Top Five Turnaround Companies As Per June 2012 Quarter Results

Our Slide Show this time is a little different than those in the past since it is rather event-specific. The result season is considered to be a major event for the markets, providing cues about how India Inc. is shaping up. A majority of the companies have declared their June quarter numbers and hence our Slide Show is based on this data. Overall, India Inc. posted a dismal performance in the June quarter. After the regular adjustments of excluding PSU oil marketing companies, the consolidated topline growth has been about 12.28 per cent while the net profits have witnessed a marginal growth of just 2.24 per cent on a YoY basis. The situation is quite poor on a QoQ basis with the topline declining by 5.09 per cent and the bottomline declining by 9.23 per cent.

However, there are some companies which have posted good business growth during the June quarter and hence are termed as ‘turnaround’ companies. If a company posts exceptionally good result vis-à-vis the result posted in the similar quarter last year, it seems that there is some kind of a turnaround in the company. Our list therefore comprises those top five turnaround companies that posted loss last quarter and have posted profit of more than Rs 25 crore this quarter.

Max India

Max India posted a robust increase in bottomline in the June quarter with net profit of Rs 536 crore against a loss of Rs 2 crore in the similar period last year. This was after the company sold 9.37 per cent equity stake (bringing its stake to 71.1 per cent) in Max Life to Mitsui Sumitomo Insurance, Japan for a consideration of Rs 984.45 crore and recognized gain on sale of investment of Rs 692.35 crore. Max India Group’s consolidated turnover for FY12 was Rs 8,562.3 crore and the consolidated operating revenue was Rs 7,695.8 crore - a growth of 15 per cent as compared to the same period last year. At present the company has pledged shares of around 19.80 per cent of their total shareholding. On an YTD basis the stock has appreciated approximately by 28 per cent.

Forbes & Company Ltd.

Established in 1767, Forbes & Company is one the oldest companies in the world. It has completed 240 years of operations and is currently controlled by the Shapoorji Pallonji business conglomerate. Forbes & Company has business interests in engineering, shipping, logistics and real estate. In the June quarter results the company has shown a turnaround with profit of Rs 52.62 crore as against a loss of Rs 3.4 crore in the June 2011 quarter. The turnaround has been mainly on account of the sale of real estate for a realization of Rs 60.50 crore. The total income during the period, however, has reduced by 6 per cent to Rs 60.41 crore. At the EBITDA level, the company has made a profit. One must note that this is an exceptional item and two of its business segments have shown sequential as well as YoY decline in revenues.

Varun Shipping

Varun Shipping is a private sector shipping company in India. With its diversified fleet of 20 vessels engaged in the LPG and crude oil sectors, it provides a comprehensive shipping solution across the entire hydrocarbon product chain. Of the 20 vessels that the company owns, 10 of them are LPG carriers, three are crude oil tankers and seven anchor-handling towing and supply (AHTS) vessels. On the financial front, the company has shown a strong recovery. The net profit grew strongly by 512 per cent on a YoY basis to Rs 145 crore while the net sales grew by 15 per cent to Rs 153 crore. The jump in profit was on account of increase in the other income and due to decline in the company’s interest outgo and employee cost during the quarter.

Religare Enterprises

Religare Enterprises, which is in the financial domain and provides services like broking, lending, asset management and wealth management, posted a good financial performance for the June 2012 quarter. The standalone figures show that the net profit has increased to Rs 141.46 crore from a loss of Rs 22.05 crore in the June 2011 quarter. On a consolidated basis the figures are a bit different. Here the bottomline for the June 2012 quarter stood at Rs 40.20 crore as against loss of Rs 149.70 crore. Some improvement in the stock market scenario and steady performance from the asset and wealth management segments helped the company.

Amtek Auto

Amtek Auto is an automotive and non-automotive component manufacturer and has facilities in India, Europe and North America. In the quarter ending June 2011, the company had announced revenues of Rs 531.34 crore and a net loss of Rs 89.85 crore. The company has turned this situation around in the quarter ending June 2012 with revenues of Rs 571.13 crore and a net profit of Rs 115.59 crore. The point to note is that the company’s operating profit margin has declined from 31.06 to 30.22 per cent. The loss to profit transition has come solely due to the addition of Rs 86.74 crore in the form of ‘other’ income, the details of which are not known.