Cash-rich MNCs find favour with fund managers

NEW DELHI: A look at the financials of many MNCs in India reveals a huge amount of cash on their books. In many instances, the money has been idling away for years in the absence of concrete utilisation plans. Companies that fall in this category include the likes of Abbott India, BASF India, Merck, Clariant (I), Ingersoll Rand, Novartis and Pfizer. After being ignored by investors for long, these companies are now finding favour with the fund managers.

Investors take to stocks for two reasons, capital appreciation and dividend, and hence a stock picker has the enviable job of finding the right mix. When the markets were moving up, fund managers paid a high premium in pursuit of growth. Those stocks have been hit badly over the last one year, forcing the fund managers to change tack. The emerging markets, and India in particular, have always been viewed as growth opportunities.

Investors during the bull run stretching from 2003-2007 pursued companies with significant sales and profit potential. They ignored MNCs, such as those mentioned above, whose growth rates barely touched double digits. Moreover, the completely-owned Indian subsidiaries often dictated major developments such as new product launches and these were therefore not reflected in the share prices of the parent companies.

(With inputs from Ramanatha Pai)