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BSE A group: Flop 10

Apr 17, 2001

Trigyn has topped a list but Mr. Suresh Rajpal is certainly not going to be excited about it. It is number one on the list of top losers from the ‘A’ group of the BSE. Of the top ten loser companies (in percentage terms) over a year, the software sector has the doubious distinction of having seven of its companies while media has two and telecom has one. But all belong to the TMT (technology, media, telecom) or ICE (information, communications, entertainment) genre. So, what’s the big deal? Everybody knows this? Well yes and no. Yes, it is expected that most of the companies would be from the TMT family but what calls for a closer look is the name of the companies. One the very interesting point to note is that the so called new economy sectors have low entry barriers therefore anybody and everybody can start a ‘software’ firm but sustainability is a different story all together.

Top losers over the year: BSE 'A' Group
Apr 16, 2001 (Rs) April 17, 2000 (Rs) H/L (Rs)
TRIGYN TECHNOLOGIES 62 1,485.0 -95.8% 1,485 / 54
MASTEK 83 1,965.0 -95.8% 2,001 / 83
DSQ SOFTWARE 67 1,397.5 -95.2% 1,655 / 53
GLOBAL TELE 116 1,695.0 -93.1% 1,960 / 98
HFCL 80 1,121.6 -92.9% 1,820 / 66
PENTAMEDIA 62 838.6 -92.7% 975 / 51
PSI DATA SYS 114 1,378.7 -91.7% 1,540 / 93
ZEE TELE 77 925.6 -91.7% 1,050 / 71
SILVERLINE TECH 61 636.1 -90.4% 743 / 51
TELEVISION 18 91 822.9 -89.0% 927 / 85
APTECH LTD. 117 925.2 -87.3% 1,073 / 88
ROLTA INDIA 60 470.2 -87.2% 534 / 53
SSI LTD. 476 3,585.7 -86.7% 4,202 / 390
SAREGAMA 188 1,310.8 -85.7% 1,471 / 166
HCL INFOSYS 65 453.6 -85.6% 520 / 55
SONATA SOFTWARE 25 147.8 -82.8% 172 / 17
SHYAM TELECOM 83 459.5 -81.9% 460 / 72
INDIAN SHAVING 300 1,548.8 -80.6% 1,725 / 295
HINDUJA FIN. 68 320.0 -78.8% 511 / 56
WIPRO 989 4,536.8 -78.2% 5,300 / 763
WOCKHARDT LIFE 15 70.7 -78.1% 77 / 15
NIIT 464 1,974.8 -76.5% 2,525 / 407
SATYAM COMP 190 751.8 -74.7% 875 / 160
POLARIS SOFTWARE 216 847.1 -74.5% 1,230 / 170
MAX (I) LTD. 84 326.1 -74.2% 354 / 71

Another point that is very clearly visible from the list is that quality of management is by far one of the most important points that decide the value of the stocks. Some of the managements have been actually accused of colluding to hike share prices. These stocks figured in the once hot and now a bad word the “K-10” index. Others have been financial wizards siphoning of money and continuously writing off bad debts. And a new set that have of course kept on creating subsidiaries for “improved efficiency”.

However, there are some companies like Mastek and Wipro that have a clean management but still figure in the list. Mastek has not been able to deliver. While the software companies have been posting superb growth rates the company has been posting very disappointing financials for two consecutive quarters. Wipro due to short supply of stocks has seen very high valuations, which have now come down to very realistic levels.

The list no doubt lauds the ability of the markets to punish the wrong doers but at the same time highlights the inability to recognize them early on. There is one very very important lesson in here. There is not shortcut to success - neither for the companies, nor the investors.

A skewed supply demand gap is certainly an opportunity but not a guarantee for success. Success has a price in terms of commitment, hard work and above all honesty. And wise investing calls for investing in those companies that will stand the test of time. And is it very difficult to say whether Infosys will be around in the next few years or not? The answer is a big no, and that could be the reason why it does not figure in the list.

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