MIND-BOGGLING VALUATIONS. Much-awaited listings. Stocks getting pummelled. Anyone tracking the Indian stock markets will tell you that this has been the usual story for new-age companies that were listed over the past year or so.
While the listing gave the start-ups' existing investors a chance to sell their holdings and get high returns, the stock price crash thereafter left retail investors frustrated.
Amid all this, old-economy or legacy companies have provided the much-needed salve. While these firms have been around for years, the recent surge in investor interest has been because of factors like rising commodity prices, geopolitical uncertainty or their smart moves. Their revenue growth has been steady, and profitability has been on expected lines. And in these uncertain times, this predictable story has found favour with investors too. Those leading the surge include Hindalco Industries, Vedanta, Coal India and L&T, and most have improved their ranks on the BT500 list this year.
So what did these old-economy companies do right? As fears of a recession loom large over most big economies globally, businesses have been under pressure to reorient their models. Take the case of metals and mining major Vedanta, No. 42 on the BT500 list. According to CFO Ajay Goel, its continued focus on disciplined allocation of capital, effective strategic business planning, driving key capex/growth projects and ESG commitment has helped it create value for stakeholders. "Our return on capital employed has significantly improved from 11 per cent in FY20 to 30 per cent in FY22, while free cash flow has increased three-fold. We were also the highest dividend-paying company last fiscal in India," he says. All this has been helped by its record production volumes for aluminium and zinc across all markets.
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