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51 sectors see sharp dip in valuations in 13 months...!!
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51 sectors see sharp dip in valuations in 13 months...!!
Fifty-one sectors, out of a broader group of 66 industrial sectors, have got devalued over the past 13 months, well below their narrowly-represented market indicators, reported The Economic Times daily.
The collective valuation of BSE companies declined over 58 percent during the considered period. The valuation of individual sectors like real estate, construction, steel, retail, shipping, consumer durables, finance, auto, cement and export sectors have seen a dip in the range of 60-80 percent, ever since the first signs of economic downturn hit the domestic market. All the 66 sectors tracked by the daily are logging a decline in market capitalization. Only six sectors managed to restrict their valuation fall below 50 percent.
"In a bull market, when sector weightage goes up, it means there is a new entrant into that business or there is genuine growth in net sales (of the sector). When sector weightage falls (in bear market), it means either of the three: stock trading is down, sales turnover has dipped sharply or companies are exiting business," said Parag Parikh Financial Advisory Services chairman, Parag Parikh.
The ongoing credit crunch has resulted in a decline of India market capitalization from a $1.9 trillion early last year to $630 billion. The valuations of Indian companies have touched five year lows.
"Times were different when Indian companies crossed seas to acquire businesses. They had huge source of leveraged funds; credit lines kept flowing as there is no end to it. Indian companies acquired foreign majors to double their size only because of their power to raise easy credit," said a Mumbai-based merchant banker.
Hypothetically, Tata Steel head Ratan Tata, who acquired Corus paying Rs 36,000 crore, could now buy Sterlite Industries for just about Rs 20,000 crore or even steel biggie SAIL by paying just over Rs 30,000 crore. Tata could have saved lots of `leftover` money, which could easily assuage the need for Tata Motors floating a corporate FD scheme to raise money, paying a hefty 11 percent interest to investors.
Strategies and synergies apart, if Aditya Birla Group chairman Kumar Mangalam Birla managed to raise Rs 25,000 crore now (the money he paid to acquire Novelis), he could have lapped up three Sensex companies in diverse sectors--cement major ACC by paying Rs 10,000 crore, infrastructure major Jaiprakash Associates by doling out Rs 8,000 crore and pharma company Ranbaxy by writing a Rs 16,000 crore cheque.
According to corporate advisors, biggies like Tatas or Birlas will not be perturbed by their high-priced acquisitions. Much more than valuation, they would probably have considered strategic benefits of acquiring foreign companies, they opine.
The collective valuation of BSE companies declined over 58 percent during the considered period. The valuation of individual sectors like real estate, construction, steel, retail, shipping, consumer durables, finance, auto, cement and export sectors have seen a dip in the range of 60-80 percent, ever since the first signs of economic downturn hit the domestic market. All the 66 sectors tracked by the daily are logging a decline in market capitalization. Only six sectors managed to restrict their valuation fall below 50 percent.
"In a bull market, when sector weightage goes up, it means there is a new entrant into that business or there is genuine growth in net sales (of the sector). When sector weightage falls (in bear market), it means either of the three: stock trading is down, sales turnover has dipped sharply or companies are exiting business," said Parag Parikh Financial Advisory Services chairman, Parag Parikh.
The ongoing credit crunch has resulted in a decline of India market capitalization from a $1.9 trillion early last year to $630 billion. The valuations of Indian companies have touched five year lows.
"Times were different when Indian companies crossed seas to acquire businesses. They had huge source of leveraged funds; credit lines kept flowing as there is no end to it. Indian companies acquired foreign majors to double their size only because of their power to raise easy credit," said a Mumbai-based merchant banker.
Hypothetically, Tata Steel head Ratan Tata, who acquired Corus paying Rs 36,000 crore, could now buy Sterlite Industries for just about Rs 20,000 crore or even steel biggie SAIL by paying just over Rs 30,000 crore. Tata could have saved lots of `leftover` money, which could easily assuage the need for Tata Motors floating a corporate FD scheme to raise money, paying a hefty 11 percent interest to investors.
Strategies and synergies apart, if Aditya Birla Group chairman Kumar Mangalam Birla managed to raise Rs 25,000 crore now (the money he paid to acquire Novelis), he could have lapped up three Sensex companies in diverse sectors--cement major ACC by paying Rs 10,000 crore, infrastructure major Jaiprakash Associates by doling out Rs 8,000 crore and pharma company Ranbaxy by writing a Rs 16,000 crore cheque.
According to corporate advisors, biggies like Tatas or Birlas will not be perturbed by their high-priced acquisitions. Much more than valuation, they would probably have considered strategic benefits of acquiring foreign companies, they opine.
