India Inc lost 39 billion-dollar babies in 2018 as the midcap mayhem singed

NEW DELHI: The billion-dollar universe of Indian market shrank 15 per cent in 2018 in the worst-ever year for midcaps since 2011. Market capitalisations (m-cap) of at least 39 stocks slipped below the $1 billion (or roughly Rs 7,000 crore) mark amid the market mayhem. Analysts are still split in their outlook for the midcaps in the event-heavy year ahead.

Data compiled from BSE showed 228 companies had market capitalisations of over Rs 7,000 crore, compared with 267 companies with the same feat at the end of 2017 and 195 companies at the end of 2016. The list included only those stocks, which have a trading history of eight years and more.

Many midcaps on the list have turned smallcaps after up to 90 per cent plunge in their market value year-to-date. Vakrangee, which had a m-cap of Rs 44,000 crore ($6.28 billion at current exchange rate of 70 a dollar) at the end of 2017, was the worst hit as the scrip lost 91 per cent of its market value this calendar. A recent Sebi investigation into the trading activities of certain entities of the company found no instance of stock manipulation by promoter or promoter group entities.

Reliance Capital has lost 80 per cent of market value this year. ICICI Securities in a recent note said the companys net worth has gone down by Rs 8,000 crore in Q2FY19 from March 2018 level.

Factoring in the sharp drop in consolidated net worth, the brokerage revised the stock valuation downwards to Rs 233 per share, factoring in Rs 280 per share cut towards group exposures. It also cut valuations of its mutual fund, home finance and consumer finance businesses considering the weak environment for NBFCs in the near term. Reliance Capital has a market cap of Rs 5,500 crore today, compared with Rs 14,600 crore (or $2.08 billion) as of Dec 29, 2017.

Jet Airways was another company which has left the billion dollar club, after a 70 per cent drop in market value. The airline reported losses for three consecutive quarters on rising crude oil prices. The companys talks with prospective investors have not materialised yet. And now the country's largest bank SBI has ordered a forensic audit of the Naresh Goyal-promoted airline from April 1, 2014 to March 31, 2018.

Among others, Rain Industries, Sun Pharma Advanced Research Company and KRBL, Indiabulls Real Estate and Avanti Feeds have witnessed up to 70 per cent slide in their market-caps in 2018. They all quoted market-caps above Rs 7,000 crore at the end of 2017.

Analysts said some of them were trading at a huge premium to their largecaps peers. “Incrementally, some of the midcaps are looking more attractive now after their valuation premium got eroded throughout 2018. At the beginning of January 2018, you had the midcap index trading at 60 per cent premium to the largecap index, which that has shrunken to just about 10 per cent now. You are getting a lot of interesting bottom-up opportunities across the space," said Gautam Duggad, Head of Research at MOSL.

Data showed the combined market capitalisation of BSE-listed companies has fallen by Rs 8.56 lakh crore this calendar to Rs 143.17 lakh crore at the end of December 27, 2018, from Rs 151.73 lakh crore at the end of 2017. This despite a 5.3 per cent jump in market value for the 30 Sensex stocks during this period.

Gaurang Shah, Senior VP at Geojit Financial Services, said there has been too much of pain for midcaps and smallcaps throughout 2018. “At the same time, we also believe not all sectoral midcaps are bad. There are opportunities to possibly look at this correction as an investment opportunity.”

Hiren Ved of Alchemy Capital Management though believes there may be more pain left. “Some smallcaps and midcaps may bounce back from these absolute low levels, but largecaps and larger midcaps should lead small and midcap stocks over the next two- three years.”

Including the recent listings, a total of 269 BSE-listed companies were a part of the billion-dollar club, compared with 313 in 2017.

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