The new boomers

That stock markets reward good performance is well known. Companies that deliver or appear poised to deliver strong topline and bottom line growth become market favourites. This fact has been amply corroborated by the profile of companies that have made it to the BT 500 list.

Of course, the past few years have been unlike any in the history of Indian stock markets. Record foreign investments have poured into Indian equity, driving the 30 leading stocks that make up the Bombay Stock Exchange’s index, Sensex, to new highs. Understandably, the foreign institutional investors have chosen the relative certainty and liquidity of the Sensex stocks over lesser known mid-cap or small-cap stocks.

However, there is a handful of companies from diverse sectors that has emerged among the biggest gainers on Dalal Street. Who are they, what is it about them that investors like, and could they become a large-cap stock tomorrow? In this story, we answer those questions.

Riding on retail revolution

Expansion is the name of the game for this knitted garment manufacturer. Encouraged by robust demand for its products from big Indian retailers like Pantaloons and Shoppers’ Stop, the company is pumping in Rs 300 crore to modernise and ramp up its existing production facilities in anticipation of a boom in the retail segment. Says Saurabh Tayal, Chairman, Jaybharat Textiles and Real Estate: “Less than 3 per cent of the retail market is organised. As it gets more organised, it will be a big business opportunity for us, as the bigger retail chains buy in large volumes.”

The company is planning to expand its presence in other segments like yarn-spinning and textile fabric processing with a view to double the revenues from its core textile business in fiscal 2008.

It is also leveraging its large land assets to foray into the real estate business: It’s building resi-It’s a volumes’ game: Tayal is modernising production dential apartments, IT parks, commercial spaces, hotels and malls in places like Vardha, Vapi, Bhiwadi, Thane and Mumbai. It expects the new business to contribute significantly to its topline and bottomline from 2009.

Betting big on education

This it solution provider is focussed on the education domain. It gets practically all its business from the US (80 per cent of its revenues) and Europe (15-20 per cent).

For growth, the company has opted for the inorganic route: eight acquisitions in the US and Europe in the last three years. As a result, it has added more than 1,000 schools and 12 local authorities to its clientele in the US alone. Says Prakash Gupta, CEO, Core Projects and Technologies: “We provide the software needed to run the schools and are different from companies like Educomp that are at the front-end in the e-education space.”

Gupta is planning to enter the domestic market and hoping to generate almost 40 per cent of Core’s revenues from it by fiscal 2009, particularly through the government’s Sarva Shiksha Abhiyan initiative. “We are in a recession-proof industry, as governments continue to spend on education irrespective of the economic situation,” says Gupta.

Billion-dollar ambition

It would not be wrong to call the two-decadeold flexible packaging giant Uflex an Indian multinational. The company offers complete packaging solution to customers globally and manufactures plastic films and flexible packaging laminates. It boasts of clients such as FMCG giants Nestle, Cadbury, P&G and Pepsi, both in the domestic and international markets.

Indeed, the company has a large sales and distribution team in over 85 countries and earns nearly onethird of its revenues from exports. Uflex expects its domestic business to grow exponentially on the back of a flourishing organised retail, which is expected to give a fillip to the packaging industry. The company estimates its topline to grow at least 25 per cent and bottom line at 50 per cent over the next two years. Says R. K. Jain, Group President, Corporate Finance, Uflex: “We are a low-cost, quality producer. Over the next 3-4 years, we want to become a $1-billion company.”

New kid on the block

India Online Broadband (IOL) is the first to offer IPTV (Internet Protocol Television) services in India, having commercially launched it in Mumbai, Bangalore and Kolkata this August. IOL has also tied up with MTNL and BSNL to offer IPTV content and video-on-demand (VoD) to their over 2.5 million broadband subscribers. Says A. S. Oberai, Executive Director, IOL Broadband, “The tie-up will mean that a significant captive market is available to us from the very beginning. We’ll be streaming the content through the MTNL and BSNL network.” IOL will offer subscribers about 150 TV channels (including some pay channels) besides value-added services such as real time interactive TV, VoD, music-ondemand and gaming-on-demand.

On the downside, though, there is not much awareness about IPTV yet and the company is in the red for now. But Oberai is confident. “The initial response to IPTV has been good and we expect to become profitable within a year,” he says.

Steeling up for growth

After SAIL and Tata Steel, it’s the third-largest cold roll steel producer in the country with presence in the value-added segment of the industry. Its products are used as inputs by the auto, white goods, construction and engineering industries. The company is now expanding operations through backward integration and is setting up a hot rolled coil plant in Orissa for that purpose.

Most of the hot rolled output will be used by the company as input for its cold rolled products. Says Nittin Johari, Director (Finance), Bhushan Steel: “Due to captive raw materials, our margins will be higher. We expect our topline and bottom line to grow at a CAGR of about 35 per cent for the next five years.” Its growth strategy includes ramping up capacity utilisation levels in its existing plants and also setting up new plants in the near future.

Long distance runner?

The marathon group as a real estate developer has been in existence since 1969. Marathon Nextgen Realty was formed when the Marathon Group bought Piramal Spinning and Weaving Mills, a listed sick textile company in Mumbai. The listed entity was subsequently renamed as Marathon Nextgen Realty.

The industrial unit was demolished and a 35-storey residential apartment was constructed in its place. Later, the company acquired more projects in Mumbai and Bangalore. The Marathon Group has chalked out ambitious growth plans for the company. Says Chetan Shah, CMD, Marathon Nextgen Realty: “It’s now our flagship company.

We’ll be transferring most of our existing projects to it.” The group has several projects in the pipeline in Mumbai, including a township, an SEZ and a low-income housing project—most of these projects are likely to be transferred to Marathon Nextgen Realty.

Powering ahead

A pure infrastructure player, the company’s portfolio comprises energy, road and airport assets. In energy, it has five power generation subsidiaries that will cross 2,000 MW capacity once they are all operational by 2013.

In road, GVK will soon start operating the Jaipur-Kishengarh Expressway that it has built on NH8 connecting Mumbai and Delhi. Other key projects in its kitty include the Mumbai airport that it will construct and operate for 60 years and the multi-product SEZ on 2,500 acres near Tiruchirapalli.

The company also plans to enter sea ports, having bid for the Dahej port project in Gujarat. Says Isaac George, CFO, GVKPIL: “Overall our expansion strategy should ensure an internal rate of return of 15-20 per cent annually without any difficulty.”

Oil’s well

Maker of the popular double sher and Kalash brands of mustard oil, K.S. Oils is the largest player in the segment with about 40 per cent market share in the organised sector. It has recorded strong topline and bottom line growth recently following expansion in states like Uttar Pradesh, Rajasthan, West Bengal and Orissa. It also continues to grow in its key markets of Madhya Pradesh, Assam, Meghalaya and Nagaland. Says Sanjay Agarwal, MD, K.S. Oils: “Almost 85 per cent of the mustard oil market is still with the unorganised players.

But of late branded sales are increasing as customers are becoming more quality conscious. Also, with the introduction of VAT, the unorganised players are finding it difficult to avoid taxes, which means there is a level playing field in terms of prices of the end products.” The company plans to capture 20 per cent of the overall mustard oil market over the next three years and is building five new plants for that. Perhaps convinced of its growth story, PE players Citigroup Venture Capital and Baring Private Equity have picked up 35 per cent in K.S. Oils recently.