So what's there for me would be the obvious question a large majority of small investors would be asking now. The sensex was in striking distance of its all-time high and A group stocks have yielded attractive returns to bigger players. The first positive sign for the small investor is that the bull run has percolated to the B1 and B2 category. With improved liquidity, it would be worth identifying stocks based on their market price to book value ratios.

Those at a discount to their book values have been part of the bull run. For instance, in Group A, both Escorts and BPL Limited's scrips have been on the rise. Both were trading at a discount to their book values. BPL limited on August 1 was trading at Rs 84, at a discount to its its book value of Rs 107 by 0.78 times.

Understandably, the stock caught the attention of investors. On Friday, the scrip closed at Rs 102.75. Similarly, Escorts was trading at Rs 80.25 on July 25 while its book value stood at Rs 92. The scrip rose to close at Rs 113 on Friday. It had touched a high of Rs 118.25 on August 6.

However, the bull run in the market has not been restricted to A group and select stocks in B1. In fact, the number of companies traded in the last two months have gone up in both B1 and B2 groups. Last Monday when the sensex closed at 4465 the number of companies traded in B2 went up to 2361 while in B1 it was 715 companies. In group B1, there are almost 670 gainers and more than 460 have outperformed the sensex gain of around 5.17 per cent in last ten days. Only 85 have shown negative returns in the past ten days.

For investors scouting for investment opportunities, we have presented a list of companies' price-book value alongwith their net profits in the accompanying chart. These companies have a price-book value ratio of less than 1.5. Only companies which have reported a net profit for 1996-97 have been taken into account for the study.

Although for many audited figures are not available, for purposes of calculating the book value, the balance of net profit (after deducting outflow on account of dividend) has been added to previous year's reserve figure.

Chambal Fertilisers

Fertiliser stocks have been favourites of late, driven by speculation and expectations of a better performance in the industry. Chambal Fertilisers is currently trading at Rs 14.5. Although the scrip has risen substantially from Rs 10.45 level on July 14, it is still trading at a discount to its book value of Rs 17.5. The company reported a net profit of Rs 118.59 crore for 1996-97.

Jindal Iron & Steel

Jisco was trading at Rs 47.50 on June 30 but today the scrip is trading at Rs 79.25. It had touched a high of Rs 87 on August 7. Even after the rise, the book value of Rs 114.5 discounts the price by 0.72 times. Investors can invest in the stock after a minor correction.

KEC International

On July 3 the scrip was trading at Rs 46.25 as against its book value of Rs 80. The scrip spurted to Rs 68 on August 5 before closing at Rs 63 on Friday. The company reported a net profit of Rs 38.55 crore on an equity capital of Rs 35.89 crore, with an EPS of Rs 10.74. The company paid a dividend of 38 per cent for 1996-97.

Vindhya Telelink

The company reported a net profit of Rs 24.4 crore on an equity capital of Rs 11.85 crore for 1996-97. Its book value stands at Rs 105 as against its current market price of Rs 60.5. The company rewarded its shareholders with a dividend of Rs 3.5 per share for 1996-97. The scrip was trading at Rs 50 on June 12 and has now moved up to Rs 60.5. With the huge difference to book value the scrip has potential to go up.

Goetze

The scrip was trading at Rs 46 on July 27 but in tandem with the sensex the scrip rose to Rs 56.50 level on August 7 but closed lower on August 8 at Rs 51. The scrip has a book value Rs 58.6 and for fiscal 1996-97 the company paid dividend of 40 per cent. For 1996-97 the company reported a net profit of Rs 21.81 crore on an equity capital of Rs 25.29 crore.

Eicher Limited

The scrip was trading at Rs 62.50 on June 25 as against its book value of Rs 70.28. In line with the market, the scrip has moved up to the current level of Rs 94. The company reported a net profit of Rs 30.7 crore and paid a dividend of Rs 3 per share.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.