The best stock of 2011? Amtek India. Now, guess the worst...

By Zenobia Imtiaz

Its that time of the year when you look at the best and the worst. Like in every thing else, markets too have their best and worst performing stocks. Firstpost ran a query on the top and worst-performing companies among the BSE 500 stocks.

While there was little to chose from among the losers, the gainers threw up a surprise list of companies, as seen in the Table 1.

[caption id=“attachment_167681” align=“alignleft” width=“436” caption=“Table 1: Top ten best performing stocks of 2011”]  [/caption]

We take a deeper look at the reason for the best and worst performers in the market.

And the best performing stock this year is………

Amtek India: An auto ancillary company has taken a few investors by surprise by emerging as the top performer on the BSE 500 index. Amtek is engaged in the manufacture of automotive components with a special focus of manufacturing a variety of iron castings.

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Though the automobile industry has been one of the worst affected by the financial crisis, government intervention, to some extent, has helped ancillary suppliers, if not the automobile manufacturers themselves.

Amtek India has gained by its consolidation with Amtek Auto, which promises further good tidings. They stand to gain from various synergies that come with consolidation - such as adopting a competitive cost structure and improving their operating leverage.

The diluted earnings per share (EPS) are projected to grow at an average of 29.22 percent over the next four years - which is a ray of hope when the market seems to be going through a rough patch the world over. The company has also allotted bonus shares in the ratio of 1:1 during the year, adding to the bullish sentiment.

Amtekbenefited from being a supplier toUK-based clients like Jaguar Land Rover, which was among the fastest growing auto companies during the year with the launch of its new models.

Consolidated revenues rose 33 percent year-on-year to Rs 1,730 crore while operating profit stood at Rs 37 crore, a growth of 21 percent, against net profit growth of 9 percent.

The non-automotive revenue has been bumped up from 18-19 percent of total revenue in 2011 to 24 percent of the current total revenue .

The fact that the company repaid its foreign currency convertible bonds worth Rs 179.5 crore has been a big plus point for Amtek as it is one of the few companies to do so. Those companies who have not been able to do so are in our list of top losers. The company’s stock price increased from Rs 34.43 as on 1 January 2011 to Rs 92.60 on 23 December 2011, a jump of 168.99 percent.

Going forward, the company is planning to foray into forging and machining and try its hand at sub-assembly. Earlier it was solely into manufacturing. All this would enable them to earn substantially higher revenues while requiring relatively less additional capital and additional overheads. Sub-assembly is already being put to test with Maruti for the first time in India and could very well revolutionise the automobile industry!

Amtek India definitely seems to be doing the right things to keep shareholders happy and ensure that the good times are here to stay.

Any guesses which was the worst-performing stock of 2011?

[caption id=“attachment_167683” align=“alignleft” width=“436” caption=“Table2: Bottom ten companies”]  [/caption]

GTL Ltd: Everything that could have gone wrong for GTL has gone wrong.The company’s share price, which was trading at over Rs 400 levels in May 2011, crashed to Rs 36 on 23 December 2011. And who was the culprit behind this? Its group company GTL Infra.

While conspiracy theories abound, there is a simple explanation at hand: the selling frenzy was brought on by a realisation that GTL Infra simply has too much debt on its books and the promoters could not raise the money easily.

Equity capital could not be raised because of the fear psychosis over the 2G spectrum scam. Investors are chary of putting money in telecom companies when the endgame in the spectrum scam is far from clear.

Share prices of the two GTL companies crashed soon after news hit the market that the group had withdrawn a $300 million capital raising plan for GTL Infra.

Why should the deferment of a capital-raising plan cause such havoc? Answer: the companies are in no position to handle the debt burden without a capital infusion.

GTL Infra, with a total debt of Rs 4,470.5 crore and an equity of Rs 957.3 crore, is in a desperate situation. This indicates a debt-equity ratio of more than four as of March 2010 - well above the prudential limit of 1:1. In the year ending March 2011, the company posted a loss of Rs 139 crore against Rs 2.5 crore in the previous year. This means the equity would erode further if no money comes in.

Debt servicing costs and rising fuel prices (diesel to run its telecom towers is its main expense) have knocked the stuffing out of GTL Infra’s prospects. Since diesel prices can only rise in future, reducing the debt through a capital infusion was the best option to keep it afloat. But that money isn’t coming. And things could get worse in a deteriorating economic climate. Investors decided to flee even at huge losses.

Earlier that year, the company acquired over 17,500 towers of Aircel in a transaction worth Rs 8,400 crore that involved substantial borrowing. That’s how the company ended up with debt levels reaching its eyeballs.

Though the group has been in the news for restructuring its debt, few investors seem keen on investing in the company.