Majority of Indian AIM firms outperform other UK indices

Monday, October 18, 2010 | Posted by: Grant Thornton
Categories: India, India Watch Issue 10 | Tags: India, finance, economy, performance, India Watch, LSE, South Asia, AIM, stockmarket

In the quarter ended 30 September 2010, Grant Thornton’s India Watch Index underperformed other UK indices. This underperformance was due mainly to the heavyweight stocks Essar Energy and Vedanta Resources which were a drag on the Index’s overall performance. However, the majority of Indian AIM companies actually outperformed the main UK indices over the quarter and the pipeline of Indian IPOs on AIM continues to look strong.

The IPOs of iEnergizer, Skil Ports and Logistics and Caparo Energy show growing appetite by investors for Indian companies on AIM and this could be further stimulated should Coal India succeed in pulling off the largest Sensex (Bombay Stock Exchange) listing in years.

We continue to see strong interest in the India story and have a robust pipeline of companies seeking an IPO over the next 6 months in varying sectors ranging from media services to pharmaceuticals to power.

Although Grant Thornton’s India Watch Index only recorded total gains of 0.91% in Q3 2010 and only 1.97% in the year-to-date. The comparatively poor performance is at odds with the fact that the majority of Indian companies listed on the London Stock Exchange (LSE) gained considerably.

As mentioned above, the primary reason for the low average gain of the India Watch Index was the poor performance of Essar Energy, part of the Essar Group, a company focused on power generation and petroleum, as well as the poor performance of Vedanta Resources, the largest mining and non-ferrous metals company in India, which alone constitute 39% and 36% respectively of the market-value weighted India Watch Index respectively. The market-value is measured by market capitalisation, where Essar Energy was £6.29 billion and Vandata Resources was £5.73 billion as at the end of Q3 2010. This is compared to the average market capitalisation of other entities on the Index being £144 million.

If we exclude Essar Energy and Vedanta Resources, the remaining India Watch index would show a gain of 6% over the last quarter.

The main winners include Oilex (+133%) in Q3 2010, translating to a 27% gain in the year-to-date.

The second best performer last quarter was Naya Bharat Property with a quarterly gain of 43%, translating to a gain of 23% in the year-to-date and a staggering 333% gain since 2009.

The third best performing stock last was Eros International, which gained 39% last quarter, making it the second best performer in the year-to-date with a 64% gain. Meanwhile India Capital Growth recorded a 12% gain last quarter, supporting its position as the best performing stock in the year-to-date with a gain of 67.

By contrast, Indian Energy suffered the worst losses with a 37% drop last quarter, trading 57% below the beginning of the year. Hirco also lost 37% last quarter, as well as losing 44% in the year-to-date. Not surprisingly both of these entities have been amongst in the bottom three performers since the beginning of the year.

Top and bottom performers - Q3 2010, YTD and last 12 months

                 

Percentage change	Last quarter	YTD	Last 12 months
	1 Jul 2010 to 30 Sep 2010	1 Jan 2010 to 30 Sep 2010	1 Oct 2009 to 30 Sep 2010
EROS INTERNATIONAL	39	64	28
NAYA BHARAT PROPERTY CO.	43	23	13
OILEX (LON)	133	27	(25)
INDIAN ENERGY	(37)	(57)	(58)
HIRCO	(37)	(44)	(59)
ELEPHANT CAPITAL	(27)	(20)	(49)

 

Grant Thornton India Watch Index chart since inception in January 2007

Finally, closer to home, Grant Thornton has recently released a report entitled, Economic Impact of AIM and the Role of Fiscal Incentives, which provides new evidence about the progression of UK companies after joining AIM and the value they add to the economy in terms of turnover and employment. It discusses the importance of existing incentives such as the Venture Capital Trust scheme in helping SMEs raise the capital they need to achieve their growth potential.

Fiona Owen

Partner, Head of Capital Markets for South Asia Group

Grant Thornton UK LLP

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*Data sourced from Thomson Reuters.

The India Watch index consists of 31 Indian companies listed on AIM or the Main Market (excluding GDRs). We only consider companies to be Indian if they are domiciled in India and/or foreign companies holding Indian assets or Investment companies with Indian promoters. The index has been created via Datastream, a Thomson Reuters product and is weighted by Market Value.