Even as mid- and small-cap stocks received a beating in the correction beginning 2011, a few such as Elgi Equipments managed to contain declines, backed by sound financial performance. The stock in fact gained 20 per cent, in the last month and a half alone, as consolidated earnings for the quarter ended December 2010 expanded 38 per cent to Rs 26 crore.

Elgi is the market leader in air compressors as well as automobile service station equipment. After a tepid year in FY-09, when demand from domestic as well as global markets slowed, the company made a strong comeback in FY-10, with 42 per cent growth in earnings.

The strong bounce back was also to some extent aided by its presence in countries such as Brazil and China. A year ago, Elgi used its internal accruals to acquire a French company which supplies compressors to industrial segments in France. Its expansion in the above countries has been viewed by the market as positive for the long term, leading to a stock rally. Given that almost a third of its products are exported to West Asia, Southeast Asia, Europe and US, such expansion seems logical. The company declared a 1:1 bonus in December 2010.

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