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The Bull Run which started in 2004 and lasted till 2008

led to several stocks becoming the so-called 'darlings'of investors. These stocks were much in favour andgave spectacular returns. For instance, you would havegained 525 times on an investment in Unitech shareshad you invested in January 2004 and exited in January2008. That is if you exited in January 2008 before theglobal financial crisis hit the Indian shores. Had youheld on to some of the 'darling' stocks you'd probablybe sitting with huge losses right now. There are somewell-known examples of companies like Unitech,BHEL, ABB and Reliance Infrastructure which havenot been able to regain their previous highs. But theyare not the only ones to have taken a hit. The ETIntelligence Group decided to look for other such casesas well and find out how they are coping.

We analysed stock returns of all listed companiesacross two time periods pre crisis (January 2004-January 2008) and post crisis (January 2008 to present).We came across stocks that had given phenomenal re-turns in the first period, but failed to recover in the sec-ond (Category I). Then there were stocks which gainedin the first period, but performed even better in the sec-ond (Category II). And then there were stocks whichgave negative returns in the boom period, but haverisen significantly thereafter (Category III).

From 231 companies that figured in Category I, wehave highlighted those with a market capitalisationexceeding`2,000 crore and logging negative returnsgreater than 50% in the post crisis period. The promi-nent ones include Unitech, Godrej Industries, NMDC,Videocon Industries, ABB, Century Textiles &Industries, Aditya Birla Nuvo, BEML, SterliteIndustries, India Cements, Reliance Infrastructure,Amtek Auto, Tata Communications, Neyveli LigniteCorporation, Bajaj Holdings & Investments andShipping Corporation of India. The rest have beenfeatured below.

I PHOENIX MILLSNewly-listed real estate stocks were one of the mostfavoured ones during the Bull Run. Investors expectedthese companies to report huge earnings on develop-ment of their land bank. Post crisis, sluggish demandimpacted revenue recognition for these companies andslowed down project execution. More recently, the up-ward interest rate cycle has worsened the prospects forthe sector.

Despite these challenges, Phoenix Mills is one of thebetter-placed stocks in the sector. Its presence in com-mercial retail real estate has enabled it to deliver sta-ble cash flows from lease rentals. It has pl ans to expandits shopping malls in major metros.

The company's stock has nearly quardrupled to `195from a low of `50 in March 2009. With the Cabinetclearing FDI in multi-brand retail, long-term businessprospects of the company are likely to improve as ithas mixed-use retail development across variousIndian cities.

I RELIANCE CAPITALIn the quarters preceding the financial crisis sales

more than doubled while profits witnessed double-dig-it growth at Reliance Capital. The growth largely camefrom its mutual fund business driven by huge returnsin the stock markets at the time, as well as from its in-surance business. Also, with expectations of exponen-tial growth in the financial se rvices sector, companieslike Reliance Capital received premium valuations.But as the crisis hit, the financial services sector took

a beating and Reliance Capital was no exception.

Moreover, the failure of ADAG's Reliance Power to re-gain pre-listing valuations hurt sentiment and had aspillover effect on other ADAG companies as well.

I AREVA T&DExpectations of big growth in India's power sector builtup premium valuations for stocks in the sector. The elec-trical equipment manufacturer increased capacities asits order book grew every quarter. Its sales grew 33%during 2004-2008 while earnings posted a CAGR of 41%.After the crisis, the stock got a severe beating and wasunable to recover for multiple reasons. Power projectsdid not pick up as previously anticipated; order bookgrowth slowed down and the company started to face in-creased competition from Chinese and Korean imports.Though the company's margins have improved slightly,visibility on earnings growth remains low and it is ad-visable to stay away from the stock for now.

I RCFBetween 2004 and 2008, RCF's net sales rose at a cumu-lative annualised growth rate of 20% despite being af-fected by the lack of availability of feedstock gas andincreased input costs. Moreover, RCF's continuous ef-forts to improve efficiency and increase capacities at

its various plants during the period offered a furtherboost to its business. However, post 2008, costly naturalgas and high raw material prices impacte d the compa-ny's profitability and pulled down its shares.

Subsidy realisation fell as the government cut ureaimports and costly feed stock naphtha was discontin-ued. Moreover, the margins in bulk chemicals havebeen under pressure globa lly. This and increased pro-duction costs adversely impacted the company's per-formance over the past few years. Its businessprospects remain linked to the country's urea subsidypolicy. The company would benefit in case of afavourable revision.

I HINDUSTAN COPPERBetween 2004 and 2008, firm copper prices were driv-ing earnings of the state-run Hindustan Copper. Therewere also expectations of foreign investors taking astake in the company, hoping that its non-operationalmines would start functioning thereby improving prof-its. But as plans for disinvestment faded the companywas unable to regain the valuations it commanded be-fore the crisis. It continues to struggle with high oper-ating costs and no disinvestment plans on the anvil.The stock is likely to continue trading near its lows.

I FINANCIAL TECHNOLOGIESThe company provides the technology backbone totrading exchanges across the globe. It also operates itsown exchanges in India and abroad for commoditiesand energy. The nature of its business links the com-pany's performance to that of the global financial mar-kets. The boom in the markets was therefore reflectedin the company's stock performance. But since the de-cline from the peaks of 2008, the stock has lost morethan three-fourths of its value.

In the six months to September 2011, its revenue roseby 8% and operating profit by 21%. The company hasreported a strong uptick in average daily turnover oneach of its five exchanges. Its performance in the re-maining quarters of the fiscal will be crucial to deter-mine how well the company can cope with the toughbusiness environment.

From a sample of 102 companies that comprisedCategory II, we have highlighted those with a marketcapitalisation exceeding ` 5,000 crore and logging re-turns greater than 100% in the post crisis period. Theprominent ones include Cadila Healthcare, Hero

MotoCorp, LIC Housing Finance, Aventis Pharma,Lupin, Nestle and Glaxosmithkline ConsumerHealthcare. The re st have been featured bel ow.

I AVENTIS PHARMADuring the Bull Run, stocks in defensive sectors likeFMCG and pharma lost favour with the investors.

Though they rose in line with other stocks, their risewas quite modest compared to the rally in other stocks.Aventis Pharma is the Indian arm of multinationalpharma major Sanofi Aventis. The company haslogged a stable performance over the years with an av-erage revenue growth of 10-12% and an operating mar-gin of 20-25%. Its balance sheet is also strong with noleverage.

In August this year, the company acquired the nu-traceuticals business of Universal Medicare making aforay into India's over-the-counter (O TC) industry. Thestock has gained 10% since the announcement of theacquisition. Given that growth in the developed mar-kets is slowing, emerging markets like India have be-come increasingly important for multinational drug

firms like Aventis. However, price controls and eco-nomic slowdown could prove to be a challenge giventhat the company earns around 40% of its revenuesfrom drugs under price control.

I P&G HEALTH AND HYGIENEBeing a stock from a defensive sector, PGHH regis-tered modest returns during the Bull Run, but hashandsomely rewarded its investors thereafter. Thecompany continued to deliver strong performance inspite of the economic slowdown in 2008 and 2009. Itsnet sales have almost doubled in the last five yearswhile net profit has increased by 67% dur ing the sameperiod. PGHH has a strong balance sheet befitting aclassic FMCG company. While e arnings growth hasbeen impacted by higher input costs, the c ompany hasmanaged to extract strong volume growth in its fe-male hygiene products.

I COROMANDEL INTERNATIONALAfter posting modest sales and profit growth between2003 and 2007, Coromandel International reported anearly 100% jump in its revenues and profits in March2008. Moreover, from 2007 to 2011, the company's topline and bottom line grew at a CAGR of 38% and 62%,respectively.

The improved performance was due to a significantincrease in production and sales, improved produc-tivity, higher ope rating efficiencies and favourablerevision in the subsidy rates for nutrients. The com-pany's inorganic growth strategy and commissioningof new plants added to earnings growth.

Also, tie-ups with raw material suppliers helped itto offset the impact of increasing raw material pricesto some extent. The company is likely to continue itsfocus on improving infrastructure and supply chainmanagement. This will enable it to reduce costs andimprove profitabil ity.

I CASTROL INDIAThe company has gained market favour in the last 2-3years mainly because of its proven ability to weatherstorms and maintain market share and profitabilitythanks to its dominant brands. It was not always so.Castrol India was facing a shaky patch between 1999and 2004 with four out of the five years showing a fall inprofits. After a couple of more years of slow profitgrowth the company picked up pace from 2007. Sincethen the company has consistently posted healthy dou-ble-digit growth in net profits.

Castrol operates in an industry where volume growthis limited. The company continues to grow and safe-

guard its margins thanks to a combination of severalstrategies: cost management, new product launches,price hikes and upgradation of customers to superiorproducts. Still 2011 has been tough. The company's fi-nancial performance in the first three quarters of 2011-12 has been flat. However, considering the increasingnumber of vehicles in the country, the company can beexpected to do better in the future.

I INDRAPRASTHA GASIndia's largest retailer of natural gas, Indraprastha Gashas grown steadily over the last decade due to multiplefactors like compulsory CNG for commercial vehiclesin many states, natural gas being cheaper than otherliquid fuels, and no supply constraints.

It enjoys firm allocations shielding it from any sup-ply shortages and any price hikes can be easily passedon. Th e company's balance sheet remains strong withyears of positive cash flows.

Indraprastha Gas has become one of the market's dar-lings due to its ability to grow 15-20% a year. Althoughits monopoly status ends in December 2011, it is un-likely to face any competition due to paucity of gas inIndia. The company is also investing heavily to expandinto nearby areas. Its steady growth is expected to con-tinue in the years to come.

From 18 companies that figured in Category III, wehave highlighted those with a market capitalisationover` 200 crore.

Apart from the ones featured below, HexawareTechnologies, Dr Reddy's Laboratories, Novartis India,

Punjab Communications, Ranbaxy Laboratories,Rhodia Specialty Chemicals, TVS Motor, EsterIndustries, Jindal Polyfilms and India NipponElectricals also made it to the list.

I FDCPharma company FDCs stock posted negative re-turns between 2004 and 2008. The company didn'tcatch the fancy of the investors because it was from adefensive sector and its progress also was modest dur-ing that period.

FDC is a leading player in oral rehydration salts,opthalmics and paediatrics. It generates positive cashflows and has a strong balance sheet. Its revenues andprofits have doubled in the past five years. FDC has alsoannounced a buyback. All these factors have led to anappreciation in the stock.

The company earns 80% of its revenues from theantibiotics therapeutic segment. This segment hasregistered sluggish growth in the last two quartersadversely impacting the performance of thecompany. FDC is likely to end FY12 on a modest notelimiting any further appreciation in the company'sstock price.

I MUNJAL SHOWAMunjal Showa, part of the Hero Group, is one of thelargest suppliers of shock absorbers to major autocompanies in India. The share price of Munjal Showapeaked in September 2006, but then started to declineas the company underperformed its peers. Its saleswere growing at a staggering pace while profits de-clined by 20-25%.

But this picture changed from 2009. Sales and profitsgrew in double digits. Given that it is one of the keysuppliers to Hero MotoCorp, it stands to gain from therobust growth in the two-wheeler segment.

At present, this is one of the best performing seg-ments within the automotive sector. Despite the risein raw material costs the company has managed to im-prove its margins.

Its stock has outperformed its peers as wellas the benchmark index so fa r this year, and can be ex-

pected to continue this performance in the comingquarters.

Kiran Kabtta Somvanshi and Crystal Barretto

(Inputs from Parul Bhatnagar, Ramkrishna Kashelkarand Ranjit Shinde)

THEECONOMICTIMES

A look at the laggards, gainers and

the runaway winners. We go beyondthe boring stats to bring you up

to speed with the Street

Which to Pick

and What to Skip

3

NEW DELHI | MONDAY 5 DECEMBER 2011 | 4 Pages with ET

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THE RISE AND FALL:A Stock Story

They are the shooting stars with a one-way ticket. When theytango with a bull run, many a fortune is made. No wonder investors fall inlove with these market 'darlings'. But things could get bad when the boomgoes bust. The ET Intelligence Group, which looked at many such stories,says the investors should break away while the going is still good

CRASH LANDING

CATEGORY

CATEGORY

CATEGORY

HIGH FLIERS

TURNAROUND ARTISTS

COMPANY M-CAP(`C R) 04 - 08 08 -T IL L D AT E

Phoenix Mills 2819.5 4343.6 -59.4

F in an ci al Te ch no 2 85 1. 5 4 26 3. 9 -74.9

Are va T & D I nd ia 4 98 8. 8 3 35 3. 1 -57.5

Reliance Capital 7419.2 1950.5 -88.7

Hindustan Copper 17977.0 1318.9 -65.6

Rashtriya Chem 3180.4 254.9 -57.3Source: ETIG Database Absolute Returns (%)

COMPANY M-CAP(`C R) 04 - 08 08 -T IL L DAT E

I nd ra pra sth a Ga s 5 65 5. 3 12 .5 142.0

Castrol India 10458.7 32.2 168.8

P&G Health 6084.9 67.0 139.2

A ventis Ph arma 5129.9 57.6 102.8

C or om an de l I nt l. 8 47 3. 2 2 84 .5 366.2

Source: ETIG Database Absolute Returns (%)

COMPANY M-CAP(`C R) 04 - 08 08 -T IL L DAT E

FDC 1452.8 -2.4 81.1

Munjal Showa 266.6 -81.6 19.1

Source: ETIG Database Absolute Returns (%)

VARANISAHU