Asset heavy firms with high debt to see less investor interest

Published: 28th August 2012 03:01 PM  |   Last Updated: 28th August 2012 03:01 PM   |  A+A-


Asset heavy companies with high leverage may continue to generate less interest among investors in the equity market till interest costs come down, a top company official of ICICI Securities said.

"Asset heavy companies with high leverage (where debt level is high) are not witnessing much interest from investors and rightly so due to higher interest rate regime, which impacts the bottom line of those companies," ICICI Securities managing director and chief executive Anup Bagchi told PTI, on the sidelines of an equity valuation workshop guided by Professor Stephen H Penman of Columbia University.

This trend is likely to continue till the interest costs go down, which is linked to inflation, Bagchi said.

About investment strategy by the investors in the current market, he said investors prefer light balance sheet with low debt in this market.

"Light balance sheet with low debt level are preferred companies at this point of time," he said.

Sensex is presently hovering around 17,650 level with renewed interest from FIIs, which had pumped in around Rs 6,800 crore into domestic equities in August 1-24 period.

From the beginning of this year, FIIs have infused a net amount of Rs 59,014 crore so far this year into equities and Rs 25,303 crore in debt market.

"Yes, FIIs are investing mostly through the ETF (exchange traded fund) route and expectation of reforms," Bagchi said, adding that the index is not a homogeneous set of stocks.

"The asset light, cash generating companies are trading in high multiples. Banks stocks itself have a large dispersion while high leverage, asset heavy companies are trading at lower PE. So, valuing the company just using one metric like price to book or multiple is simplistic and one has to get deeper to reach at the proper valuation of an entity," Bagchi said.

Stay up to date on all the latest Business news with The New Indian Express App. Download now


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp