Nbfcs Market Capitalisation Declines, Top Five Buck The Trend

The market capitalisation of 72 non-banking finance companies (NBFCs) have declined during the last three years.

The aggregate market capitalisation (the market price multiplied by the number of shares) of the traded scrips of major NBFCs declined from Rs. 7255 crore in December 1995 to Rs 5696 crore in December 1996. It, however, increased to Rs 6090 crore in December, 1997.

Market capitalisation reveals the rating of shares of a company on the stock exchange. 72 NBFCs have been considered for the study. The share prices have been computed from the official price lists of Bombay Stock Exchange. December end quotations have been considered for the study.

 

The market capitalisation of the top five NBFCs rose from Rs 3788 crore in December, 1996, to Rs 4998 crore in December, 1997, recording a growth rate of 31.9 per cent.

The top five in terms of market capitalisation in the descending order in December, 1997, are HDFC, Reliance Capital, LIC Housing Finance, Tata Investment Corpn. and Tata Finance.

The top five in market capitalisation , in descending order , in December, 1996, were HDFC, Reliance Capital, LIC Housing Finance, Apple Finance and Gujarat Lease Financing. Thus, HDFC, Reliance Capital and LIC Housing Finance have retained a place among the top five in both the years. Of the top five NBFCs in December, 1997, the highest rate of growth in market capitalisation was recorded in the case of Tata Finance (45.2 per cent).

The bottom five, in ascending order, in terms of market capitalisation in December, 1997, are Sterling Guaranty & Finance, Fiduciary Capital & Financial Services, Libord Finance, Forward Securities and Yule Fin & Leasing. The bottom five companies, according to market capitalisation, in December, 1996, were Yule Fin. & Leasing, Forward Securities, Libord Finance, Regency Investment Trans Corpn. and Brescon Corpn.

Yule Fin. & Leasing, Libord Finance and Forward Securities were among the bottom five companies in both the years.

HDFC got the first rank during the years for which the study was conducted. Its assets grew to Rs 8708 crore during 1996-97, and income increased from Rs 982 crore to Rs 1265 crore during 1996-97. While profit after tax moved up to Rs 248 crore, its net worth also went up to Rs 1662 crore. Deposits grew by Rs 989 crore to Rs 3502 crore during 1996-97 from Rs 2513 crore last year, an increase of 39 per cent. The depositor base increased from 5.17 lakh to 8.67 lakh during the year.

The share of the top five in the total aggregate market capitalisation moved up from 70.9 per cent in December, 1996, to 85.2 per cent in December, 1997.

The frequency distribution of the selected 72 NBFCs, classified according to the range of market capitalisation, reveals that more than 16 per cent of the units (12 units) accounting for a market capitalisation of 89.9 per cent or more belonged to the range of Rs 50 crore and above. These 12 NBFCs together accounted for a market capitalisation of Rs.5477 crore. In December, 1996, and December, 1995, the number of companies in this category were 18 and 21 respectively. The market capitalisation of these companies accounted for 88 per cent and 89.1 per cent in the total market cap respectively.

In the range of Rs 10 crore to Rs 50 crore, 21 companies (29 per cent of the total number) had an aggregate market capitalisation of about Rs 478 crore, representing about 8 per cent of the total figure in December 1997.

While the total market capitalisation of the NBFCs belonging to these two groups showed wide variation, their share in the total figure declined from 98.1 per cent in December, 1995, to 97.9 per cent in December, 1997.

A comparison of the number of companies and market capitalisation in the above two groups - Rs 50 crore and above and Rs 10 crore to Rs 50 crore- reveal that though the number of companies in the first group is lower than the other group, the amount of market capitalisation, however, has increased by more than 11 times.

In the last range, i.e.below Rs 10 crore, there has 39 companies which accounted for a market capitalisation share of 2.2 per cent. The respective figures for the earlier periods were 31 companies (2.6 per cent) and 24 companies(1.9 per cent) in December, 1996, and December, 1995, respectively.

The market capitalisation of these NBFCs rose from Rs 137 crore in December 1995 to Rs 150 crore in December, 1996.

It declined thereafter to Rs 135 crore in December, 1997.n BS Research Bureau

The ratio of market capital to equity capital reveals the extent of appreciation/depreciation of equity capital during a period. The ratio range of up to 300 per cent included about 17 per cent of the companies in December, 1997, 25 per cent in December, 1996, and 36 per cent in December, 1995.