Indian firms continue to weather the storm

Wednesday, October 01, 2008 | Posted by: Grant Thornton
Categories: | Tags: India, global, performance, India Watch, LSE, infrastructure, South Asia Group, aim, Fiona Owen, FTSE, KSK

Performance of Indian companies on the London Stock Exchange since 1 January 2007

Forty per cent decrease in Indian firms on LSE since last quarter; Mortice rides it out.

Grant Thornton’s second quarterly India Watch arrives on the back of the gathering economic maelstrom that has seen indices plummet worldwide. Despite the swell of pessimism, many Indian companies listed on the LSE continue to swim strongly against the tide – collectively outperforming both the FTSE 100 and the AIM 100 by a substantial margin, for the second quarter in a row.

We are using India Watch to monitor the UK/India business relationship by tracking the performance of Indian companies on the LSE since 1 January 2007 and through the examination of cross-border M&A trends between nations.

The latest results reveal that, since January 2007, the India Index is only down 6%, while the FTSE 100 is down 21% and the AIM 100 is down 40%.

Particularly strong performers over the three months to September 2008 include support services companies on AIM, in particular Mortice Ltd – our ‘one to watch’ last quarter – and CBay Systems Holdings Ltd, while Eros International Plc shone in the media sector.

Grant Thornton acted as nominated adviser to Mortice Ltd, which raised circa US$10 million of new funds via a placing of 7.7 million ordinary shares on AIM in May. Building on the success of its AIM listing, Mortice Ltd is pursuing the growth of the existing business and its proposed acquisitions strategy.


Top performing companies over the last quarter

Top performing companies over the last year

Remarkably, from our top performing companies last quarter – KSK Power Ventur PLC, Vedanta Resources Plc and Hardy Oil & Gas Plc – both Vedanta (down 47.2%) and Hardy (down 49%) were among the worst performers this quarter, albeit KSK Power Ventur PLC is still a top performer over the period since listing. The rapid decline of these energy and mining stocks may reflect the general turbulence of the markets and the downward trend across the majority of indices. However, there is still significant growth potential in the natural resources sector.

The largest initial public offering (IPO) this year was an Indian energy fund, KSK Emerging India Energy Fund Limited, which raised US$200 million. Grant Thornton UK LLP acted as nominated adviser.

Even in the current market turbulence, there is undoubtedly great value within the London market for those courageous and clever enough to find it.

Sectors analysis

The success of Mortice Ltd and CBay Systems Holdings Ltd is also a reflection of the success of support services stocks, which continue to lead on share price growth. Despite the current depression, other sectors also offer great promise including: technology, IT, infrastructure development and media.

Real estate and media continue to dominate the sectors of India listings

Last quarter, with four Indian firms floating on AIM in four weeks, it appeared the pipeline of ambitious Indian companies listing on AIM was strong: the LSE remains the gateway for Indian companies with global aspirations, and who want to benefit from the rich talent pool that is committed to serving emerging markets.

For the time being, however, Indian firms – like everyone else – will have to sit tight and ride out the storm, until the previous levels of investor confidence and market promise resume.

Fiona Owen
Partner and Head of South Asia Group Capital Markets
For Grant Thornton UK LLP