Increases in promoter equity are generally considered to point to ‘good times’ for a company.
ET Intelligence Group: For the less keenly tracked small-and midcap companies, a change in promoter equity is often considered the most accurate barometer of immediate stock and operating performance. Promoters are among the first to know the inflection points in their own businesses. So increases in promoter equity are generally considered to point to ‘good times’ for a company. As minority investors, it is time to add such quality midcaps and small-caps, therefore.
ETIG presents a list of five such companies. Investors, however, must do their own homework before punching in ‘buy’ orders.
RAYMOND
In November, the textile company announced the demerger of its lifestyle business, which will now house the top brands. This is expected to unlock value for investors. Furthermore, the management began a property venture on its land parcel in Thane, a sought-after Mumbai suburb. This business should generate? 1,100 cr in net profit over the next 5 years. Analysts believe the combined value of the two businesses is? 950 per share, while the current stock price is? 689.
SASKEN TECHNOLOGIES
The Bengaluru-based digital services and products provider bought back shares in the December quarter at ? 825 apiece, 25 % higher than the current market price, but the promoters did not tender their shares. While the management has been guiding strong revenue growth, it is yet to show any improvement. In the September quarter, the company reported a revenue decline of 9 % sequentially after its biggest client sold a part of the business. The management expects to make up for this loss in the second half. The decision by promoters to skip the buyback points to a likely turnaround.
VOLTAMP TRANSFORMER
The transformer company reported 3 % year-on-year revenue growth in the September quarter due to weak execution through the monsoon months, although the order book expanded 60 %. Analysts expect revenue to grow 20 % for the next two years, boosting operating leverage and margins. It reported EBIDTA margin of nearly 11 % in the first half of FY20. The stock trades at a price-earnings (P/E) multiple of 11
BAYERNSE 0.39 % CROPSCIENCE
The performance of the agriculture and pharma products company has been lackluster in the first half, with a mere 2 % growth in sales. But the management has been working on a restructuring plan that includes integration of the Monsanto NSE -0.40 % team, which would eventually lead to cost reduction and renewed marketing strategy. The multinational company has already introduced stricter sales policies with an incentive structure to make its products more attractive to distributors and farmers.
GREAVES COTTONNSE -0.14 %
The auto ancillary company acquired 100 % of Ampere, an EV (two-wheeler) maker. The promoters raised stake notwithstanding the fall in the core operations in the September quarter, indicating that they are bullish on the prospects of the newly acquired company and the future of e-mobility.
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