Business Daily from THE HINDU group of publications
Saturday, Sep 02, 2006
Business Daily from THE HINDU group of publications Saturday, Sep 02, 2006 |
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Markets
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Insight
D. Murali
Chennai , Sept. 1 What is common among Bharti Airtel, Essar Oil, Jain Irrigation and Welspun Gujarat? These are among the top 11 companies that have not paid dividends for the last three accounting years. Interestingly, market capitalisation of all these companies has grown, almost three-fold, from Rs 30,015 crore in June 2004 to nearly Rs 1 lakh crore now.
Methodology
We began with the set of listed companies, and identified the ones that have not been paying dividends in any of the three recent years. The list ran to 569 companies, beginning with 3M India and ending with Zenotech Lab. But this set included many companies that were reporting losses. So, we filtered a sub-set of only the non-red companies, and these numbered 211, with a total market cap of Rs 1,18,253 crore. Significantly, the total reported net profit of this sub-set had more than tripled, from Rs 1,407 crore to Rs 5,164 crore over the period. Arranged in the descending order of market cap, we cut off at Rs 1,000 crore, which left us with 11 companies (see Table). These account for 84 per cent of the market cap, and 76 per cent of the latest reported net profit of the 211 zero-dividend, non-loss making companies in the sub-set. Profit track record in the sample isn't uniform, nor is it generally dismal. In fact, in some cases, the jumps are more than impressive. Such as, from Rs 60 crore to almost 10 times in the case of Essar Steel. And, in Ispat's case, from Rs 44 crore in the previous year to almost Rs 700 crore. While it may be useful to analyse the cash-flows of the `100 per cent retention club' for any insights on how the retained earnings have been deployed, what should ensure a good night's sleep for investors is that the top 11 companies in the table constitute only 4 per cent of the total market cap of the BSE-listed companies.
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