for about 9%of FMCG sales, is also witnessing its sharerising as the companies try to push pre-mium personal and healthcare productsthrough this channel.

The home- and personalcare segments,in particular, have been the key beneficia-ries of a shift towards premium or value-added products by consumers and has beenresponsible for improved realisation for mostcompanies. Affordable low unit packs in-duce more consumers to try premium prod-ucts. For example, HUL has successfullyexpanded the customer base for its premiumDove hair care brand with the introductionof sachets priced at Rs 3. Similarly, low unitpacks of Colgate toothpaste have aided ru-ral consumers to uptrade from economytoothpaste brands.

While the share of these premium prod-ucts is not that significant, they do have thepotential to drive consumer uptrading andsupport margin growth. HUL has been re-porting higher growth rates for its premiumbrands Dove (soaps and shampoos), Surfand Rin (laundry), and Ponds (skin care).New distribution formats (modern trade,specialised salons, and chemists) are alsosupporting growth of premium offerings.

Certain premiumisation trends have beenobserved across crucial key FMCG catego-ries. For instance, ITC has been registeringfaster growth in the kings segment comparedwith regular size cigarettes. As they are con-sidered inexpensive luxury and affordable sta-tus symbol, demand for cigarettes will likelyrise more than bidis as disposable income lev-els increase.

In the skincare segment, fairness creamscontinue to dominate, with nearly half theshare. But incrementally anti-aging creamsand men’s skincare products are catching upfor higher share. In terms of price points,economy brands (Rs 30-Rs 150) dominatethe category with over 80% share, while thetop end (Rs 500+) accounts for 6-8% share,which is likely to go up as the premium endis growing at 20-25% as against the economybrands’ 13%-15%.

In oral care, FMCG companies have comeup with multiple niche variants targeting vari-ous consumer segments and ailments such aswhitening, foul breath, gum problems, andsensitive teeth over recent years. Most ofthese premium variants are priced 1.5-3 timestheir mass-market variants. With newlaunches, the share of multibenefits (whiten-ing and sensitive care) has risen to about 12%

The market is the village

The urban-rural mix of the FMCGindustry, at about 65:35, is expected tochange on aggressive distributionexpansion initiatives in rural regions

20

23

25

35

38

40

50

GSk Consumer

GCPL

Marico

Dabur

Emami

Colgate ndia

HUL

10 16 22 28 34 40 46 52

Rural contribution to consolidated sales in percentage.Source: Company reports.

Outreach efforts

Distribution network of home- and personalcare companies in India

COMPANY DISTRIBUTION NETWORK

Hindustan Unilever Direct reach to 2 million (mn) + outlets; products reach 6.5 mn outlets

Colgate Palmolive India Direct reach to 1,713 outlets and indirect reach to 4.5 mn outlets

Marico Direct reach to over 0.8 mn outlets and indirect reach to 4 mn outlets

Dabur India Total reach 5.8 mn outlets; direct reach 0.8 mn outlets

GCPL Covers 3.7 mn retailers in India predominantly in the north and west

Jyothy Laboratories Available in 2.9 mn outlets in India as of 31 December 2012

P&G India Direct reach to 1.3 mn outlets

Emami 0.55 mn+ retail outlets; brand reach 3.5 mn outlets; 3,000+ distributorsSource: Company reports


InFocus

in the overall toothpaste sales now. Thesensitive oralcare space specifically hasseen lot of action from MNC playersfrom Colgate, GSK Consumer, and HULwith aggressive launches and promotionto gain share in this fast growing category.

Incumbents are introducing variouspremium products in the shampoo seg-ment such as hair treatments, serums,hair masks, and hair conditioners to helpsupport margin profile for their haircareportfolio. And these premiumisation ef-forts are not just restricted towards themid or the premium segments. New prod-uct are being introduced within mass brands.For example, Clinic Plus conditionerslaunched recently by HUL.

The household insecticides market isdominated by coils (with about 45% share),while electrics account for 30% and aerosols18% share. However, aerosols and electrics(mid-high teens growth) are gaining over coils(high single-digit growth). A rising number ofaffluent urban homes and improved distribu-tion through modern retail are bolstering thegrowth of aerosols, while increasingaffordability continues to drive higher pen-etration of electrics. In coils, low-smoke prod-ucts are driving premiumisation. In rural In-dia, rising urbanisation, more closed construc-tion of homes, lesser frequency of power cuts,and enhanced affordability with launch oflower priced electric variants are supportingthe premiumisation trends.

In addition to premiumisation, pricingpower is the key to sustainable earning

growth. Companies that enjoy dominantmarket shares, strong brand equity andlower competition tend to have better pric-ing power. This, in turn, helps to protectthe margin even in adverse raw material en-vironment. Within the home- andpersonalcare spaces, companies enjoy pric-ing power in selective categories. HUL hasgood pricing power in skin care, with domi-nant shares and wide gap with the next com-petitor. It has fairly low pricing power inthe highly competitive and fragmented cat-egories of laundry and shampoos. Maricoand Dabur hold sway in niche categoriessuch as hair oils in Dabur health supple-ments, and GCPL in household insecticide.ITC's pricing power in the cigarette seg-ment remains unmatched, led by over 70%market share by volume, very strong dis-tribution network, and strong brandsacross various price points. Further, it isalso supported by consolidated industrystructure, which does not allow for adver-

tising (see table: Forsustainable earning).

The declining rawmaterial price trendwould also help the sec-tor. Over the last sixmonths, while crudeprices have increased13% in rupee terms,palm oil has declined asharp 27%. As commod-ity prices hit them witha lag, moderation in palmoil prices will positivelyimpact FMCG compa-nies, going forward.Though agri commodi-ties like wheat have beenup 29% over the last sixmonths, they have beenstable in recent months(see table: Helping hand).

ITC is one of largest companiesin India with a diversified portfoliocomprising cigarettes, hotels,paperboards and specialty papers,packaging, agri-business, packagedfoods and confectionery, branded ap-parel, personal care, stationery, safetymatches and other FMCG products.Over the years, the company hasevolved from a major cigarettes manu-facturer to a FMCG conglomeratewith a diversified portfolio. Growthis attributed to distribution network,

supply-chain management, and brand-building capabilities.

Over the last decade, ITC has built arobust portfolio of FMCG businesses builton reinvestment of strong cash-flow gen-eration of its cigarette division and back-ward integration (sourcing of agri inputsfor foods and paper for stationery) and in-house packaging expertise. Its FMCG busi-ness has been delivering a steady 20% plusrevenue growth for the last 10-11 quarters,driven by strong expansion in the brandedpackaged foods, personal products (soaps,shampoos and skin care) and stationerybusinesses. While the FMCG business isstill making loss, the branded packagedfoods business (about 67% of segment rev-enues) has already broken even and is likelyto generate higher margin driven by risingcontribution of premium variants, in bothatta and biscuits, and better profitabilityon Bingo, a salt snack.

ITC’s share price has been under pres-sure since the Union Budget 2013-14, whenexcise duty was increased 18% on 65-mmcigarettes. This was followed by value-added tax increases by states (see box: Abreather). However, with its near-mo-nopoly on cigarettes, the company will beable to pass on cost increases as it hasbrands at all price points and the best retailpresence and distribution network to pushthrough the introduction of micro filters.Duty on the micro filter segment less than65mm, now called deluxe size filters, wasunchanged in the budget. There will be agrowth opportunity for this product,which could make up for a decline in longerlength cigarettes. ITC has extended its brandportfolio into this segment.

In the first week of April 2013, ITCraised prices of its cigarettes by 14-18% inline with market expectations. This pricehike would support the margin of the com-pany, especially in cigarette business.

For sustainable earning

Pricing power of FMCG companies in select categories

COMPANIES CATEGORIES MARKET SHARE OF

SHARE (%) REVENUE (%)

Home and Personal Care

HUL Skincare 57 15

Dabur Hair oils 22 16

Emami Hair oils 9 18

Marico Hair oils 22 50

GCPL Household Insecticides 34 28

GCPL Hair Colors 32 7

Packaged Foods

GCPL Malted Food Beverages 71 94

Nestle India Noodles 60 23

Nestle India Baby Foods 76 22

Tobacco

ITC Cigarettes 72 58

Source: Company reports

Helping hand

The declining raw material price trend will helpthe FMCG sector with a lag

CRUDE OIL PALM OIL WHEAT SUGAR

Rs/Barrel Rs/Tonne Rs/100kg Rs/100kg

Q1 FY2012 5,686 52,895 1,248 3,018

Q2 FY2012 5,725 55,857 1,237 2,931

Q3 FY2012 5,912 50,331 1,427 3,359

Q4 FY2012 5,896 38,765 1,577 3,349

Q1 FY2013 6,125 40,250 1,563 3,136


InFocus

HUL, a subsidiary of Unilever withstrong local roots in more than 100 coun-tries across the globe, is India's largestFMCG company. HUL has its presence inbusiness segments like home- and personalcare, food and beverages and water purifier.It has a strong product presence for the en-tire income pyramid and enjoys a commend-ing market share across all product catego-ries. With over 35 brands spanning 20 dis-tinct categories such as soaps, detergents,shampoos, skin care, toothpastes, deodor-ants, cosmetics, tea, coffee, packaged foods,ice cream, and water purifiers, the companyis a part of the everyday life of millions ofconsumers across India.

Historically, HUL was a follower in pricechanges. In the past two to three months, thecompany is taking the initiative. With lowercommodity costs, It has made pre-emptiveprice cuts in soaps and detergents. While thismay hurt near-term average sales prices, themargin is expected to sustain. HUL is com-mitted to improve the operating margin, de-spite increases in royalties and growing rev-enue, either in line or ahead of the market inthe next two to three years. The key metricto watch for the company is revenue growth(underlying average sales price growth) be-cause it determines brand equity (over costpush) and is a function of the proportion ofpremium products to the total portfolio.

HUL’s pricing points, category depth,and geographical reach provide it with theability to grow volume and revenue oncemacro headwinds diminish. The current 5%-6% volume growth is temporary and as

price corrections are absorbed by consum-ers, the volume growth could trend higherto 6%-7%.

Nestlé India, a subsidiary of Nestlé S.A.of Switzerland, the world's leading nutrition,health and wellness company is majorly intofood categories like milk products and nu-trition, beverages, prepared dishes and cook-ing aids, chocolates, and confectionary. Thecompany enjoys one of the top two posi-tions in most categories it operates in, withdominant leadership in the core categoriesof baby foods and instant noodles. Its popu-lar international brands in India includeNescafe, Maggi, Milkybar, KitKat, Bar-One, Milkmaid and Nestea. Nestle also ex-ports products to Russia, Hungary, Japan,US, and several other countries.

Despite eight manufacturing facilitiesand four branch offices spread across theregion, Nestle is bogged by capacity con-straints to capitalise on the long-term growthpotential in India. The company undertooka mega capacity expansion plan in calendaryear 2010, through a mix of brownfield andgreenfield expansion, post which it hasdoubled its capacity in all product segmentsexcept Nescafe.

Last year was tough for Nestlé, withweak discretionary spend and portfolio re-alignment affecting volume growth. While

Room for selective growth

Given the rich valuations, the market has turned cautious towards FMCG stock thougha few have scope for further appreciation

COMPANY NAME CMP % CHANGE 52-WEEK 52-WEEK CURRENT TTM

(Rs) IN CY 2013 HIGH LOW MARKET CAP P/E*

(Rs) (Rs) (Rs Cr)

Britannia Inds. 515 2.8 599 400 6162 30.0

Colgate-Palm. 1321 -15.5 1580 1098 17972 42.3

Nestle India 4471 -10.1 5040 4306 43114 40.4

Hind. Unilever 471 -11.2 580 400 101875 33.2

ITC 291 1.5 311 223 230298 33.0

Tata Global 128 -20.4 182 100 7925 42.3

Dabur India 143 10.7 145 101 24958 39.8

United Spirits 1756 -10.1 2149 547 22960 90.5

Marico 217 -1.5 250 166 14005 34.6

Jubilant Food. 1149 -12.4 1397 1020 7498 63.2

Godrej Consumer 781 8.2 832 465 26569 49.2

United Breweries 766 -18.4 1023 458 20241 138.9

BSE Sensex 18450 -5.8

BSE FMCG Index 5724 -3.7

As on 5 April 2013. TTM ended December 2012.Source: Capitaline Corporate Databases

A breatherAfter the 18% hike in specific excise duty in FY 2013-14 Union Budget,moderate Vat increase by key states

After the unexpected 18% hike inspecific excise duty by the governmentin its FY 2013-14 Union Budget, themoderate value-added tax (Vat) increaseby key states has come as a breather forcigarette companies. Andhra Pradeshand Tamil Nadu, which are among thehighest cigarette-consuming states(about 35% of total cigarette sales ofITC comes from here), have kept theirVat rate on cigarettes unchanged, while

Kerala increased it marginally from 20%to 25%. Further, no increase in Vat byAndhra Pradesh is a key positive forVST Industries as cigarettes are thehighest volume contributor to its sales.ITC has increased cigarette prices by14%-18%, as expected by the market.This price hike will support the marginof the company.

Among other states, the steepestincrease in Vat was taken by Punjab (from22.5% to 55%), Himachal Pradesh (from18% to 36%) and Bihar (from 20% to30%). However, with the contribution ofcigarettes to ITC’s and VST’s volumesbeing less than 5%, this would not have alarge impact on revenue growth. More-over, the launch of lower excise duty 64-mm cigarettes by the companies nation-ally is expected to be the focal point fordriving volume growth.Growth addiction


InFocus

macro slowdown and capacity constraintswere partly to blame, the core reason forvolume slippage has been a strategic tilt to-wards margin focus compared with volumegrowth as the company took steep pricehikes across product categories, defocusedon low margin distribution channels likearmy canteens and exports and rationalisedits product portfolio. The volume growth isexpected to pick up in CY 2013 from newproducts and capacity additions and port-folio re-alignment and repricing that shoulddrive volume growth.

Given the penetration and acceptanceof its products, Nestlé will benefit fromgrowing urbanisation and increasing dispos-able incomes and will use the Maggi brandequity to drive packaged food consumption.The company’s recent acquisition of 26%stake in dairy company Indocon Agro &Allied Activities in February 2013 indicatesthe intention to integrate the back-end andensure milk supplies.

OutlookGiven the outperformance and the rich valu-ations, the market has turned cautious to-

Payback timeThe increase in royalty by HUL and Nestle India eliminates the near-term uncertaintyfor these stocks. But the overhang remains for Colgate and GSK Consumer

Hindustan Unilever (HUL) and NestleIndia (Nestle) have seen an increase inthe royalty rates paid to their parents inrecent months. Nestle has hiked theroyalty payment to Nestle SA to 4.5%of sales from 3.5% over the next fiveyears. The increase will be at 0.20% ayear for five years from 1 January 2014.This royalty will be paid on third-partysales and is net of tax. The company hasa general license agreement that allows itto access its Swiss parent's intellectualproperty rights including its globalportfolio of brands, proprietary science,and technology including over 1,300patents, and research and development.The increase of 20 basis points eachyear starting next January will raise thecost of technology and brands for theIndian subsidiary, but also puts acertainty over the royalty rates that willbe applicable in the medium term.

HUL had announced an increase inroyalty to 3.15% of its turnover byMarch 2018 from 1.4% currently in a

phased manner from 1 February 2013.However, it is still lower than the ratethat Nestle is currently paying.

Colgate and GSK Consumer havenot announced any increase in royaltyyet. But given the changes seen recently,there could be a risk of new negotiatedrates in the future. Both these compa-nies pay a significantly higher paymentas royalty to their parents: Colgate 5.2%and GSK Consumer 3.5%. The reason

for the higher payment is that a largepart of their portfolios is owned bythe parent.

Nestle India says “the increase isbased on the lower limit of the rangesestablished by the two Indian firms andis in line with the erstwhile guidelines ofthe government of India”. In the longerterm, this leaves scope for furtherincrease, particularly if more globalbrands are introduced in India.

While it is difficult to conclusivelysay if the increase in royalty rates isjustified, it does take out the near-termuncertainty over HUL and Nestle. Whilethere will be some impact on earning ofHUL and for Nestle because of theincreases in royalty rates, the quantumwill not be large. Colgate and GSKConsumer have not seen any increases inroyalty recently but the chances ofchanges in royalty rates will remain anoverhang for these stocks. Meanwhile,GSK Consumer’s stock price may besupported by investor expectation of afurther buyback and Colgate might holdon to present valuations given thestable nature of the business in thecurrent environment.Nestle has left the door open for more royalty

wards FMCG stock. Currently, the Sensexis trading at trailing 12-month (TTM) price-earning (P/E) ratio of 16.7 times, while theBSE FMCG index is at P/E of 35.2 times,more than twice that of the Sensex. How-ever, there is still room for selective playersto outperform. FMCG stocks may not per-form that well as they did last year. Butbeing defensive and in a consumer-driveneconomy, the sector would fare compara-tively better than other sectors.

The premium valuations that the sec-tor enjoys are justified due to the rela-tively resilient and robust revenue growthof most companies. The companies havehealthy and stable free cash-flow genera-tion, high return on equity, and strong bal-ance sheets. High earning visibility is sup-ported by stable-to-increasing margin pro-file for most companies.

Distribution footprint expansion hasbeen one of the key enablers for the healthyvolume growth in recent quarters and is ex-pected to remain an important driver forgrowth over medium term. The use of tech-nology has improved data availability. Salesteams are being provided with handheld ter-

minals that facilitate daily reports to under-stand consumption patterns in a particularlocation and help decide stocking or promo-tional scheme requirements at a store or arealevel. Besides supporting the topline growth,mix improvement and scale over time wouldalso support profitability.

Emergence of modern retail is gaininghigher share in urban markets and recentchanges in foreign direct investment regu-lations bodes well for the FMCG sector,whose long-term growth outlook is drivenby rising disposable income levels, favor-able demographics, faster rural growth, andrising aspirations leading to premiumisationacross product categories. Companies in thesector are known for good corporate gover-nance and high dividend payouts.

Given their inherent strengths in respec-tive products, strong product profile, mar-ket leadership in product offerings, brandequity and robust growth ITC, HUL andNestle are expected to do better comparedwith other FMCG players. ITC is tradingat TTM P/E of 33.0 times, while HUL is at33.2, and Nestle 40.4 times.

— CA Aryan


InFocus

Indian rupee

What’s thediagnosis?More than increase in foreignfund flows, reduction in importbill will boost the currencyThe Indian rupee is caught in a fix. It is downmore than 20% over the last four years, re-cording the biggest loss for any major emerg-ing market currency. After eroding a sharp30% last year and approaching an all-timelow of 58 per US dollar, the currency hasmoved in a broad range of 55-53 against theUS dollar in the current year. This batteringhas taken place despite recovery in the localstock markets in calendar year (CY) 2012.Though the rupee is off its all-time low, at54.70 a US dollar on 9 April 2013, it hasfailed to improve much.

The movement of the Indian currencyin the last one year has been rather ironicdespite net foreign portfolio inflow of US$31 billion into equity and debt in the fiscalended March 2013 (FY 2013) comparedwith its performance during the previousperiods of equity market bull runs. The par-tially convertible currency gained 10.50%in CY 2007, hitting a multi-decade high ofunder 39 per US dollar, as the central banklet the currency ride higher to curb domes-tic inflation. FIIs invested a net US$ 40billion in equity and debt in FY 2008.

However, with the US dollar gainingfavour with international investors in theaftermath of the global financial crisis in thesecond half of CY 2008, the rupee witnessedepisodes of selling pressure purely linkedto the strength of the greenback. While theIndian currency managed to recover fromthese bouts of selling, the scenario turnedaround late CY 2011. The second half ofthe year witnessed heavy losses for the cur-rency. All other emerging market currenciesalso fell steeply during this time as the euro-zone crisis had taken a turn for the worseand growth worries hurt investor sentiments.

The rupee eventually broke beyond 55per US dollar mark and slipped to a fresh all-time low near 58 per US dollar in the firstfew months of a CY 2012 even as foreignfunds clawed their way back to the local fi-

nancial markets, surpassing their inflows inFY 2010 and FY 2011, and equities soared. Aweak currency raises the government’sfertiliser and oil subsidies bill as India is de-pendent on the global market to a very largeextent for its energy and fertilizer needs.

In fact, it is the deteriorating externalfinances that have been keeping the rupeeunder pressure. The country’s current ac-count deficit (CAD) stood at a record US$71.7 billion, or 5.4% of GDP, in April-De-cember 2012 and hit a decade high of US$32.6 billion, or 6.70% of the GDP in theOctober-December 2012 quarter.

India had been recording sustained tradedeficits due to low exports base and high im-ports of oil, gold and coal for its energy needs.The country’s merchandise imports grew9.4%, while merchandise exports did not showany significant growth in Q3 of FY 2013 com-pared with the 7.6% growth in Q3 of FY 2012.

On the positive side, a weak rupee is ben-eficial to the Indian IT stocks. The BSE ITindex zoomed to a fresh all-time high above7,000 on 8 March 2013. The index is up nearly16% in FY 2013, recording a handsome gainof 350% since it bottomed out at a multi-year low in March 2009. The broad market,as measured by the BSE Sensex, has givenreturn of around 250% during the same time.

The other sector, which has been ben-efited the most by the weakness in the ru-pee, is pharmaceuticals. The BSE Health Careindex is up 320% over last four years andaround 23% in FY 2013.

ConclusionThe Indian rupee gained modestly in the firstcouple of months of the year but the recov-ery failed to extend beyond 53.50 per USdollar mark. The bounceback could be linkedto the drastic correction in the US dollar in

overseas markets on worries triggered by theUS fiscal cliff rather than on the surge foreignfunds into local debt and equity markets.

However, the greenback reversed theselosses and stuck a five-month high againsteuro in the first week of April as the Cyprusbanking crisis hit the world markets. Thedollar gained even more as the Dow JonesIndustrial Average Index hit an all-time high,indicating that investors are comfortable park-ing their funds in the US currency even intimes of buoyant risk appetite.

This means that even if foreign invest-ment remains strong in near term, it is unlikelythat the rupee would be headed back to itswinning ways of FY 2008. FII flows can beerratic and a sharp reversal, possibly triggeredby an external shock, could hurt the Indiancurrency even more.

Oil imports remain the most criticalaspect of India’s foreign trade composi-tion. The share of oil in total imports isaround 30% and oil imports expressed inUS dollar terms have nearly doubled inthe last five years. The finance ministryhas recently said the CAD would moder-ate in the March 2013 quarter if the trendof improved exports and steady importspersisted. The government and the centralbank have eased procedures to allow In-dian companies to raise funds overseas toboost dollar inflows.

The International Monetary Fund (IMF)estimates India’s economic growth at a 10-year low of 5.4% in the last financial year. Ithas pegged growth at 6% in FY 2014, antici-pating lower infrastructure investments andsupply bottlenecks, especially for food, elec-tricity and transportation. As such, a sig-nificant reduction in CAD cannot be ex-pected. This will keep the rupee volatile.

— Sachin Dabhade

Net FII investment in debt and equityin US $ billion

The movement of the rupee againstthe US dollar

Current account deficit.Figures in US$ billion.

Check, counter-check

Despite foreign portfolio investment hitting highs, a rising current account deficitis keeping the gains of the rupee capped


InFocus

Cox & Kings

On a holidayThe challenging conditions in several international markets,due to economic slowdown and debt, are key concernsAmong the high profile listings in recent times,Cox & Kings (Cox) is one of the big disap-pointments. The stock was trading at Rs 129on 5 April 2013. This represents a loss of21.8% compared with the initial public offer-ing (IPO) price. Over the last one year, thestock is hovering below the IPO price, report-ing an all-time low of Rs 119 in June 2012. Itis now available at its historical low.

Cox came out with an IPO in November2009. The issue was priced at Rs 330 pershare with premium of Rs 320 and face valueof Rs 10. The issue was oversubscribed 5.6times. The stock was listed at Rs 343 on theNSE and closed at Rs 430 on the listing day,a gain of Rs 100.

Of the total funds raised through IPO, asignificant portion was used for acquisitionand other strategic initiatives (Rs 211.2crore), repayment of loans (Rs 128.4 crore)and investment in overseas subsidiaries (Rs59.2 crore). In June 2011, the company wentfor stock-split. The face value of Rs 10 wassub-divided into shares of Rs 5 each. Thisgives the IPO price of Rs 165 per share.

The domestic and international travelsand tours operator’s core business is leisuretravel including tour and destination manage-ment services. Operations are spread across

26 countries including India, Europe, Austra-lia, US, Dubai, Japan and Singapore. Estab-lished in 1758, the oldest travel company is apremium brand in its markets. In India, thecompany’s leisure business also includesmeetings, incentives, conferences, and exhi-bitions and trade fairs. Besides its destina-tion management services comprises ground-handling services. The corporate travel divi-sion services over 200 clients. The company

is among the major foreign exchange provid-ers in India and enjoys or status similar tothat of foreign-exchange-nominated banks.

Cox’s leveraged buyout of Holidaybreak,the UK-based travel firm with operationsacross Europe, for GBP 311.4 million was thelargest acquisition by an Indian firm in thetravel and tourism sector. The company floateda special purpose, a wholly owned subsid-iary, Prometheon Holdings UK (Prometheon),to acquire Holidaybreak. The acquisition wascompleted in September 2011.

With the buy of Holidaybreak, Cox hasemerged a dominant player in the educationtour segment in the UK. The British com-pany provides educational and activity tripsfor school children, worldwide adventureholidays, short breaks in the UK and Eu-rope, mobile-home and camping holidays onsites throughout Europe. The multiple op-erating divisions consist of education adven-ture, hotel breaks and camping. The over 15brands comprise PGL, NST, EST, Eurocampand Keycamp. The management believesthat the business of Holidaybreak is reces-sion-proof and defensive business.

Cox is fairly aggressive in perusing inor-ganic growth. In December 2009, My PlanetAustralia Pty Ltd and Bentours InternationalPty Ltd were bought through an earn-outmechanism. In April 2009, the company ac-quired US-based East India Travel CompanyInc, a up-market tour and travel packageprovider. 2008 saw the purchase of TempoHolidays Pty Ltd, a travel wholesaler offer-ing tours arrangements in 42 countries, withfocus on Europe, Middle East, India andLatin America. This acquisition facilitatedCox’s entry into the Australian market,which, in turn, gives it economy of scale andmore bargaining power with its suppliers.

The aggressive consolidation over thelast five years has severely added to Cox’sdebt. Debt stood at Rs 4605.1 crore end ofthe fiscal year that closed March 2012 (FY2012) compared with Rs 844.3 crore endFY 2011, a jump of five times. The pur-chases, with an aim to increase market pres-ence and to gain bargaining power with ven-dors, would certainly pay off in the mediumto long term. However, the company wouldbe struggling with the debt at least for thenext two years. This could keep its valua-tion depressed. In FY 2012, the interest cov-erage ratio collapsed to 1.5 times comparedwith 4.5 times in FY 2011 and 7.9 times inFY 2010. The scenario is unlikely to im-prove in the immediate future.

Disappointing showing

Cox’s & Kings stock, listed at Rs 343,was trading at Rs 129 on 5 April 2013,a loss of 21.8% compared withthe IPO price

Base=100 as on 11 December 2012.FV of Cox & Kings Rs 5.

Relative performance ofCox & Kings v BSE Sensex

* 5 April 2013

Company SynopsisBoard of DirectorsQuarterly ResultsBalance SheetProfit & LossShare Price/Chart (Monthly High/Low/Close)Key Financial Ratio

Fundamental

World Indices/ADR PricesForex MarketFII/MF Invesments

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InFocus

Lately, Cox has reported a jump in fi-nance cost. Consolidated, finance cost in-creased to Rs 263.2 crore in the nine monthsended 31 December 2012 from Rs 98.6 crorea year ago. The consolidated results are notcomparable with those in the nine monthsended 31 December 2011 as the numbers ofHolidaybreak were consolidated from 28 Sep-tember 2011. However, the risk of interestcost clearly reveals the mounting burden.Standalone finance cost rose 122% to Rs 79crore in the nine months ended 31 December2012 over a year ago. Standalone profitnosedived to Rs 45.5 crore in the nine monthsended 31 December 2012 from Rs 70.5 croremainly on account of surge in finance cost .

In FY 2012, the international marketcontributed 64% to Cox’s consolidated rev-enue and rest 36% came in from the domes-tic market. Thus, the company is subject tocurrency risk and adverse developments inthe overseas markets.

In August 2012, Citi Venture CapitalInternational (CVCI Private Equity) enteredinto a binding agreement with Cox to ac-quire a significant minority stake inPrometheon for US$ 137.75 million. Thistransaction was completed in November2012. The investment proceeds were usedto retire part of the debt raised for the ac-quisition. The quantum of stake acquired

by CVCI is not known. But certainly it cer-tifies the value of Holidaybreak and a posi-tive development for the company.

Going forward, Cox would be focusing onincreasing footprint through franchisee and agentnetwork. The company also views cross-sell-ing as a major opportunity to boost revenue.Besides, it would be expanding its educationbrands to Europe with products available inIndia and Australia. Also, Cox has the advan-tage in the domestic market as early mover inthe education travel market. The camping holi-day segment has reasonably strong visibility

for FY 2014. Considering the bookings so far,the company has already achieved 63% of therevenue target for full year.

The shift in business from unorganisedtour operators to organised tour operatorsand the addition of first-time travelers tothe market pie is a long-term positive trendfor Cox. Increase in disposal income andemergence of young and aspiring workforcewould be the driving force for the travel andtourism industry. But the challenging mar-ket conditions in several international mar-kets, particularly in Europe, due to eco-nomic slowdown is the key concern for thestock. At the current market price of Rs128.2, the stock is trading at a price to earn-ings (P/E) multiple of 7.4 based on the con-solidated trailing 12-month earning for theperiod ended 31 December 2012.

In a strategic roadmap released in No-vember 2012, Cox has set a revenue targetof Rs 2700 crore-Rs 2800 crore by FY 2016.Further, it would be aiming to achieve re-turn on equity (ROE) of 19%-21% and keepthe debt-to-equity ratio at around 1 by FY2016. The consolidated debt-to-equity ra-tio stood at 2.3 times end of FY 2012. ROEwas 3% in FY 2012 and 13% and FY 2011.The ratio of debt-to-equity of around 1, astargeted by the company, in a way admis-sion of the fact that debt is going to on thehigh side for the next couple of years. Inchallenging economic situation, servicingdebt is always going to be a problem.

Cox is a low beta stock. Considering thelast one year, its beta based on the Sensexstood at 0.59. Thus, the stock is less volatilecompared with the market. This could pro-vide solace to investors in the falling market.

— S Khedekar

On an acquisition spree

Debt is a burden

Consolidated Financials of Cox & Kings

201203 201103 201003 200903 200803

Networth (Rs cr) 1189.6 1204.5 807.1 224 165.9

Capital Employed (Rs cr) 5821.3 2050.3 1311.4 578.2 295.6

Net Sales (Rs cr) 837.9 496.7 399.2 286.9 182.1

Other Income (Rs cr) 166 36 42.1 6.7 6.2

PBIDT (Rs cr) 302.2 266 228.6 128 79.2

PAT (Rs cr) 27 130.6 134.8 63.4 45.2

Cash Profit (Rs cr) 76.1 149.1 149.9 73 51.5

Book Value (Rs) 87.1 176.5 128.3 80.2 59.4

Dividend (%) 20 10 10 2 2

Dividend Payout (%) 55.2 5.8 4.7 0.9 1.2

Cash Flow From Operating Activity (Rs cr) -136.6 95.1 38.4 -95.8 -13.9

Cash Flow From Investing Activity (Rs cr) -2293.5 -81.3 -330.4 -94.1 14.5

Cash Flow From Financing Activity (Rs cr) 2483.6 573.2 604 203.7 38.1

Debt-Equity Ratio (times) 2.3 0.7 0.8 1.2 0.8

Interest Cover Ratio (times) 1.5 4.6 7.9 5.9 12.3

PBIDTM (%) 38.8 53.6 57.3 44.6 43.5

PATM (%) 4.4 26.3 33.8 22.1 24.8

ROCE (%) 7 14.7 22.6 27.1 33.4

RONW (%) 3.1 13 26.2 32.5 36.3

PBIDTM (%) is profit before interest depreciation and tax margin. PATM (%): Profit after tax margin. ROCE: Return on capital employed.


InFocus

gineering 8.7%, Bajaj Hindusthan 8.1%,Balrampur Chini Mills 7.4% and BannariAmman 4.6% (see graph: A relief rally).

Under the earlier levy quota obligation,sugar companies had to sell their quota tothe government at a price of Rs 19 per kilogram (kg). The government, in turn, sold thissugar under the public distribution system(PDS) scheme at Rs 13.50 per kg to thepoor. Thus, a large portion of the subsidyburden was borne by the sugar companies.

To continue subsidised supply to poor,

states will now have to buy sugar at openmarket rates and maintain the existing PDSsale price, which has not been revised for adecade. The Central government will then re-imburse the states for the cost difference asagainst the market price of Rs 32 per kg. Thiswill substantially increase the government’ssubsidy cost on sugar from about Rs 1540crore to Rs 5180 crore a year. However, sugarcompanies, which otherwise had to bear aboutRs 3640-crore subsidy, would not have tobear the burden (see table: Crushed).

The impact of doing away this levy obli-gation will be substantial on the sugar com-panies as the incremental revenue will directlyflow to their bottom lines. At the currentmarket price, the blended realisation of thesugar companies would increase by Rs 1.1-1.3 per kg (see table: Bottomline boost). Atthis rate, companies with higher sugar pro-duction would benefit more. BajajHindusthan, the largest sugar producer in thecountry, would be the biggest gainer. Its profitbefore tax will increase by about Rs 152 crore.

Under the regulated monthly releasemechanism, the government fixes themonthly sugar quota that can be sold in theopen market by each sugar mill. Since April2012, this mechanism has been relaxed andthe quota is now being released on half-yearly basis. The abolition of the releasemechanism will facilitate the free play ofmarket forces for the commodity and enablemills to sell their inventory as per their cash-flow requirement to pay cane farmers, es-pecially during the crushing season.

The regulated release mechanism forcedthe sugar industry to hold back itsoutput. Now, the pullback will de-pend on whether the sugar millshave the financial strength to carrythat inventory. There would bedownward pressure on sugarprices during the crushing seasonas millers would need to sell sugarto pay farmers. Otherwise, theywould have to borrow workingcapital loans at 14%-16%. Thus,there would be trade-off betweenprevailing sugar prices and carry-ing cost of sugar.

The government took these de-cisions following the C RangarajanCommittee report, which pro-posed dispensing with both theregulatory release mechanism andthe levy system. The panel, headedby Economic Advisory Council to

Partial sugar decontrol

Half-finished jobFor sustainable profitability, output prices need to be linkedto cane prices, a politically-sensitive issueShare prices of sugar companies rose 4.6%-13% between 4 and 5 April 2013 after theCabinet Committee on Economic Affairscleared the partial decontrol of the sugar sec-tor by abolishing the requirement for pri-vate mills to sell 10% of their output to thegovernment at concessional rates. The gov-ernment has also abolished the decades-oldpractice of regulating how much sugar a millcan sell in open market, known as monthlyrelease mechanism. Sakthi Sugar was up13%, Shree Renuka sugar 9.6%, Triveni En-

A relief rally

Sugar stocks rose 4.6%-13% between4 and 5 April 2013 after partial decontrolof the by abolishing levy quota andrelease mechanism

The C Rangarajan Committee submitted its report on decontrol of sugaron 12 October 2012.Base =100 on 1 October 2012

CMP as on 8 April 2013. BV: Book value as on 31 March 2012 but forBajaj Hindusthan and Triveni Engineering 30 September 2012.Source: Capitaline Corporate Database

Looking ahead

Among larger companies, efficient playersshould trade at par to their BVs due to theimproved profitability outlook


InFocus

the Prime Minister Chairman C Rangarajan,submitted its report on 12 October 2012. Be-sides recommending the immediate removalof these two controls, other proposals thathave still to be accepted included completedecontrol of the sector, removal of cane res-ervation and minimum distance criteria, andcane price linkage to sugar revenue of mills.The committee favoured stable import-exportduty barring exceptional circumstances andno regulations on by-products, especially mo-lasses, and scrapping of the jute packagingmandate for sugar.

The two decontrol measures accepted bythe goverment come into effect for output since1 October 2012, the start of the sugar year2013 (SY2013), and will be reviewed afterwatching the impact on the market and farm-ers for two years. However, Indian Sugar MillsAssociation Director General, Abinash Vermasays the regulated release mechanism and levysugar mandate have gone forever. These arenot going to come back after two years. Thetwo-year rider is only for the government’ssubsidy that will be given to state governments.The subsidy, as per the decision of the Cabi-net, will be calculated at the maximum price ofRs 32 per kg. Therefore, the government isgoing to give subsidy to the state governmentsfor the next two years at Rs 32 minus Rs 13.50PDS sales price.

Besides, sugar mills will continue to besubjected to controls by state governments,which will decide cane prices and regulatevarious aspects of cane cultivation and sale.The state governments have been given theflexibility to decide on the minimum dis-tance norms for mills.

The decontrol measures will re-duce the cyclicality in the sugar sector.Until now, the sugar industry followeda four-five-year cycle. The levy obli-gation and the monthly release mecha-nism prevented sugar mills from ad-justing output and prices as per de-mand and added to their financial stress.Thus, mills were not be able to maketimely payments to the farmers, re-sulting in arrears. This would lead tolower plantation of sugarcane in thefollowing season, thereby reducingproduction steeply. The sugar mills,unable to pass on on the increase incane prices to the market, had to ab-sorb the higher input cost.

The freeing of prices and quan-tity to be sold would improve mills’profitability, allowing them to makehigher sugarcane payments to the

Bottomline boost

The blended realisation of sugar companies will nowincrease by Rs 1.1-1.3 per kg in SY 2013

SH. RENUKA BALRAMPUR BAJAJ

SUGAR CHINI HINDUSTHAN

Sales volume for SY2013(E)# 0.62 0.89 1.17

Before decontrol

Open market sales# 0.56 0.80 1.05

Levy sales # 0.06 0.09 0.12

Open market price (Rs/kg) 30.00 32.00 32.00

Levy price (Rs/kg) 19.00 19.00 19.00

Blended realisation before decontrol 28.90 30.70 30.70

After decontrol

Open market sales# 0.62 0.89 1.17

Levy sales # Nil Nil Nil

Open market price (Rs/kg) 30.00 32.00 32.00

Blended realisation after decontrol (Rs/kg) 30.00 32.00 32.00

Incremental benefit (Rs/kg) 1.10 1.30 1.30

Incremental benefit at PBT (Rs bn) 0.68 1.16 1.52

# mn tonnes

Crushed

Sugar companies would have had to bearRs 3640-cr loss in SY 2013

BEFORE AFTER

DECONTROL DECONTROL

Sugar production SY 2013 (E)# 24.6 24.6

Levy share# 2.8 2.8

Levy price for companies (Rs/kg) 19.0 0.0

Open market price (Rs/kg) 32.0 32.0

Subsidy by sugar companies (Rs/kg) 13.0 0.0

PDS selling price (Rs/kg) 13.5 13.5

Subsidy by government (Rs/kg) 5.5 18.5

Subsidy borne by sugar cos (Rs/bn) 36.4 0.0

Subsidy borne by government (Rs/bn) 15.4 51.8

# mn tonnes

farmers, who, in turn, would feel incentivisedto cultivate the sugarcane crop. This wouldlead to abundant production in the comingseason and keep prices under check and willalso contribute to reducing the subsidy bur-den of the Centre.

Mills will now enjoy better profitabil-ity along with improved cash flows, therebyenabling them to tide over the downturnswithout defaulting on sugarcane paymentsto farmers, thus reducing the cyclicality inthe sugar industry.

OutlookDecontrol would improve sugar companies’profitability. With a benefit of Rs 1.1- 1.3per kg flowing straight to the bottom line,the earning per share for all sugar compa-nies would increase significantly. However,for sustainable profitability of the sector,

there should be linkage between sugar andsugar cane prices. Otherwise, the cyclicalitywould persist.

Further, being politically sensitive, anyhaphazard increase in sugarcane prices can-not be ruled out as witnessed in SY2012and SY2013 in Uttar Pradesh. In two con-secutive sugar seasons, sugarcane priceswere increased 40% without commensu-rate increase in sugar prices. Sugar pricesare driven by domestic demand supply aswell global sugar prices.

Lower production estimate by one-twomillion tonnes (mt) for the next season from24.5 mt in the current season coupled withthe end of the crushing season in May 2013may support sugar prices from here on. How-ever, weak international prices will act as acap as the lower import parity prices wouldrestrict any meaningful increase in domesticprices. The landed cost of imported sugar,available at 18 cents per pound in the inter-national market, is roughtly at parity withthe current domestic price of Rs 32 a kg.However, if the import duty of 10% is re-moved, imports would turn cheaper. Thus,the government can stabilise domestic sugarprices by removing the import duty on sig-nificant increase in domestic prices.

Among the larger companies, efficientplayers should trade at par to their bookvalues (BVs) due to the improved profit-ability outlook after the partial decontrolof the sector (see chart: Looking ahead).Due to its leaner balance sheet and lowerdependence on international sugar prices,which are expected to remain subdued,

Balrampur Chini would have an edgeas it is the most efficient sugar pro-ducer in the country.

Many players are quoting at a hugediscount to their BVs due to problemsof higher leverage. Some like BajajHindusthan, Triveni Engineering andSakthi Sugars reported losses in thefiscal ended March (FY 2012), whichmay come down in FY2013 due to theincremental sugar realisation. However,a complete turnaround and re-rating ofthe sugar sector may not be possibleunless other decontrol measures, assuggested by Rangarajan committee, areimplemented. No wonder the rally insugar stocks for a couple days after theannouncement of partial decontrolcould not be sustained. Thus, any shareprice increase could be considered asan exit opportunity.

— C A Aryan

Venkata Ravuri


IPOPerformanceLackluster showShare prices of about two-third companies that hit the primary market in the past 33 months are languishing below their issue price.Their performance was weighed by steep valuation, reversal of market sentiment, corporate governance issues and problems impactingthe sector or the business of the company. Barring micro-cap stocks, shares of jewellery retailer TBZ, education services provider TreeHouse Education and Accessories, and non-banking finance L&T Finance Holdings logged decent gains. Losers included jewelleryretailer Tara Jewels, consumer electronics firm PG Electroplast, and pharmaceuticals producer Aanjaneya Lifecare.

COMPANY ISSUE TIMES OFFER LIST LIST LIST LIST LIST PRICE HIGH /LOW VAR. (%) VAR(%)

OVER PRICE PRICE PRICE PRICE PRICE DATE 5/APRIL/13 FRM DATE FRM OFFER FRM LIST

CLOSE SUBSCB (Rs) OPEN CLOSE HIGH LOW (Rs) OF LISTING PRICE PRICE

(Rs) (Rs) (Rs) (Rs) (Rs)

GCM Securit. 20/03/2013 2 20.00 65.00 68.25 68.25 65.00 05/04/2013 68.25 68/65 241.25 5.00

Lakhotia Poly. 21/03/2013 1 35.00 35.80 35.00 35.90 35.00 04/04/2013 35.50 36/35 1.43 -0.84

Repco Home Fin 15/03/2013 2 172.00 165.00 160.85 176.00 158.05 01/04/2013 171.55 178/158 -0.26 3.97

Bothra Metals 14/03/2013 1 25.00 25.50 25.00 25.55 24.85 25/03/2013 25.25 26/25 1.00 -0.98

HPC Biosci. 05/03/2013 1 35.00 37.25 39.10 39.10 37.25 19/03/2013 45.25 45/37 29.29 21.48

Kavita Fabrics 22/02/2013 1 40.00 40.90 41.00 41.00 40.00 12/03/2013 40.90 43/39 2.25 0.00

Channel Nine 26/02/2013 1 25.00 26.25 26.25 26.25 26.25 12/03/2013 30.30 30/26 21.20 15.43

Sunstar Realty 25/02/2013 2 20.00 21.45 22.50 22.50 21.20 11/03/2013 29.70 30/21 48.50 38.46

V-Mart Retail 05/02/2013 1 210.00 216.00 205.25 216.00 205.25 20/02/2013 165.95 216/145 -20.98 -23.17

Esteem Bio Org. 22/01/2013 1 25.00 25.25 26.50 26.50 25.25 07/02/2013 54.50 55/25 118.00 115.84

Eco Friendly 31/12/2012 1 25.00 24.50 25.55 26.00 24.15 14/01/2013 41.40 41/21 65.60 68.98

Bharti Infra. 14/12/2012 1 220.00 200.00 191.20 200.00 188.70 28/12/2012 180.70 216/163 -17.86 -9.65

PC Jeweller 12/12/2012 6 135.00 135.50 149.00 154.75 135.50 27/12/2012 109.10 195/103 -19.19 -19.48

Credit Analysis 11/12/2012 34 750.00 949.00 923.95 986.20 896.20 26/12/2012 771.25 986/758 2.83 -18.73

Veto Switchgears 05/12/2012 2 50.00 58.00 50.45 58.00 50.30 13/12/2012 50.40 58/50 0.80 -13.10

Tara Jewels 23/11/2012 2 230.00 242.00 229.95 244.90 229.95 06/12/2012 176.50 245/164 -23.26 -27.07

Bronze Infra 23/10/2012 1 15.00 16.70 16.30 17.10 16.00 07/11/2012 10.50 20/6 -30.00 -37.13

RCL Retail 01/10/2012 1 10.00 10.10 10.45 10.45 10.10 16/10/2012 9.90 11/8 -1.00 -1.98

Anshu’s Clothing 28/09/2012 1 27.00 26.85 27.15 28.15 26.85 12/10/2012 31.50 34/23 16.67 17.32

Comfort Comtrade 10/09/2012 1 10.00 10.30 10.80 10.80 10.10 24/09/2012 24.75 30/10 147.50 140.29

Thejo Engg. 06/09/2012 2 402.00 403.00 403.00 403.00 403.00 18/09/2012 373.00 403/297 -7.21 -7.44

SRG Housing 28/08/2012 1 20.00 20.30 20.30 20.35 20.30 11/09/2012 26.00 26/20 30.00 28.08

Jointeca Edu. 21/08/2012 1 15.00 15.20 15.00 15.25 15.00 04/09/2012 14.70 18/15 -2.00 -3.29

Jupiter Info. 01/08/2012 1 20.00 22.00 22.05 22.10 21.10 16/08/2012 24.40 25/21 22.00 10.91

Sangam Advisors 26/07/2012 2 22.00 22.10 22.00 22.20 21.95 09/08/2012 22.00 26/19 0.00 -0.45

VKS Projects 04/07/2012 1 5.50 5.58 5.51 5.60 5.31 18/07/2012 14.10 36/5 156.36 152.69

Max Alert 02/07/2012 1 20.00 51.50 49.25 51.50 49.25 13/07/2012 96.00 96/49 380.00 86.41

Speciality Rest. 18/05/2012 2 150.00 153.00 160.65 160.65 152.90 30/05/2012 168.25 227/141 12.17 9.97

Looks Health 16/05/2012 1 40.00 42.00 40.10 42.00 40.10 30/05/2012 255.00 255/40 537.50 507.14

T B Z 26/04/2012 1 120.00 115.00 111.20 119.80 110.00 09/05/2012 209.95 301/88 74.96 82.57

NBCC 27/03/2012 5 106.00 100.00 97.05 101.00 95.05 12/04/2012 129.15 195/79 21.84 29.15

MT Educare 29/03/2012 4 80.00 86.05 90.35 90.35 86.05 12/04/2012 81.85 142/67 2.31 -4.88

Olympic card. 13/03/2012 1 30.00 29.95 28.50 30.00 28.50 28/03/2012 56.95 73/27 89.83 90.15

BCB Finance-SME 27/02/2012 1 25.00 27.00 25.70 27.00 25.70 13/03/2012 25.15 28/25 0.60 -6.85

Multi Comm. Exc. 24/02/2012 46 1032.00 1387.00 1297.05 1426.00 1282.10 09/03/2012 928.80 1617/830 -10.00 -33.04

Indo Thai Sec. 05/10/2011 1 74.00 75.00 23.00 99.10 18.10 02/11/2011 10.13 99/9 -86.31 -86.49

Vaswani Inds. 03/05/2011 1 49.00 33.45 17.75 35.40 13.00 24/10/2011 3.90 35/4 -92.04 -88.34

M and B Switch. 05/10/2011 2 18.60 18.00 31.76 35.60 11.87 20/10/2011 21.10 39/5 13.44 17.22

Flexituff Intl. 05/10/2011 1 155.00 155.00 166.40 185.40 142.00 19/10/2011 221.60 385/132 42.97 42.97

Taksheel Sol. 04/10/2011 3 150.00 157.40 55.85 185.00 38.50 19/10/2011 7.01 185/6 -95.33 -95.55

Onelife Capital 04/10/2011 2 110.00 115.00 145.90 173.00 114.00 17/10/2011 151.85 849/114 38.05 32.04

Tijaria Poly. 29/09/2011 1 60.00 62.00 18.10 67.80 16.05 14/10/2011 6.10 68/6 -89.83 -90.16

RDB Rasayans 23/09/2011 1 79.00 85.00 26.50 93.15 19.80 07/10/2011 13.26 93/7 -83.22 -84.40

Prakash Constro. 21/09/2011 2 13.80 14.50 22.95 24.50 11.25 04/10/2011 7.20 31/7 -47.83 -50.34

PG Electro. 12/09/2011 1 210.00 200.00 411.65 490.00 175.05 26/09/2011 85.00 548/77 -59.52 -57.50

SRS 26/08/2011 1 58.00 55.00 33.65 61.40 31.80 16/09/2011 44.55 61/26 -23.19 -19.00

TD Power Sys. 26/08/2011 3 256.00 251.60 274.80 308.75 242.00 08/09/2011 231.75 342/206 -9.47 -7.89

Brooks Lab. 18/08/2011 2 100.00 110.00 60.20 131.10 57.75 05/09/2011 18.60 131/13 -81.40 -83.09

Tree House Edu. 12/08/2011 2 135.00 132.80 116.55 161.50 104.15 26/08/2011 247.70 295/104 83.48 86.52

L&T Fin.Holdings 29/07/2011 5 52.00 51.00 49.95 52.50 49.50 12/08/2011 75.25 97/40 44.71 47.55

Inventure Grow. 22/07/2011 5 29.25 29.75 51.99 56.25 22.89 04/08/2011 5.19 84/5 -82.26 -82.55

Bharatiya Glob. 14/07/2011 1 82.00 84.00 30.95 84.00 27.15 28/07/2011 6.10 84/4 -92.56 -92.74


IPOPerformance

COMPANY ISSUE TIMES OFFER LIST LIST LIST LIST LIST PRICE HIGH /LOW VAR. (%) VAR(%)

OVER PRICE PRICE PRICE PRICE PRICE DATE 5/APRIL/13 FRM DATE FRM OFFER FRM LIST

CLOSE SUBSCB (Rs) OPEN CLOSE HIGH LOW (Rs) OF LISTING PRICE PRICE

(Rs) (Rs) (Rs) (Rs) (Rs)

Readymade Steel 29/06/2011 2 108.00 115.00 66.45 117.75 62.30 13/07/2011 40.55 118/35 -62.45 -64.74

Rushil Decor 23/06/2011 3 72.00 81.25 119.65 124.05 75.00 07/07/2011 44.25 350/36 -38.54 -45.54

Birla Pacific 23/06/2011 1 10.00 10.10 25.35 30.70 10.10 07/07/2011 1.22 31/1 -87.80 -87.92

Timbor Home 02/06/2011 6 63.00 72.00 91.20 94.50 72.00 22/06/2011 25.30 109/19 -59.84 -64.86

VMS Indus. 02/06/2011 1 40.00 43.95 28.50 49.25 24.00 14/06/2011 20.80 135/10 -48.00 -52.67

Power Fin.Corpn. 13/05/2011 4 203.00 197.60 199.45 200.70 191.40 27/05/2011 187.00 227/130 -7.88 -5.36

Aanjaneya Life. 12/05/2011 1 234.00 229.45 311.25 324.00 224.00 27/05/2011 102.35 851/102 -56.26 -55.39

Sanghvi Forg. 09/05/2011 1 85.00 85.00 111.75 116.50 85.00 23/05/2011 25.85 145/22 -69.59 -69.59

Innoventive Ind. 29/04/2011 1 117.00 110.00 93.60 114.85 86.30 13/05/2011 100.05 148/76 -14.49 -9.05

Servalaksh.Paper 29/04/2011 1 29.00 30.00 19.00 48.75 17.30 12/05/2011 2.99 49/2 -89.69 -90.03

Future Ventures 28/04/2011 1 10.00 9.50 8.30 9.50 7.95 10/05/2011 9.95 12/8 -0.50 4.74

Para. Print. 25/04/2011 4 35.00 35.00 26.65 37.50 24.60 09/05/2011 1.36 38/1 -96.11 -96.11

Muthoot Finance 21/04/2011 21 175.00 180.00 176.25 198.00 161.50 06/05/2011 178.40 246/106 1.94 -0.89

Shilpi Cable 25/03/2011 3 69.00 78.35 47.60 84.65 45.45 08/04/2011 13.45 85/9 -80.51 -82.83

PTC India Fin 18/03/2011 2 28.00 28.00 24.90 28.00 23.50 30/03/2011 14.02 28/10 -49.93 -49.93

Lovable Lingerie 11/03/2011 30 205.00 261.50 249.20 278.95 241.40 24/03/2011 267.35 637/220 30.41 2.24

Fineotex Chem 25/02/2011 2 70.00 80.00 140.90 157.90 74.10 11/03/2011 18.45 353/17 -73.64 -76.94

Sudar Industries 24/02/2011 1 77.00 74.00 113.10 117.70 74.00 11/03/2011 21.60 184/22 -71.95 -70.81

AcroPetal Tech. 24/02/2011 1 90.00 130.00 98.45 150.00 89.00 10/03/2011 6.57 156/6 -92.70 -94.95

Omkar Spl.Chem. 27/01/2011 4 98.00 95.00 46.20 101.00 42.50 10/02/2011 111.00 150/27 13.27 16.84

Tata Steel 21/01/2011 6 610.00 630.15 625.70 633.85 615.65 02/02/2011 308.50 661/301 -49.43 -51.04

Midvalley Enter 12/01/2011 4 70.00 73.00 58.05 76.50 55.00 27/01/2011 0.00 153/6 0.00 0.00

C Mahendra Exp 06/01/2011 3 110.00 111.00 110.85 120.90 110.00 20/01/2011 87.85 342/46 -20.14 -20.86

Shekhawati Poly. 29/12/2010 7 30.00 32.50 47.50 69.00 30.70 12/01/2011 38.75 69/20 29.17 19.23

Pun. & Sind Bank 16/12/2010 50 120.00 146.10 127.05 149.70 126.20 30/12/2010 59.75 150/56 -50.21 -59.10

Ravikumar Distll 10/12/2010 2 64.00 64.00 80.05 90.30 64.00 27/12/2010 8.95 94/8 -86.02 -86.02

A2Z Maintenance 10/12/2010 1 400.00 390.00 328.90 398.90 318.65 23/12/2010 20.25 399/16 -94.94 -94.81

Claris Lifescien 02/12/2010 1 228.00 224.40 205.85 227.90 198.10 20/12/2010 209.85 292/98 -7.96 -6.48

S C I 03/12/2010 5 140.00 136.90 132.45 138.00 132.15 15/12/2010 42.10 138/39 -69.93 -69.25

MOIL 01/12/2010 56 375.00 551.00 466.50 591.05 458.50 15/12/2010 228.85 591/216 -38.97 -58.47

RPP Infra Proj. 22/11/2010 2 75.00 75.00 68.95 80.40 67.35 06/12/2010 39.30 95/35 -47.60 -47.60

Power Grid Corpn 12/11/2010 15 90.00 95.00 96.60 97.20 94.00 25/11/2010 104.85 124/92 16.50 10.37

Gravita India 03/11/2010 42 25.00 43.75 42.08 51.00 41.00 16/11/2010 31.30 205/26 25.20 -28.46

Coal India 21/10/2010 15 245.00 287.75 342.35 344.75 287.45 04/11/2010 308.50 422/287 25.92 7.21

Prestige Estates 14/10/2010 2 183.00 190.00 192.55 209.00 188.15 27/10/2010 166.30 232/58 -9.13 -12.47

Gyscoal Alloys 15/10/2010 9 71.00 76.60 81.55 112.70 76.60 27/10/2010 22.55 113/8 -68.24 -70.56

BS 13/10/2010 1 248.00 251.00 378.50 399.00 247.80 27/10/2010 329.35 509/78 32.80 31.22

Oberoi Realty 08/10/2010 10 260.00 280.00 282.95 299.00 269.80 20/10/2010 253.90 328/205 -2.35 -9.32

Commercial Eng. 05/10/2010 2 127.00 122.80 112.25 144.80 106.30 18/10/2010 30.05 145/27 -76.34 -75.53

Bedmutha Indus. 01/10/2010 8 102.00 114.40 180.80 205.00 98.00 14/10/2010 10.41 287/9 -89.79 -90.90

Ashoka Buildcon 28/09/2010 15 324.00 333.55 333.35 362.30 312.65 14/10/2010 200.00 362/180 -38.27 -40.04

Sea TV Network 29/09/2010 11 100.00 120.00 106.00 126.15 105.05 14/10/2010 22.50 126/12 -77.50 -81.25

Va Tech Wabag 27/09/2010 32 524.00 662.00 683.76 722.64 660.44 13/10/2010 501.70 723/270 -4.26 -24.21

Tecpro Systems 28/09/2010 20 355.00 399.40 407.85 454.25 398.00 12/10/2010 96.35 454/86 -72.86 -75.88

Cantabil Retail 27/09/2010 2 135.00 133.80 104.75 133.80 102.10 12/10/2010 19.10 134/12 -85.85 -85.72

Gallantt Ispat 24/09/2010 1 50.00 48.90 81.60 87.40 48.80 11/10/2010 74.05 119/35 48.10 51.43

Ramky Infra 23/09/2010 3 450.00 450.00 387.35 460.00 345.05 08/10/2010 61.70 460/51 -86.29 -86.29

Electrosteel St. 24/09/2010 7 11.00 12.35 11.25 12.35 9.35 08/10/2010 4.99 12/4 -54.64 -59.60

Orient Green 24/09/2010 1 47.00 45.70 44.90 46.60 38.30 08/10/2010 14.26 47/8 -69.66 -68.80

Eros Intl.Media 21/09/2010 25 175.00 213.35 190.05 217.70 178.60 06/10/2010 170.85 277/124 -2.37 -19.92

Career Point 21/09/2010 41 310.00 461.00 632.35 674.00 450.00 06/10/2010 113.15 711/105 -63.50 -75.46

Microsec Fin 21/09/2010 12 118.00 135.10 110.90 141.00 108.30 05/10/2010 32.00 141/20 -72.88 -76.31

Tirupati Inks 17/09/2010 9 43.00 53.95 36.65 61.45 35.70 01/10/2010 4.38 61/4 -89.81 -91.88

Indosolar 15/09/2010 1 29.00 29.75 23.70 29.90 22.80 29/09/2010 2.79 31/2 -90.38 -90.62

Guj Pipavav Port 26/08/2010 19 46.00 56.25 54.05 58.40 51.90 09/09/2010 49.40 75/41 7.39 -12.18

Prakash Steelage 10/08/2010 5 110.00 118.55 187.95 201.90 117.00 25/08/2010 95.95 243/82 -12.77 -19.06

Bajaj Corp 05/08/2010 16 132.00 146.00 151.65 162.40 146.00 18/08/2010 236.05 264/73 78.83 61.68

NOTE: Price in Rs adjusted for rights, bonus and splits. Var(%) from offer price and list price as on 5 April 2013.


SectorSpecificSectorSpecific

S&P BSE Sensex 3061836 18450.23 19041 / 18450 20104 / 15948 -1.52 -3.62 -6.74 -2.58 5.51 2.87

S&P BSE 200 5385880 2248.82 2321 / 2249 2489 / 1969 -1 -3.86 -9.15 -3.52 3.18 0.06

S&P BSE 500 6010184 6975.85 7198 / 6976 7764 / 6176 -0.8 -3.79 -9.9 -4.17 2.06 -1.39

TCS 293580 1500 1572 / 1500 1590 / 1059 -2.66 -2.61 15.61 15.05 27.3 86.89

O N G C 268770.4 314.15 317 / 296 341 / 243 6.19 -0.51 10.32 9.38 14.9 14.84

Reliance Inds. 251979.7 780.35 811 / 767 923 / 676 -3.76 -5.56 -9.34 -8.99 4.45 -30.64

ITC 230298 291.45 309 / 291 309 / 224 -4.51 -0.24 3.2 5.71 28.31 120.75

Coal India 194859.7 308.5 310 / 297 382 / 297 3.71 -2.87 -14.98 -15.11 -9.69 -

Infosys 164453.7 2863.85 2970 / 2853 3005 / 2125 0.11 -1.95 21.95 13.29 0.47 7.14

S&P BSE Mid-Cap 898320.1 6144.36 6310 / 6054 7336 / 5809 1.06 -3.05 -15.99 -8 -5.09 -11.79

Pidilite Inds. 13325.04 259.95 271 / 257 271 / 160 -1.31 4.42 12.48 25.37 57.69 122.37

Glenmark Pharma. 12641.55 466.65 487 / 463 543 / 308 -3.96 -5.62 -11 16.36 51.09 73.09

M & M Financial 11869.81 208.7 211 / 194 242 / 121 7.27 9.58 -13.86 17.1 51.43 178.3

Apollo Hospitals 11743.81 844.15 844 / 791 881 / 599 6.78 0.42 4.64 8.85 36.26 129.89

Essar Oil 11449.27 80.2 82 / 71 95 / 47 12.88 -8.86 10.77 32.56 41.32 -44.07

Motherson Sumi 10832.06 184.25 205 / 176 209 / 105 -10.06 -5.99 -7.64 14.3 44.96 114.99

S&P BSE Small-Cap 274569.1 5914.39 6074 / 5727 7657 / 5727 2.45 -3.77 -22.34 -17.23 -13.59 -33.36

Alembic Pharma 2162.1 114.7 115 / 103 115 / 48 9.66 24.4 61.89 63.39 114.79 -

Navneet Publicat 2006.53 59.95 60 / 57 69 / 52 5.73 -1.64 -10.52 2.92 -0.08 18.36

Ajanta Pharma 1796.2 766.95 767 / 643 767 / 255 19.29 23.08 97.34 95.53 204.19 669.64

Kirloskar Indus. 1766.73 363.9 373 / 347 420 / 263 1.44 -0.3 -5.48 18.3 5.4 116.93

Vardhman Textile 1744.01 274 275 / 256 290 / 205 7.09 0.46 4.38 17.67 35.64 1.88

Triveni Turbine 1741.87 52.8 53 / 52 62 / 41 1.54 -1.4 -14.15 5.92 6.24 -

S&P BSE IT Sector 684782.5 6730.9 6976 / 6731 7060 / 5158 -0.84 -1.8 16.08 13.87 10.23 25.71

TCS 293580 1500 1572 / 1500 1590 / 1059 -2.66 -2.61 15.61 15.05 27.3 86.89

Infosys 164453.7 2863.85 2970 / 2853 3005 / 2125 0.11 -1.95 21.95 13.29 0.47 7.14

Wipro 111998.1 454.75 455 / 431 455 / 330 4.32 5.01 12.77 21.66 2.72 5.16

HCL Technologies 52726.09 757.45 796 / 743 800 / 461 -1.34 1.52 19.5 32.04 49.09 110.05

Oracle Fin.Serv. 22296.49 2652.45 2694 / 2532 3375 / 2368 3.08 -8.44 -19.41 -12.09 1.36 15.17

Satyam Comput 13332.92 113.25 128 / 113 130 / 67 -8.85 -6.41 4.57 3.95 39.9 20.67

S&P BSE FMCG Sector 503409.9 5723.78 5921 / 5724 6142 / 4472 -2.21 0.78 -2.73 1.49 27.09 101.95

ITC 230298 291.45 309 / 291 309 / 224 -4.51 -0.24 3.2 5.71 28.31 120.75

Hind. Unilever 101875.4 471.1 472 / 459 578 / 404 2.59 4.79 -11.74 -16.55 17.91 106.22

Nestle India 43113.72 4471.45 4686 / 4471 4990 / 4328 -4.59 -5.09 -8.28 -2.7 -4.68 64.96

Godrej Consumer 26568.92 780.75 814 / 772 814 / 488 0.3 7.06 7.71 12.56 58.53 187.41

Dabur India 24958.33 143.2 144 / 131 144 / 102 7.19 7.11 11.92 7.75 35.8 75.38

United Spirits 22960.18 1755.5 1901 / 1756 2075 / 564 -5.14 -5.27 -9.37 39.21 159.67 27.94

S&P BSE Capital Goods 216654.3 8914.64 9342 / 8826 11354 / 8553 -2.29 -4.1 -19.66 -21.38 -13.94 -37.82

Larsen & Toubro 83056.03 1348.75 1422 / 1337 1711 / 1135 -3.55 -3.24 -17.14 -18.09 0.25 -18.13

B H E L 43493.85 177.7 185 / 176 266 / 176 -1.28 -10.59 -26.69 -32.47 -35.04 -63.88

Siemens 17719.9 498.45 555 / 498 830 / 490 -9.99 -0.31 -27.91 -32.97 -36.73 -33.04

A B B 10400.05 490.8 511 / 489 836 / 489 -3.59 -15.02 -32.28 -37.8 -41.64 -41.98

Bharat Electron 9454.8 1181.85 1206 / 1129 1532 / 1122 3.88 -4.53 -10.27 -3.25 -21.97 -43.77

Havells India 7504.27 601.4 648 / 594 698 / 521 1.33 -2.78 -5.55 -6.5 3.5 92.36

S&P BSE Healthcare 326022 8208.56 8247 / 7933 8303 / 6511 3.22 3.71 0.03 10.52 24.94 51.43

Sun Pharma.Inds. 89020.18 859.6 865 / 814 865 / 559 4.79 7.6 16.99 25.71 52.37 133.97

Dr Reddy’s Labs 32440.71 1910.3 1910 / 1752 1947 / 1543 9.04 6.48 1.15 12.82 11.72 50.34

Cipla 31016.03 386.3 392 / 380 429 / 302 1.06 1.07 -7.14 6.08 26.26 10.59

Lup in 27676.49 618.4 637 / 618 637 / 510 -1.51 3.6 2.38 8.74 15.71 89.01

Wockhardt 21778.48 1987.45 2024 / 1894 2115 / 622 4.95 3.92 21.63 55.67 208.71 1277.78

Ranbaxy Labs. 19013.85 449.5 452 / 432 570 / 380 4.1 14.95 -12.44 -15.06 -5.77 -6.75

S&P BSE PSU 1453355 6509.42 6621 / 6369 7862 / 6369 2.08 -5.11 -14.33 -13.53 -12.77 -28.91

O N G C 268770.4 314.15 317 / 296 341 / 243 6.19 -0.51 10.32 9.38 14.9 14.84

Coal India 194859.7 308.5 310 / 297 382 / 297 3.71 -2.87 -14.98 -15.11 -9.69 -

MARKET CLOSE FORTNIGHT 52-WEEK VARIATION OVER (%)

CAP PRICE HIGH / LOW HIGH / LOW FORTNIGHT MONTHLY QUARTERLY HALF YEARLY YEARLY 3-YEAR

Slim pickings amid setbackKey benchmark indices edged lower in the fortnight ended 5 April 2013 after a private survey showed that growth in the services sector hit a17-month low in March 2013. However, the BSE Mid-Cap and the BSE Small-Cap indices logged gains on bargain hunting after a steep recentslide. Auto stocks dropped as sales remained sluggish in March 2013, with buyers postponing purchases on account of higher interest ratesand rising fuel prices. Capital goods stocks fell on worries the ongoing slowdown in the economy could restrict new orders. Shares fromthe healthcare sector gained on defensive buying and attractive valuation.


SectorSpecific

Market cap in Rs crore. Stock prices in Rs. Only top six index constituent by market cap taken.

MARKET CLOSE FORTNIGHT 52-WEEK VARIATION OVER (%)

CAP PRICE HIGH / LOW HIGH / LOW FORTNIGHT MONTHLY QUARTERLY HALF YEARLY YEARLY 3-YEAR

St Bk of India 140657.1 2056.3 2140 / 2051 2539 / 1829 -1.32 -3.49 -17.24 -12.1 -4.99 -3.8

NTPC 116137.3 140.85 145 / 140 174 / 138 0.93 -5.72 -11.19 -17.51 -16.04 -32.61

I O C L 69779.28 287.4 290 / 274 349 / 240 -1.02 -6.63 2.11 11.07 9.55 -2.26

NMDC 49479.46 124.8 138 / 125 199 / 125 -4.7 -10.67 -23.72 -34.09 -25.67 -58.16

S&P BSE BANKEX 664885.6 12742.79 13234 / 12743 14759 / 10543 -0.96 -5.81 -13.29 -3.55 6.86 16.78

HDFC Bank 147854.9 621.2 630 / 605 704 / 487 2.61 -1.79 -8.59 -0.12 17.96 59.84

St Bk of India 140657.1 2056.3 2140 / 2051 2539 / 1829 -1.32 -3.49 -17.24 -12.1 -4.99 -3.8

ICICI Bank 115118.5 997.95 1052 / 998 1214 / 782 -2.96 -8.76 -15.59 -6.44 12.07 1.38

Axis Bank 5 7 4 9 0 1228.55 1315 / 1229 1508 / 930 -5.48 -12.5 -10.86 7.65 5.25 4.62

Kotak Mah. Bank 47397.9 634.85 655 / 632 693 / 530 -0.83 -3.17 -2.3 -0.46 15.34 65.61

Bank of Baroda 27788.3 655.4 696 / 655 889 / 611 -3.08 -7.98 -25.87 -17.37 -18.21 -2.07

S&P BSE Auto 314579.3 9741.8 10115 / 9688 11768 / 8680 -3.69 -9.13 -15.95 -7.16 -3.21 24.6

Tata Motors 81441.98 255.3 275 / 255 333 / 205 -5.58 -15.07 -19.03 -8.94 -8.22 63.48

M & M 51439.24 837.8 874 / 838 968 / 636 -4.12 -6.67 -10.88 -3.6 19.77 53.12

Bajaj Auto 49103.2 1696.9 1823 / 1674 2214 / 1447 -6.91 -13.9 -23.03 -3.09 3.93 61.84

Maruti Suzuki 40620.71 1405.95 1406 / 1280 1626 / 1068 7.94 -1.77 -8.94 1.27 6.64 0.75

Hero Motocorp 29525.65 1478.5 1656 / 1459 2245 / 1459 -10.73 -10.16 -21.56 -18.35 -26.46 -27.29

Bosch 27595.89 8788.5 9054 / 8704 9476 / 8221 -0.33 3.92 -5.75 0.2 7.25 83.66

S&P BSE Metal 465770 8518.54 8831 / 8492 11405 / 8492 -1.24 -6.68 -24.55 -19.68 -24.98 -54.06

Coal India 194859.7 308.5 310 / 297 382 / 297 3.71 -2.87 -14.98 -15.11 -9.69 -

NMDC 49479.46 124.8 138 / 125 199 / 125 -4.7 -10.67 -23.72 -34.09 -25.67 -58.16

Hind.Zinc 49224.75 116.5 121 / 114 143 / 114 2.46 1.3 -16.58 -14.21 -9.34 -6.85

Jindal Steel 31287.76 334.7 353 / 329 514 / 329 -4.89 -5.16 -26.92 -19.75 -36.36 -53.16

Sterlite Inds. 29998.71 89.25 94 / 88 122 / 88 -3.51 -5.71 -25.59 -11.59 -19.3 -58.81

Tata Steel 29961.83 308.5 322 / 304 470 / 304 -4.22 -10.31 -28.82 -24.82 -35.01 -54.55

S&P BSE Oil&Gas 780300.9 8416.78 8528 / 8280 9696 / 7389 -0.07 -3.91 -4.96 -4.92 3.39 -19.59

O N G C 268770.4 314.15 317 / 296 341 / 243 6.19 -0.51 10.32 9.38 14.9 14.84

Reliance Inds. 251979.7 780.35 811 / 767 923 / 676 -3.76 -5.56 -9.34 -8.99 4.45 -30.64

I O C L 69779.28 287.4 290 / 274 349 / 240 -1.02 -6.63 2.11 11.07 9.55 -2.26

Cairn India 55167.73 288.8 294 / 272 363 / 272 4.05 -1.21 -14.4 -11.41 -19.45 -6.7

GAIL (India) 40172.76 316.7 322 / 304 392 / 304 -1.08 -5.9 -14.53 -19.28 -14.72 -23.98

Oil India 31913.99 530.9 531 / 489 561 / 436 8.51 -2.57 10.28 8.58 7.46 15.04

S&P BSE IPO 74357.92 1545.56 1587 / 1497 1980 / 1402 2.76 -6.78 -21.95 -6.82 -1.9 -25.3

Bharti Infra. 34129.53 180.7 185 / 170 213 / 170 4.39 -7.17 -12.75 - - -

L&T Fin.Holdings 12918.62 75.25 77 / 71 94 / 41 5.47 -6 -20.24 48.13 58.76 -

Muthoot Finance 6631.31 178.4 182 / 174 231 / 116 1.16 -11.57 -21.06 -1.16 36.44 -

Multi Comm. Exc. 4736.88 928.8 929 / 834 1594 / 834 8.69 -11.94 -34.51 -30.47 -27.93 -

Credit Analysis 2201.92 771.25 811 / 771 938 / 767 -1.48 -3.49 -17.46 - - -

PC Jeweller 1953.98 109.1 123 / 107 188 / 105 2.3 -10.06 -41.81 - - -

S&P BSE Greenex 1196003 1453.37 1501 / 1453 1649 / 1307 -2.16 -5.46 -11.64 -8.13 0.06 -

St Bk of India 140657.1 2056.3 2140 / 2051 2539 / 1829 -1.32 -3.49 -17.24 -12.1 -4.99 -3.8

H D F C 119154 770.55 826 / 771 875 / 621 -3.2 -0.32 -8.01 2.79 13.36 38.11

NTPC 116137.3 140.85 145 / 140 174 / 138 0.93 -5.72 -11.19 -17.51 -16.04 -32.61

ICICI Bank 115118.5 997.95 1052 / 998 1214 / 782 -2.96 -8.76 -15.59 -6.44 12.07 1.38

Hind. Unilever 101875.4 471.1 472 / 459 578 / 404 2.59 4.79 -11.74 -16.55 17.91 106.22

Sun Pharma.Inds. 89020.18 859.6 865 / 814 865 / 559 4.79 7.6 16.99 25.71 52.37 133.97

S&P BSE Power 368546.5 1647.12 1686 / 1630 2144 / 1630 0.58 -6.05 -18.96 -21.1 -23.68 -47.81

NTPC 116137.3 140.85 145 / 140 174 / 138 0.93 -5.72 -11.19 -17.51 -16.04 -32.61

Power Grid Corpn 48542.72 104.85 107 / 103 124 / 101 2.29 -3.41 -8.75 -11.18 -5.07 -2.19

B H E L 43493.85 177.7 185 / 176 266 / 176 -1.28 -10.59 -26.69 -32.47 -35.04 -63.88

NHPC Ltd 26631.1 21.65 22 / 20 29 / 17 10.46 8.25 -13.92 7.44 5.87 -30.5

Tata Power Co. 22580.05 95.15 96 / 95 112 / 89 -0.73 -3.45 -13.58 -8.55 -5.75 -31.16

Reliance Power 17980.88 64.1 66 / 59 119 / 59 2.97 -11.77 -33.16 -37.83 -47.13 -58.06

S&P BSE Realty Index 78914.7 1770.2 1889 / 1761 2311 / 1498 -0.63 -9.08 -19.48 -9.2 -1.53 -47.9

DLF 39571.22 232.95 256 / 231 286 / 181 0.82 -10.28 -2.02 -3.64 14.08 -27.51

Oberoi Realty 8333.76 253.9 264 / 251 316 / 227 -3.75 -5.05 -15.44 -5.74 -9 -

Unitech 6174.47 23.6 25 / 22 40 / 18 -1.46 -10.27 -34.26 -7.63 -18.9 -69.13

Prestige Estates 5820.5 166.3 169 / 163 189 / 103 -1.36 -2 -10.04 17.2 55.78 -

Godrej Propert. 4141.33 530.6 570 / 515 672 / 501 3.02 -5.71 -18.4 -10.13 -14.11 1.79

Phoenix Mills 3632.11 250.75 267 / 248 279 / 157 -4.17 -1.26 -3.41 28.03 20.12 33.77


OffFocus

Packing the bags

Have will, will travelBoth group and solo travel can be pleasurable. There is alwaysthe middle way of travelling alone but gaining local company

individuals and are, therefore, best plannedwithin the group, days in advance. Logis-tics of a group tour are also different. Whenpeople of different age groups travel to-gether, care may be required to plan foractivities that interest each and every mem-ber of the group. If there are elderly or thechildren involved, special considerationmust be paid towards their needs.

In a group setting, matching of tem-perament and tastes is necessary. Travelcan be stressful and weigh heavily on thenerves. If there is a personality clash in-volved, an already stressful trip can turn into a living nightmare. Even a trip in whichonly two people travel together, for ex-ample, a married couple, can be stressful ifnot all is well at home to begin with. InJapan, a popular drama series, NaritaRikon, was based on just that premise.Narita Airport is the main gateway to To-kyo, while Rikon means divorce. The showfeatured couples that went on honeymoonsand got a divorce after they got back toJapan. The term Narita divorce has nowgone mainstream in Japanese vocabulary.

The right frame of mind is importantbefore anyone sets foot outside the house.This means aligning expectations and plan-ning ahead. The trip should be planned insuch a way that everyone gets to see anddo as much can possibly be done in thetime when the group is on holiday. Whentravelling in small groups or just with an-

Planning a vacation is almost as fun as go-ing on one. Sometimes it is even more sobecause the anticipation is almost betterthan the real thing. For most people theirfirst memory of a vacation is almost al-ways a family trip. It is natural for familiesto travel together. A change of scene bringsthe family closer. It is also a chance formembers to rediscover each other. Beingwith the people who are related makes fora comforting experience. For a lot of peopletravel is an experience in itself. A time fornew discoveries and for meeting newpeople. A walk away from the familiar andcomforting things in life. These people maylike to travel by themselves.

It may be inconceivable for a few peoplewhy someone would want to go away froma loving home and family or even the com-fort of one’s own bed. Yet there are thosethat brave all the odds and set out into thevast unknown with just the bare essentialsor whatever the airlines allow people to carrywith them these days. So from the have-toothbrush-will-travel kind to those whotake everything and everyone including thekitchen sink, it takes all kinds of people togo on outings, either alone or in hordes.

Trips in a group can mean differentthings to different people. A group couldbe a family or friends. It could also be col-leagues or, sometimes, an organised grouptour with even strangers. Group trips usu-ally need to cater to the tastes of many

other individual, it is also good to align fi-nancial compatibility. One of the travellingcompanions may not be comfortable stay-ing at expensive hotels. In case of trips thatinvolve strenuous activities like trekkingor climbing, travelling with someone whois not used to much physical activity canbe a deal breaker.

Then there are those who just prefer togo it alone. One of the chief advantages oftravelling alone is ironically the chance tosocialise. It is far easier to start a conversa-tion with a total stranger in a train or a planeif there is no one else in the tow. With noone to set the terms of the trip, that boringmuseum that every one in the family wantedto skip can be seen at leisure. Endless hoursat the beach doing particularly nothing use-ful are no longer a problem either. Also, with-out the tag-along travel companion or com-panions, the budget can be tailor-made toindividual taste.

On the flip side, travelling alone involvesthe problem of security. Getting lost on yourown or staying in a dodgy hotel can get re-ally scary. In adventure holidays, having atravel companion means that, if somethinggoes wrong, the co-traveller can easily ar-range medical attention or rescue in case ofan emergency. For the solo traveller that isnot an option. Long backpacking holidayscan sometimes get lonely. Being home-sickafter being weeks alone is not unheard of.

One of the fundamental problems thatall solo travellers face when they set out isthat they miss having someone to watchover their luggage while going to the bath-room or when they fall asleep at a train or abus station. Solo travellers also face physi-cal dangers like being easy victims of crimeand being fleeced by touts and unscrupu-lous malefactors that prey on touristsworldwide.

Priyank Thatte is a travel blogger livingmostly in Toronto, Canada, and travelling theworld part-time for the past five years. Ev-ery year he takes approximately two monthsoff work and travels to places he hasn’t beenbefore. Israel, Russia, Turkey and Bhutan aresome of the countries he has visited in thepast. But his favourite region to explore isLatin America. Priyank writes about his back-packing stories on his travel and photogra-phy blog: finaltransit.com. He had this to sayabout travelling solo: “I almost exclusivelytravel by myself and I prefer independenttravel both for the extreme solitude it offersand the crazy experiences I encounter. I wasin Turkey few months ago and went hiking in

OffFocus


OffFocus

the Cappadocia desert that is dotted withcaves and rock formations that seem liketerrain another planet. On the way I got lostand barely escaped a pack of wild dogs; butthen I also saw spectacular scenery that hadno sign of human presence. It was im-mensely fulfilling.”

Everyone has a different take on travel-ling alone or in a group. Some people justprefer the idea that there is someone to covertheir back in case something untoward hap-pens. Then there are others that think thatno one should cramp their style. For women,travelling alone always poses interestingchallenges. In the late 19th and early 20th cen-turies, there was a dramatic increase in thenumber of European and American womantravellers. Many of them wrote about theirexperiences. Some of these travellers weremarried but still decided to go on journeysto far-flung areas of the world by themselves.Some of them were on journeys of scientificor geographic exploration, while others justtravelled for leisure.

One famous woman traveller wasAlexandara David Néel, who travelled to Ti-bet in 1924 when it was still closed to theoutside world.She wrote many books on re-ligions of the East, philosophy and her trav-els. David Néel also travelled to Vietnam,India, Sikkim, Japan and France. There wereother famous female travellers like MaryKingsley, who went to West Africa, andMary Seacole, a mulatto from Jamaica, whowent to the Crimea during the war.

In modern India, many women have takento travelling solo. Naina Sharma based inMumbai works for a global telecom company.In her free time she likes to travel on her ownand sometimes with companions. “I havebeen travelled in large groups extensively insouthern India, especially Karnataka, and inmountainous regions of the north inUttaranchal,” she says. As a solo backpacker,she has been to Swedish Laplands, South-West China in Yunnan, and Sri Lanka. “Whenasked what she thinks about unique challengesthat the woman traveller faces, Naina said:“Most importantly, it is a bit difficult to findcheap and safe accommodation. We oftenhave to pay a premium just to ensure thatnobody would be forcing open our doors inthe middle of the night. Also, there is oftencuriosity and unwanted attention attached tosolo women travelers by the local populace.To tackle it gracefully is partly an art, andpart borderline science.”

Whether the traveller is a man or a

woman, there are certain charms in solotravel that cannot be ignored. “Solo v groupis a highly sensitive topic in the backpack-ing community,” notes Priyank. “I travelsolo but solo travel does not mean I have tobe alone all the time. In fact, travelling in-dependently compels you to talk to locals,meet fellow travellers and plan your ownjourney without having to accommodateother people’s demands. I also take publictransport, eat in markets and stay with thelocals (through couchsurfing).” There aretimes when he would rather let someoneelse plan, organise and lead a tour. When hegoes hiking in the Himalayas, he wouldrather have someone else to worry aboutfinding food and accommodation or figur-ing out other details of the journey.

“I would advice you to choose your groupwell; traveling in smaller groups with like-minded travellers can be a blast,” says Priyank.“My city tour of Mexico City was awful be-cause I was in a bus full of older CaucasianAmericans. On the other hand, I went hikingin the Colca Canyon, Peru, in a group of fouractive travellers in their late-twenties and itwas one of my most memorable hikes.” Nainasays she would take solo travel any day. “It ishighly addictive. You are always present inthe moment with no idle chit-chat to distractyou from experiencing your travel in the high-est intensity possible.”

For a lot of travellers going it solo, theinternet has opened new avenues.Couchsurfing.com and AirBNB.com provideaccomodations in the form of either rentalsor homestays. These services allow hoststo give on rent living space or sleeping quar-ters to travellers for short stays. The re-view-based rating helps people pick the rightaccommodation for their needs. These ser-

vices make it possible to interact more withthe locals because it is they that let outthe accommodations for homestays. Otherservices like Tripping.com andTriptrotting.com help connect locals andtravellers as well. A visitor can hook up witha local person who can show the sights andenjoy the company of an exotic foreign guestin return. Those travellers who would rathertravel solo but find a travelling companionjust for a particular trip can use the servicesof websites like FindMeetGo.com orGlobetrooper.com. In fact, AirBNB hasproved to be such a challenge to establishedhotels and hostels that some countries arenow losing out on tax revenue and are con-sidering outlawing the use of it. Recently,the local government in Amsterdam wasthinking of banning AirBNB entirely.

Those that like to travel in groups havemany options as well. Traditional travelagents like Cox & Kings, Thomas Cook, andSita do provide travel packages, which aregeared towards the Indian traveller. Someonline travel companies likemakemytrip.com, cleartrip.com, andyatra.com also provide holiday packages thatcater both to group and personalised itiner-aries. When booking a group holiday it isimportant to check on the kind of accom-modation and transport provided by theagent. It is also important to examine if thegroup tour will provide some leeway in termsof excursions to shopping malls or culturalspots. Most group tours have some amountof flexibility built in to them but it is unrea-sonable to expect a lot of freedom becausethe structure of the tour will remain rigid.

Different travellers have different needs.Those that like to plan everything by them-selves love solo travel. Travelling alone isalso the way to go for those holidaymakersthat enjoy the idea of mingling with localpeople and getting a bit of cultural experi-ence. Travellers who just want to have achange of scene without immersing them-selves in to the nittty-gritty often just wantto go with a group. Factors like safety andsecurity are real concerns in today’s globalenvironment and group travel does allow fora more secure experience.

Both group and solo travel can be plea-surable. There is always the middle way oftravelling alone but gaining local company forgetting the best of both the worlds. Whateverway anyone chooses, as long as the mind isopen, travel will certainly broaden horizons.

— Shivdeep Singh

Many options to choose the way to travel

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