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Stock Analysis, IPO, Mutual Funds, Bonds & More

Top wealth destroyers: A dozen lose over 90% market value in a year

Investors should resist the temptation of buying many of these beaten-down shares.

, ET Bureau|
Updated: Oct 14, 2019, 08.44 AM IST
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The small-cap index is down 7.5 per cent, while the midcap index has declined 1.2 per cent during this period.
India’s stock benchmarks — Sensex and Nifty — have returned 12 per cent in the last one year thanks to the resilience of a few blue chips. But a study of stock performances beneath the surface shows the extent of investor wealth destruction in the past one year. Many companies such as Cox & Kings, McLeod Russel India, Reliance ADAG companies, Dewan Housing Finance, Indiabulls Housing Finance, Jet Airways (India), Coffee Day Enterprises among others have lost 78-99 per cent in value, making them the biggest wealth destroyers in this period.

The stock declines have been mostly on account of investor aversion to companies with high debt and corporate governance problems “Any stock which has lost money, not only over the last year but over a period of time, has seen poor governance and situations where business models didn’t exist,” said Nilesh Shah, managing director at Kotak Mahindra Asset Management Company.

wealth-graph

ET analysed data of the biggest laggards in the market over the last one year, which had a market capitalisation of over Rs 1,000 crore a year ago. Out of these, shares of 12 companies have fallen over 90 per cent, while 32 per cent have dropped over 70 per cent. Among business groups, Anil Ambani’s Reliance Group, Indiabulls and Essel have borne the biggest brunt of the sell-off.

The small-cap index is down 7.5 per cent, while the midcap index has declined 1.2 per cent during this period.

Money managers said investors should resist the temptation of buying many of these beaten-down shares.

“Businesses will have swings but if governance and ethics of the promoter don’t sustain then nothing can protect the company. In some sense excess debt is also a function of governance as many projects were gold plated,” said Shah.

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