I continued with my search for companies available at low market capitalization to average earnings of last 10 years. A couple of interesting names sprang up: Grasim Industries and India Nippon.
Grasim Industries looked specifically interesting based on the consistent consolidated earnings. Interestingly, the company has a 60% stake in UltraTech Cement. This alone values to 38,593 crores. The current market capitalization of Grasim is 27,839 crores. It was the low dividend payout, complexity of balance sheet (due to various businesses and subsidiaries) and a prejudice against the promoters that drove me away.
Another interesting name was India Nippon Electricals 1.
India Nippon is a joint venture between Lucas Indian Service Ltd, a wholly-owned subsidiary of Lucas-TVS Ltd and Kokusan Denki Co. Ltd, Japan - a group company of Hitachi Japan, to manufacture Electronic Ignition Systems for two-wheelers, three wheelers and portable engines. Over the years the company has enlarged its customer base and now supplies to most of the manufacturers of two-wheelers, three wheelers and gensets.
The company has a better dividend payout and a stream of consistent earnings. The stock has a decent dividend yield of 4.21%, but nothing attractive beyond that. The profits have remained the same over 10 years, the return on equity has been low at ~14% (due to large amount of investments) and the valuations look fair at the market capitalization of 240 crores.
Will give both of the above a skip.
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The company has nothing to do with 'Nippo' the popular battery brand. That is a different listed company called Indo-National Ltd. ↩