INSUBCONTINENT EXCLUSIVE:
Culturally, Indian society sees debt as something that should be generally avoided
Last year, at a time when a number of companies struggled with debts, this sentiment was all pervading among stock investors, who shunned
leveraged businesses to bet on debt-free ones
That resulted in an asymmetric rise of pockets of stocks.
Stocks of a majority of companies that are virtually debt free jumped as much as
Fifteen of the top debt-free companies rewarded their investors with over 50 per cent market returns during the year.
They included Reliance
Nippon Life Asset Management (RNAM), HDFC AMC, Astrazeneca Pharma India, Info Edge (India), Abbott India, Whirlpool Of India, Dr Lal
Pathlabs, HDFC Life Insurance, SBI Life Insurance, Indraprastha Gas, Multi Commodity Exchange of India, Bata India and Avanti Feeds, among
environment, when access to capital vis-a-vis what was 12 months back has become difficult and cost of capital has also moved upward, the
health of the balance sheet of a company will play a far more important role and, hence, companies that have negligible debt will enjoy an
these companies will enjoy a higher valuation multiple compared with the highly-indebted ones.
The best performers among the 15 companies
Debt is not all bad, if it comes with 10-20 per cent growth
close to zero or zero, 54 delivered positive returns in 2019
Rest slipped up to 54 per cent.
Tejas Networks was the biggest loser in 2019, followed by eClerx Services, Lakshmi Machine Works, NBCC
India, Nocil, V-Mart Retail, TV Today Network and Care Ratings, among others
