Free Fall

Top players in some sectors have seen a massive erosion in market value. Most may never go back to their past highs.

- Rashmi Pratap

THE YEAR 2019 saw the fall of some mighty companies. While some were buried under debt, some faced governance issues, and others became victims of the liquidity crisis. But the net result was the same – deep erosion in market capitalisation.

According to BT research covering the top 500 listed companies, 22 saw a fall of more than 45 per cent in average market cap (October 2018-September 2019 period) over the previous year.

These companies cut across sectors and include Vakrangee, PC Jeweller, Arvind, Rain Industries and Indiabulls Real Estate, among others.

“It is a very wide set of industries and companies. The stress has aggravated, especially for entities whose balance sheets have been leveraged a lot and where operating metrics had deteriorated. In terms of stock price behaviour, mid- and small-caps have been battered. As a result, there has been a significant decline in investor interest,” says Dhananjay Sinha, Head of Strategy and Chief Economist, IDFC Securities.

Some companies have also seen issues around reporting of numbers, whose credibility has been questioned, adds Sinha.

The biggest decline in average market cap was witnessed by technology firm Vakrangee, which runs one of India’s largest networks of last-mile retail outlets. The scrip first came under pressure in early 2018 after Price Waterhouse quit its audit mandate and raised concerns about the company’s books of accounts. The company also came under the scanner of the Securities Exchange Board of India (Sebi) for alleged stock manipulation issues but was given a clean chit in November 2018 by Sebi as well as the Economic Offences Wing. In the meanwhile, its stock took a beating. From ₹420 on January 1, 2018, it continued to fall and closed at ₹36.55 on November 1, 2019.