Friday, August 11, 2006
Indian FMCG better at Capital utilization
Indian FMCG companies seem to be almost thrice as efficient as global heavyweights when it comes to utilisation of capital. An ETIG analysis shows that Indian companies such as Hindustan Lever, Dabur and Marico have an average capital employed figure worth around three months of yearly sales, while for global majors like P&G, Coke, Pepsi and Ajinomoto it's 8-9 months of annual turnover. To put it differently, for every rupee invested in the business, Indian companies generate Rs 4 worth of sales against one-and-a-half bucks generated by global biggies.
This analysis compares sales turnover ratios of top 10 Indian FMCG companies with top six US FMCGs ¾ P&G, Coke, Pepsi, Altria, Colgate and Starbucks along with Ajinomoto and Tingyi, the Japanese and Chinese food giants respectively. Capital employed turnover is the ratio of average capital employed to annual sales, which is multiplied by 365 to represent it in days. Barring ITC, which has to maintain a huge inventory of tobacco to buffer seasonal fluctuations, all Indian FMCG companies have a capital employed turnover ranging from two to five months.
Godrej leads the pack with a capital employed turnover of just 38 days, helped by depreciated fixed assets, while Nestle India has the highest negative working capital figure of around 36 days. On the other hand, global giants have capital employed turnovers of 7-9 months, with Starbucks having the best figure of around 140 days. There is not much to choose between Indian and global companies on working capital front with most companies enjoying negative working capital turnover. This means that for most of these companies, 15-20 days of sales is financed by suppliers and creditors in a year.
A notable exception is the Japanese manufacturer of cooking oils, processed foods and drinks, Ajinomoto, which has a positive working capital figure. This observation is in sync with most of the Japanese companies, as most of them maintain a positive net working capital from a conservative standpoint. The biggest differentiator between the Indian and US companies is the intangible asset turnover ratio. Intangible assets comprising of goodwill, brand patents, technical knowhow and acquisition premium account for 4-6 months of annual sales for most of the US giants while this ratio is negligible in case of Indian companies.
While this allows domestic FMCG majors to score highly above their global counterparts on the capital efficiency front, it is to be noted that these brand premiums help the global companies in commanding better operating margins and hence ultimately matching up on RoCE front. On the fixed asset front too, Indian companies outshine global counterparts with an average fixed asset turnover of 56 days compared to 81 days for the latter. The Indian majors appear much leaner, with their fixed asset turnover figures ranging from just 30 days for Britannia to around 70 days for Marico, while for US majors — P&G, Coke, Pepsi and Colgate — the corresponding figure is 90-100 days.
Indian FMCG companies seem to be almost thrice as efficient as global heavyweights when it comes to utilisation of capital. An ETIG analysis shows that Indian companies such as Hindustan Lever, Dabur and Marico have an average capital employed figure worth around three months of yearly sales, while for global majors like P&G, Coke, Pepsi and Ajinomoto it's 8-9 months of annual turnover.
To put it differently, for every rupee invested in the business, Indian companies generate Rs 4 worth of sales against one-and-a-half bucks generated by global biggies.
This analysis compares sales turnover ratios of top 10 Indian FMCG companies with top six US FMCGs ¾ P&G, Coke, Pepsi, Altria, Colgate and Starbucks along with Ajinomoto and Tingyi, the Japanese and Chinese food giants respectively.
Capital employed turnover is the ratio of average capital employed to annual sales, which is multiplied by 365 to represent it in days.
Barring ITC, which has to maintain a huge inventory of tobacco to buffer seasonal fluctuations, all Indian FMCG companies have a capital employed turnover ranging from two to five months. Godrej leads the pack with a capital employed turnover of just 38 days, helped by depreciated fixed assets, while Nestle India has the highest negative working capital figure of around 36 days.
On the other hand, global giants have capital employed turnovers of 7-9 months, with Starbucks having the best figure of around 140 days.
There is not much to choose between Indian and global companies on working capital front with most companies enjoying negative working capital turnover. This means that for most of these companies, 15-20 days of sales is financed by suppliers and creditors in a year.
A notable exception is the Japanese manufacturer of cooking oils, processed foods and drinks, Ajinomoto, which has a positive working capital figure. This observation is in sync with most of the Japanese companies, as most of them maintain a positive net working capital from a conservative standpoint.
The biggest differentiator between the Indian and US companies is the intangible asset turnover ratio. Intangible assets comprising of goodwill, brand patents, technical knowhow and acquisition premium account for 4-6 months of annual sales for most of the US giants while this ratio is negligible in case of Indian companies. While this allows domestic FMCG majors to score highly above their global counterparts on the capital efficiency front, it is to be noted that these brand premiums help the global companies in commanding better operating margins and hence ultimately matching up on RoCE front.
On the fixed asset front too, Indian companies outshine global counterparts with an average fixed asset turnover of 56 days compared to 81 days for the latter. The Indian majors appear much leaner, with their fixed asset turnover figures ranging from just 30 days for Britannia to around 70 days for Marico, while for US majors — P&G, Coke, Pepsi and Colgate — the corresponding figure is 90-100 days.
Wednesday, July 26, 2006
Rural demand for FMCGs to rise over 50% by '12
The FMCG segment is estimated to become a Rs 1,06,300 crore industry by 2012 from the present Rs 60,000 crore.
Market penetration currently stands at about two per cent in the rural and semi-urban areas against total growth rate of about eight per cent, the chamber said.
Indian rural market with its vast size and demand base offers a huge opportunity to FMCG companies, it said.
A good number of malls would come up in the next four to five years in semi-urban areas, which would lead to increase in the the demand of these products, the report said.
However, the chamber also pointed out that the companies would have to face a number of difficulties specifically in the rural areas.
India has about 6,27,000 villages spread over 3.2 million sq km. About 750 million Indians live in rural areas and finding and delivering them the products is a tough task, it said.
The poor state of infrastructure would be the biggest challenge to make the products available in far-flung areas.
Affordability of a product or service to a rural consumer is also a problem with low disposable incomes that will compel the manufacturers to make the products more affordable.
www.economictimes.com
In search of kanta Bai
These companies are devising campaigns specifically targeted at these professionals who will use these products instead of creating a brand for the products and getting lost in the clutter of traditional avenues of advertising.
3M, a consumer goods manufacturer, has adopted a unique method to campaign for its brand Scotch-Brite — the utensil cleaning scrub pad. It has targeted maidservants to market its product.
Recently in Pune, over 100 maidservants marched through the city promising to keep homes clean. The walkathon was aimed at promoting cleanliness at homes and the city at large. The company expects that these maids will carry the message to all the households they work and help them market the product.
“Maids have today become a critical part of every household. Over 60% of all cleaning tasks in a household are performed by maidservants. This is the reason why we thought that it was a good idea to directly cater to the primary user of our product than householders,” says Sanjit Sampathy, divisional manager, home care division, 3M.
“We are expecting our sales to double in Pune in the next three months,” he adds. Owing to the good response to this campaign, the company has planned to extend the campaign in at least four to five cities across the country in each region. Also, the company plans to impart a 10-day training programme for maidservants where they will be shown movies on cleanliness and given sweets and goodies.
Shri Kalyani Garments, a Pune-based garments distributor and manufacturer, has started a tailors club to unite the hitherto unorganised tailoring segment. The club is aimed at providing raw material like cloth, hooks, buttons and threads to tailors across Maharashtra at a fixed price.
The club will form tailor shoppes across the state so that this material reaches the tailors at his hometown and he need not come to a bigger city to collect these raw materials. The company currently has 350 inhouse tailors and is expecting to rope in around 5,000 tailors across the state by December this year in the club.
Source: www.economic-times.com
FMCG - Defn by CII
The Fast Moving Consumer Goods (FMCG) sector is the fourth largest sector in the economy with a total market size in excess of Rs 60,000 crore. This industry essentially comprises Consumer Non Durable (CND) products and caters to the everyday need of the population.
Product Characteristics
Products belonging to the FMCG segment generally have the following characteristics:
- They are used at least once a month
- They are used directly by the end-consumer
- They are non-durable
- They are sold in packaged form
- They are branded
Industry Segments
The main segments of the FMCG sector are:
- Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care.
Major companies active in this segment include Hindustan Lever; Godrej Soaps, Colgate-Palmolive, Marico, Dabur and Procter & Gamble.
- Household Care: fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish).
Major companies active in this segment include Hindustan Lever, Nirma and Reckitt & Colman.
- Branded and Packaged Food and Beverages: health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.
Major companies active in this segment include Hindustan Lever, Nestle, Cadbury and Dabur.
- Spirits and Tobacc Major companies active in this segment include ITC, Godfrey Philips, UB and Shaw Wallace.
An exact product-wise sales break up for each of the items is difficult.
The size of the fabric wash market is estimated to be Rs 4500 crore; of household cleaners to be Rs 1100 crore; of personal wash products to be Rs 4000 crore; of hair care products to be Rs 2600 crore; of oral care products to be Rs 2600 crore; of health beverages to be Rs 1100 crore; of bread and biscuits to be Rs 8000 crore ; of chocolates to be Rs 350 crore and of ice cream to be Rs 900 crore.
In volume terms, the production of toilet soap is estimated to have grown by four per cent in 1999-2000 from 5,30.000 tonnes from 5,10,000 tonnes in 1998-99. The production of synthetic detergents has grown by eight per cent in 1999-2000 to 2.6 million tonnes. The cosmetics and toiletries segment has registered a 15 per cent growth in 1999-2000 as against an annual growth of 30 per cent recorded during the period 1992-93 to 1997-98.
In the packaged food and beverage segment, ice cream has registered a negligible growth and the soft drink industry has registered a six per cent growth in 1999-2000.
The FMCG sector: Companies and brand acquisitions
| Nitin Kochhar / Mumbai May 05, 2006 13:58 | |||||||||||||||||||||
“Growth is Life” is not just the punch line of Reliance, but it is what every business, sector and company strives for. The FMCG sector is no exception. The sector saw a slump between ’02 and ’04 but has made a quick recovery. The percentage growth of the FMCG sector has progressed from single digit to double digit. This is definitely a signal that good times lie ahead. Consider some statistics.
What has driven this sector for the past few years? There are only two growth paths– Organic (Innovation) or Inorganic. FMCG behemoths like P&G have been proponents of organic growth. Recently (April 27, 2006), AG Lafley, global CEO of P&G said, “Organic growth is more valuable because it comes from your core competencies. It is like a muscle. If you use it, it gets stronger.” However, there is a different view point. In 2005 Dabur India announced the acquisition of Balsara Hygeine and Home Care businesses. The CEO, Sunil Duggal mentioned that Balsara's acquisition is certainly not the last one and there may be more strategic takeovers in future. After citing the different viewpoints from the CEOs of FMCG majors, one wonders if there can be one unique strategy, that FMCG companies can adopt. The answer is ‘no’. In the recent past, a skewed trend towards acquisition of companies and brands by FMCG companies has been observed. This paper explores the reasons companies choose this path substantiating the reasons with several case studies. Rationale behind FMCG companies choosing the inorganic path 1. Feasible option: Building a brand from the grass root level requires lump-sum investment. Small FMCG players cannot survive before giants like HLL because they lack the financial capacity to build a new brand and get a decent market share. Also, riper product categories make it very difficult for other FMCG players to enter that space because of huge competition and the firm foot-hold older brands have. Acquiring brands from other companies will not only help cross the crucial hurdle of exorbitant investment on brand building, but also serve as a cost saving methodology. P&G’s acquisition of Gillette proved gainful: P&G expected revenue gains and cost savings of $14-16bn from the merger with Gillette due to elimination of overlapping functions and a planned 6,000 job cuts. 2. Time constraints: Launching a brand from the grass root level takes consumes exorbitant amount of time. It also requires in-depth market research, explicit understanding of consumer behaviour, pilot testing at selected places, etc. One must keep in mind the dynamic disposition of consumer markets. The needs of the consumers keep changing. The longer organic route is perilous in the sense that fresh innovative brands may become obsolete by the time they hit the shelves. 3. Product enhancement: Diversification of existing product portfolio and complementing current product portfolio tends to ensure sales. It is also the quickest way to increase a company’s basket of goods, giving a straight license to step into new product categories. 3.1 Dabur’s acquisition of 7 brands from Balsara: DIL's acquisition of the three Balsara group companies has given them access to seven established brands; toothpastes Promise (unique clove oil positioning), Babool (value segment) and Meswak (premium segment), Odonil air freshener, Odopic utensil cleaner, Sanifresh toilet cleaner and Odomos insect repellent. Balsara’s herbal oral care range is a good strategic fit for Dabur, as their products are also positioned on the herbal benefits. 3.2 Godrej bought Keyline’s Brands: The deal gave GCPL an easier route to enter the skincare segment through Keyline brands such as Endocil, Inecto, Skyhydra and Aapri. GCPL is no more just soap and hair colour. Its products have now come to include Erasmic shaving products, Cuticura talcum powder, Adorn & Nulon. They have been eying Nihar’s hair oil, as it fits into Godrej's portfolio. However, Nihar, which belongs to HLL’s stable was picked up by Marico. 3.3 Marico acquired skincare company Sundari LLC, two aromatic soap brands in Bangladesh and Nihar coconut oil from Hindustan Lever. 3.4 Wipro Ltd acquired the Chandrika soap brand with long-term lease rights for marketing the product in India and the SAARC region. Chandrika is the second largest selling brand in South India after Medimix. Also, this would align with Wipro’s strengths in markets like Andhra Pradesh, where Santoor soap brand is already the market leader with a market share of 17 per cent. 3.5 P&G's acquisition has given it access to Gillette's portfolio comprising shaving products, Oral-B toothbrushes and Duracell batteries, among others. This has helped P&G to upgrade from household products like soaps, detergents and cleaners, to a company that is into ’lifestyle’ products in the personal care and grooming segments. Gillette's basket of hi-tech shaving systems for men and women, powered tooth-brushes and male grooming products will complement P&G's set of brands in the beauty, personal care and feminine hygiene segments. Gillette will also add more high-margin products to the P&G portfolio, making space for more robust profit margins than its rivals. 3.6 Tata Group's tea business acquired Good Earth to leverage potential for growth in the specialty tea sector of the US market and elsewhere in the world. The experience and skills of Good Earth and Tetley complement each other well and will combine to have a strong position in the US tea industry. 4. Size/scale advantages: Various parameters that lead to an increase in size/ scale of an organization by adopting the inorganic route are: Ø Increase Turnover/ Profits Ø Increase Market Capitalization Ø Increase Market Share Ø Presence on the world map 4.1 Increase Turnover/ Profits: Coming out with good results, especially healthy top/ bottom line pre-occupies the top officials of every company. Acquisitions definitely reassure the management. GCPL's CMD, Adi Godrej feels that through Keyline’s buyout, their sales turnover should go up 20 per cent and profits should increase 10 per cent. GCPL’s 35 per cent revenue comes from hair color brands. Considering that the hair colour market in UK is five times that of India, sales and profits are bound to take leaps. Dabur after acquiring Balsara saw an immediate growth of 10 % in revenues. 4.2 Increase Market Capitalization
These figures clearly shows a positive correlation between acquisitions and share value. Marico witnessed a marvelous 35 per cent growth in just 3 months. Ø The market cap of GCPL increased by 10 per cent post the Keyline acquisition Ø The above companies have been rewarded with premium valuations, which was previously enjoyed by multinationals alone. 4.3 Increase Market Share Dabur’s market share in oral care market has increased by 6%. Nihar’s 8% market share along with old market share has made Marico the undoubted leaders in coconut oil market with a share of 60% in Rs8bn CNO market. This also led to an increase from 35% to 75% in the perfumed coconut oil segment. 4.4 Presence on the world map TATA Tea Ltd acquired Good Earth Corporation few years back. Managing Director, Tata Tea, pointed out that the traditional strength of Tetley in the US market had been in areas such as New Hampshire and Boston. Good Earth offered the company presence in the attractive California market, which has welcomed new and innovative offerings in tea. Companies are going global not only with the expansion motive. The other reasons are: 4.4.1 Ready-made global brands: The move to acquire Keyline Brands marks GCPL's foray into the global market with ready-made brands. 4.4.2 Market availability and brand sharing: Ø Domestic to new markets: GCPL has decided to take its hair powder dyes and Fairglow soap to the UK, where there is a substantial Indian population. Ø Foreign brands to enter domestic markets: Godrej is planning to introduce few of its popular Keyline brands i.e. Erasmic and Cuticura in India, as customers are aware of them. 4.4.3 Targeting Ethnic population: Brand in domestic market will definitely attract the ethnic population residing in the target countries. According to Godrej its huge brand equity in India will spill over to create brand pull among the British Afro-Asian population. GCPL is hoping to gain from the current craze for "ethnic Indian" by introducing sandalwood and ayurvedic variants of Godrej No. 1 in British supermarkets. Godrej’s products are customized to Indians and UK has a large Indian population, as a result, Godrej stands make more gains. 4.4.4 Increased Learning Curve: Entry into any new geographical retail arena offers a lot to learn. Ø Different retail formats prevailing there Ø Insights on planning and meeting global delivery schedules Ø Doing business in a different land Ø Dealing with different cultural and traditional backgrounds of consumers Ø Understanding offer schemes to attract more customers in the new place Ø Learning about the variations in margins and discounts across geographies Ø Right shelf space attract customers Learning the retail trends and applying them in domestic markets can only do more good than harm. There also exists the possibility of importing new skill-sets to tackle the nuances of manufacturers and retailers in the domestic market. Unlike in India, distribution is not fragmented overseas (US, UK etc.) Manufacturers deal with fewer retailers, hence calling for different skill sets. Godrej, is likely to bring to India, the best practices of organized retail. As retail chains in India are growing rapidly, its application will give Godrej a competitive edge against multinationals in India, who are not new to these practices. Godrej will also enhance its skills in managing modern trade channels. 5. Enhanced Distribution FMCG is a market of the masses and the key to success is held by distribution.. If the acquired company's distribution network is complementary to the company's own, it can easily be leveraged to vend existing brands to new consumers. 5.1 Dabur pursued Balsara for its distribution reach in the West and the South. Dabur’s past distribution network had better penetration in the Northern and Western regions. Balsara has a direct distribution reach of 3,40,000 and 1.5mn indirect reach. The acquisition will enable Dabur to distribute its products in Southern markets as well. 5.2 Nihar's strong presence in states such as Bihar and Jharkand will complement Marico’s strong foothold in the West and the South. 5.3 Keyline Brands' relationships with retailers such as Boots and Tesco in the European markets will allow GCPL a better access to the UK market. Before the acquisition, GCPL relied on merely one distributor to put brands on UK shop shelves. The company says, "Supermarkets have long-term relationships with local companies. Without which, it is difficult to penetrate markets such as the UK." GCPL expects that its access to retail chains such as Boots, Asda, Sainsbury's and Tesco in the UK would boost its domestic brands. 5.4 P&G will have a greater say over display and shelf-space with retailing giants such as Wal-Mart, Carrefour etc. They will also get greater bargaining power in its negotiations with raw material suppliers and the advertising media. 5.5 Priya Pickels was acquired by CavinKare to take advantage of the former’s local distribution network. 6. Economies of Scale 6.1 Dabur’s combined business with Balsara would provide economies of scale in marketing, sales and distribution. Combined advertisement will reduce costs. 6.2 At present Keyline outsources about half of its manufacturing to various units in the UK. According to reports, GCPL's manufacturing costs are 30 to 40 per cent lower than those in the UK. This has forced GCPL to shift some of Keyline's production to its Vikhroli, Mumbai plant. Areas of Concern 1. Human Resource: The companies need to retain the talent that they have acquired. For example, Keyline employees need to be there to ensure continuity and to help the GCPL team learn the nuances of the modern trade to move up the learning curve. 2. Brand Cannibalization: The companies must ensure no overlap between the needs of the consumers of existing and the acquired brands (if they serve as substitutes), to avoid one brand killing the share of other. Marico must market Parachute and Nihar in such a manner that each has its share of sales and at the same time Nihar’s sales can be increased. 3. Competition: Entry into new product categories means a wider product basket. Therefore distribution reach may expose these companies to greater competition. 4. Integration: The most challenging task of P&G was to integrate operations, manufacturing facilities and work culture of two companies, that had functioned independently for many years. 5. More brands, less power: No specialization and a large number of brands may distract the management from nurturing them. Clairol, the hair-care brand that P&G acquired in 2001 has lost market share to L'Oreal. Unilever in India has learnt from this and hence focused on 30 power brands. Future This endeavor of acquiring more brands and entering into new product categories will be rampant in the coming years. FMCG companies have their eyes set to fill in the gaps in the existing brand portfolio by acquiring companies with set of brands complementing their existing portfolio. FMCGs are vigilant to grab any opportunity to grow as fast as possible, by acquiring companies. But some have not followed suit and have chosen the other route of organic growth. The views expressed above are those of the author. India Infoline may or may not subscribe to the same. This report is for information purposes only and does not construe to be any investment, legal or taxation advice. It is not intended as an offer or solicitation for the purchase and sale of any financial instrument. Any action taken by you on the basis of the information contained herein is your responsibility alone and India Infoline Ltd (hereinafter referred as IIL) and its subsidiaries or its employees or directors, associates will not be liable in any manner for the consequences of such action taken by you. We have exercised due diligence in checking the correctness and authenticity of the information contained herein, but do not represent that it is accurate or complete. IIL or any of its subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this publication. The recipients of this report should rely on their own investigations. IIL and/or its subsidiaries and/or directors, employees or associates may have interests or positions, financial or otherwise. | |||||||||||||||||||||
FMCG firms must innovate: Marico
CFO of Marico Industries Milind Sarwate believes that the FMCG sector has emerged out of the rut that it was in until a few years ago. He feels that the challenge is to maintain the momentum and keep the consumer sentiment alive.
Sarwate advocates that FMCG companies need to innovate and focus on consumers.
Excerpts from CNBC-TV18's exclusive interview with Milind Sarwate:
What do you see as the key challenges for FMCG companies like yours in the next few quarters?
The challenge would center around a couple of things. First, the sector as a whole, may have to come out of some kind of rut, in which it was until a few years ago. I think the challenge is to maintain the momentum and keep the consumer sentiment alive.
We are seeing a period of good economy growth and the sector must capitalise on that and second part of the innovation is the key to the first part. I think companies need to innovate and focus on consumers. In a tough period, there was an excessive focus on the competition. That focus has moved to some extent to consumers and that must sustain.
How do you combat margin pressures because that is showing up for many FMCG companies? The point that you made about competition; how much elbow room do you have for price increases at this point?
We are riding a good period almost for four-five quarters, where our margins have continuously expanded. We believe that in terms of our competitive scenario, we are well-placed at this point of time. Not that we are relaxing; but in terms of our pricing power, it has held quite well over the past 18 months or so.
Out of our turnover increase of 38% including this quarter, almost 37% has come from volume. So we have not had inflationary growth. We have not been required to raise prices but we have held prices despite the underlying material prices that have gone down.
From www.moneycontrol.comPublished on 26th july 2006
What's in store for the FMCG sector?
FMCG analyst at SSKI Nikhil Vora believes that the next round of growth for the FMCG sector will get powered by a lot of front-ended investment by companies. This effectively means innovations, advertising and sales, promotion spends and also overall consumerisation in the economy.
He further states that none of the FMCG company results have been surprising. He feels that most of them have been strong and steady performers.
Excerpts from CNBC-TV18's exclusive interview with Nikhil Vora:
Do you agree for the next few quarters FMCG will show signs of strong sales and profitability?
If one looks at the slightly longer-term trend from FY02 to FY05, one would see that the sector has grown at a single-digit growth track. Now if one looks at last year, the growth has come back to strong double digits at around 15-16%. My thought is that it's a back-ended investment, which helped consumer sector to come back in the face of price guards and down trading.
The next round of growth will get powered by a lot of front-ended investment by companies, which effectively means innovations, advertising and sales promotion spends and also overall consumerisation, which is happening in the economy.
A lot of Indian consumer players like Marico and other Indian companies will up their ante as far as acquisitions are concerned, given the fact that there is still disproportionate cash-on-book.
The point about volume growth is taken but as far as stock prices and valuations are concerned, where do these stocks stand? For a couple of them like Dabur India or Marico, you have put an under performer rating.
It is quite a contradiction right now. The businesses are doing well, the underlying growth is steady, there is visibility of most of the businesses that we are looking at; including Marico for instance, where we have downgraded the stock. But the fact is that valuations are running ahead of time and we have taken into account the cash-on-book and potential acquisitions, which all these companies can do and the risk of error is pretty much negligible from that level.
The fact is that incrementally going forward, for a lot of raw material, many companies would start to stock in inventory given the fact that some of the raw material are at the lowest levels. I think a lot of companies will start to release stock significantly now, to just hold on to their prices.
From the numbers you have seen so far, which ones have you liked best?
None of them have surprised. I think most of them have been strong and steady performers. So I cannot point out any single company, which has stood out in that sense.
From:
www.moneycontrol.com
On 26th july 2006
