Promoter Reputation in Indian Equity

Since opening of Indian economy in 1991 we have seen hundreds of companies creating great wealth for its investors e.g. Infosys, Wipro, RIL, HDFC, HDFC Bank, Tata Motors etc. However, investors must not forget there are equal number of companies vanishing from market after pump and dump operation by promoters and market operators. We strongly feel we should not look for so called multi-bagger but look for safety of our capital first while picking a stock which comes only from the reputation of promoters.

This is the most important factor while investing in Indian Equity - pedigree of company's promoters. Since we became SERIOUS investor in 2001 we have given utmost importance to this factor than making our investment decisions based on over analyzing ratios and calculating cash flows. Lot of our friends/clients keep asking us how to make sure we buy good promoter stocks?. Answer to this question can go in pages but let us summarize. 

Of listed about 3000 companies we have studied/analysed majority companies at some or other point of time in our investment career. Our conclusion is investors should buy stocks/companies which belong to old promoter group OR MNC. Some of the prominent Indian promoter groups are as follows:

Birla(founded in 1861), 

TATA (founded in 1868), 

Dabur(1884), 

Kirloskar(1888), 

Godrej (1897), 

Murugappa (1900), 

TVS(1911), 

Singhania(1918), 

Bajaj(1926), 

Ramco(1938), 

Mahindra(1945), 

Hero (1956), 

Kalyani(1964), 

HDFC(1977) 

Jubilant (1978) and so on.

Apart from investing in above group stocks investors can rarely wrong in investing MNCs listed in India - Some of the renowned MNCs listed in India are as follows:

Siemens, 

Bosch, 

ING Vysya,

ABB, 

Alstom, 

Colgate, 

HUL, 

ITC, 

Abbot, 

Glaxo, 

Novartis,

Clarient, 

Basf, 

Bayer,

Castrol,

Grindwell,

Hitachi,

MarutiSuzuki,

Godfrey Phillips and so on.

Please note above is NOT an exhaustive list but names which could remember immediately so we may have missed some Indian promoter groups or MNCs but point we want to make is return OF capital is more important than return ON capital :-).