alphabet soups go, the Bombay Stock Exchange is quite a champion.
It has 5,000-odd companies listed on it for share trading (now what
was Shanghai's figure again?). Naturally, not all those shares are
worth the paper they're printed on, or in these DEMAT times, perhaps
even the chip memory they occupy. There are hundreds and hundreds
of worthless stocks that can still be traded (some dead firms too,
Now, of the 5,000-odd scrips, as many as 3,640
were trading at under Rs 50 on October 8, 2004. The good news, and
that's what this is about, is that some of these are actually genuine
bargains. They're going cheap at the moment, but they won't stay
Why are they so cheap? Good question. Some
lie undiscovered. Some of them are momentarily in the dumps, plain
and simple. Some just have low face values. Most of these companies,
though, are really small, with the market value of all shares adding
up to under Rs 100 crore (also called 'market capitalisation').
So they are not tracked by the big research houses. Nor do they
get media attention. Another problem that plagues most of them is
lack of liquidity. It all adds up to low investor interest. Yet,
some of the best opportunities are found where others fear to look.
So here goes our list of 10. If you have both the patience and risk-appetite,
you might want to give them a shot.
Kamat Hotels (India)
A name associated by most with South Indian
fast food, this stock is actually a play on the prospects of The
Orchid Hotel, an 'Ecotel' certified eco-friendly five-star hotel
located near the airport in Mumbai. And its outlook is bright, given
the increase in both green consciousness and foreign arrivals. "As
the price is still cheap, the stock offers good growth potential,"
says Jamshed Desai, Head of Research at IL&Fs Investsmart India.
Lakshmi Precision Screws
A cyclical gainer. In the rush for automotive
fasteners, investors ignored industrial fasteners (hence its low
p/e multiple). But the expected industrial recovery in India, together
with its increased focus on exports (38 per cent of revenues for
the year ending March 2004), could see this firm stage a resurgence.
GIC Housing Finance
In a fiercely competitive housing finance market,
GIC Housing Finance has taken its net profit up 68 per cent in 2003-04
by slashing its cost of borrowing. Since the debt restructuring
was done recently, its full impact on profitability will be felt
for several more quarters. Since the stock's price is still low,
its dividend yield works out to around 6 per cent.
This emerging company is yet to break on to
the investor radar. Buying it is a bet that it will, once it kicks
off operations. Promoted by ONGC, GAIL, IOC and BPCL to set up LNG
import and re-gasification facilities, "it is a very good emerging
infrastructure stock" in the estimation of Rajesh Jain, Director
and CEO of Pranav Securities. Promoter interest remains strong;
the gas will use GAIL pipelines, and will be used mostly by IOC
Mahindra Ugine Steel Co.
This maker of alloys and special steel products
has been in a bad shape lately, with rising steel prices sending
it into losses, but is turning around sharply. With the auto components
sector in boom, it is doubling its capacity and is likely to bounce
upwards. "This capacity doubling is done at a very low cost
(of Rs 18-20 crore)," says Jigar Shah, Head of Research at
KR Choksey Research.
Another turnaround stock, this time on account
of a restructuring. In February, it reduced its equity capital base
from Rs 152 crore to Rs 15.2 crore (and wrote off the rest). Further,
additional capital was infused by Bank of Muscat and Sabre Capital.
With this, it was able to report a small profit for the June quarter,
and has just issued rights. "With the new management in place,
things are expected to improve further from here," says Jain
of Pranav Securities.
Deepak Fertilisers & Petrochemicals
This has been a victim of misperception. It
is treated just as a fertiliser company, and gets clubbed by analysts
as such, though it is getting a fast increasing share of revenues
from its chemicals business. Further, it is a consistent dividend-paying
company, and can boast a yield of more than 5 per cent.
This truck maker is a big company with a Re
1 face value share (the minimum allowed). With commercial vehicles
in increased demand because of India's industrial spurt, it is expected
to turn in a performance even stronger than that of 2003-04. "Ashok
Leyland is not expensive in relation to its earnings," says
Rajeev Thakkar, Head of Research at Parag Parikh Financial Advisory
Services. Interest rate and oil price rises, though, could hurt.
This stock's low price is an open and shut
case of a share split (which typically splits the price too). A
medium-sized firm, Pricol-formerly known as Premier Instruments
& Controls-is one of India's most efficient auto component manufacturers,
and this sector is headed up. "With its export thrust yielding
good results, it has a good upside from the current levels,"
says Desai of IL&Fs Investsmart India.
Another stock with strong potential. This Coimbatore-based
company, reputed for industrial gears (which includes boxes, motors
and assemblies), caters to a wide range of industries, from steel
and cement to chemicals and textiles. "The management of Shanthi
Gears is rightly expanding its capacities to leverage its pre-eminent
position and brand image to capture the revival in its user industries,"
says S. Ranganathan, an auto analyst with LKP Research.