In Share Market, stock prices moves based upon the Liquidity available in stock market, Current Earnings of company, Future Prospects, Demand of a company among investors and many more reasons. If most of the reasons goes in favour of a company and there is an increase in buying interest of Institutional Investors in it, its stock might see an exponential rise in its valuations.
In last one year, stock market has been very bullish. Many stocks have turned multibaggers in this period. But there are some stocks that have even turned quite expensive in same time.
Institutional Investors like these stocks a lot. That’s why, they are continuously pumping money into these stocks. But ultimately, pumping of money has now made these stocks quite expensive in the market. PE or Price to Earnings ratio of these companies is comfortably moving above 100.
Our economy has gone through a series of economic restrictions in 2020 and 2021. In this period, most of the companies had reported one time losses or temporary decline in earnings which are unlikely to last when the economy would again normalise.
Therefore, there are high chances that most of the companies might definitely look expensive if we look their PE ratio. This ratio is calculated by using Current earnings of the company. That’s why, adjusted PE ratio of the companies has been taken that gives a much better picture.
In our list of Most Expensive Stocks in India, we have avoided adding those stocks which have less than ₹10,000 crore Market Capital. Only those companies have been added here whose Market Capital is above ₹10,000 crore.
List of Most Expensive Stocks in India
|COMPANY NAME||INDUSTRY||MARKET CAPITAL|
|Avenue Supermarkets (DMart)||Retail – Department Stores||₹2,10,000|
|ABB India||Heavy Electrical Equipments||₹38,000|
|Jubilant Foodworks||Restaurants & Cafes||₹40,000|
|Apollo Hospitals||Hospitals & Diagnostic Centres||₹50,000|
Avenue Supermarts is primarily engaged in the business of organized retail and operates supermarkets under the brand name of D-Mart. Promoter of the company is Radhakishan Damini who is a well known investor in Indian Stock Market.
Some of the reasons why Avenue Supermarts share price is so expensive
- Radhakishan Damini (Promoted) is holding nearly 75% shares of the company. Thus only 25% shares are available with investors. Considering the demand of company among Big Investors, 25% shares seems little less for them.
- In last 5 years, Revenue of company has grown by over 23% annually. Profit has also grown by similar rate.
- Company uses almost Zero Debt to fund its Growth. Institutional Investors like those companies a lot where Debt is Zero.
3M India is a part of USA based 3M company. It has a diversified portfolio of businesses consisting Industrial; Health Care; Consumer; Safety and Graphics; and Energy business. Scotch Bright is among the most popular products of the company which is a kind of abrasive product. The product comes in home uses such as dish washing and scrubbing, as well as various types of surfaces for industrial applications, such as discs, belts, and rotating brushes, with varying compositions and levels of hardness.
Some of the reasons why it is expensive
- Like in Avenue Supermarts stock, Promoters of 3M India too have nearly 75% shares of the company.
- Between 2010 to 2019, Revenue and Profit of the company grew by 10% annually.
- 3M India is a Debt Free company. Debt Free is equals to less risks in the company. And less risks in business generally leads to higher interest of Big Investors in the company.
ABB India is one of the leading engineering companies in Power and Automation Technologies. It undertakes projects in the field of electrical distribution, power grids and plants, machinery components, and other industrial applications. Robotics, Power, Heavy Electrical Equipment, and Automation Technology are the key business segments of the company.
Like 3M India, Promoters of ABB India are also not Indian and company belongs to a Switzerland based company. From 2010 to 2019, there has been no major growth in the business of company. Revenue grew by marginally 2% annually whereas profit has nearly nil or zero growth.
However, it has been seen many times in the Indian Stock Market that companies which are owned by a well known Foreign Company generally trades at a healthy valuation. Interest of Institutional Investors stay high in such companies.
It happens because manipulation risks in Financial Accounts of such companies always remain very low. Whatever their Indian based company earns, Foreign Promoters tend to distribute them among the shareholders in best possible ways. Beside of these factors, such companies have access to superior technology, more defined business model, and have higher budgets. Moreover, as their parent companies have been in the business for a longer time, they also have good experience in running a company smoothly along with growing their reputation and brand.
Another possible reason for its high share price could be its Shareholding Pattern. Promoters are holding 75% shares in the company. As per SEBI rules, promoters are not allowed to own more than 75% shares in their listed companies on exchanges. However, when Promoters percentage is even around 75%, shares of the company doesn’t stay in huge quantity in market which can result in higher price of the stock.
Currently, PE of company is trailing above 100 even when there is no significant growth in the business. So imagine what would happen with the share price of ABB India when there will be any growth in the financials of company🤔😐
Even if you are not an investor of this company, i guess you would probably know about the Product Portfolio, business modal and much more about the company.
Incorporated in 1984, Relaxo Footwear is the largest footwear manufacturer in India. Its most popular brands – Relaxo, Sparx, Flite & Bahamas are a leader in their space. Having a pan India distribution footprint, Relaxo also operates a 350+ strong network of own retail outlets, with availability on all major e-commerce portals as well.
A basic characteristic that was common in all above Expensive stocks is present in Relaxo Footwear too! Promoters holds maximum shares in the company. Though they have reduced their holding little bit in past year, they still hold nearly 71% shares of the company. And that is one of the reasons why share price has been able to reach current height and turned as one of the most expensive stocks of India.
Growth in business which is another characteristics of Expensive stocks also exist in Relaxo Footwear company. Between 2010 to 2020, revenue of company grew by 13% annually. However, profit grew much better in the same period and kept rising 18% annually. Impressive!😃
We can also look at ROE, ROA, or other ratios. But we are not looking at them here because discussion of these would only extend the length of this article.
Jubilant Foodworks is another stock whose PE (Price to Earning ratio) is comfortably moving above 100. If you don’t track stock market much and is not an investor of this company, then you can really find it difficult to figure out what this company actually does?
Domino’s which is a popular brand of Pizzas in India, is run by this company. Jubilant Foodworks has exclusive rights to operate Domino’s Pizza Brand in India. Beside of India, company has these rights in Bangladesh, Nepal and Shi Lanka also. Beside of Domino’s rights, company has exclusive rights of Dunkin Donuts to operate in India.
Today, there are more than 1000 Domino’s Restaurants in India which are run by Jubilant Foodworks. Pizza business of this company has turned so big that most of the earnings today comes from this source.
In last 10 years, Revenue and Profits of company grew by nearly 19% and 15% annually, respectively. It means company has been able to achieve a good growth over long term. From here too, Jubilant has a potential to keep rising in future.
Indigo Paints is engaged in manufacturing different types of decorative paints like emulsions, enamels, wood coatings, primers, distempers, putties and cement paints.
Company has joined the stock market in recent time. IPO had seen a grand subscription. Price at which IPO listed on exchanges was also grand level. Money invested in the IPO had got doubled in just few days. But since its listing, demand of company’s shares has been little subdued and price has seen some correction too. However, still today, its PE is well above 140 and therefore is among the most expensive stocks of India in terms of valuations.
Before Indigo Paints, whichever company we have saw above were mostly offering 10-25% growth in the business annually. But this company offers you a much better growth! In last 10 years, sales of company has grown by over 35% annually which is really impressive. However, does it justify 140+ PE?
No doubt it is very high. But other related stocks like Berger Paints or Asian Paints too have PE around 100. Indigo Paints has a more attractive Growth Track record than these companies. So, it is quite obvious that it can have a very high PE.
But weather it truly deserves 140+ PE or not can only be found upon the detailed analysis of company. And here, we are not doing any such thing. We are just discovering those stocks which trade at 100+ PE.
Established in 2000, HDFC Life is a leading long-term life insurance solutions provider in India, offering a range of individual and group insurance solutions that meet various customer needs such as Protection, Pension, Savings, Investment, Annuity and Health. As on March 31, 2020 the Company had 37 individual and 11 group products in its portfolio, along with 6 optional rider benefits, catering to a diverse range of customer needs. HDFC Life Insurance Company is a joint venture between HDFC Limited and Standard Life Aberdeen, a mauritius based global investment company.
After reading about the companies above, we can surely say that past growth in business and future growth potential are the important characteristics of an Expensive Stock. Otherwise, why anyone would pay a higher price for the stock??
Beside of Growth Potential, Risks in business, stability in business, promoters of company, any competitive edge, available shares of the company in market, future prospects and many more things influences share price a lot.
HDFC Life has a favorable support from most of these factors and that’s why its share price is trading with 100+ PEPE which makes it among the Expensive stocks of India.
Apollo hospitals operates a network of private hospitals in India. It also operates primary care and diagnostics clinics as well as telemedicine units and offers health insurance, education and training, and research services.
Company earns more than 50% of its total revenues from core healthcare business. Pharmacy busines contributes the second largest portion to revenue.
In last 10 years, revenue (Topline) of the company has grown by over 15% annually that seems really impressive. However, profit has not witnessed similar growth but yes, it has grown too!
Promoters hold nearly 30% shares of the company. While remaining 70% shares are with investors who wouldn’t mind to sell them if a good price would came in the stock. However, right now Apollo Hospitals is comfortably trading with 100+ PE! It indicates how much investors like the company.
Recently, Apollo Hospitals has moved its backend pharmacy business, Apollo 24/7 and other associated brands into a new entity, Apollo HealthCo. As per many analysts, this move is expected to help value unlocking for the existing shareholders of the company.
So, these were the stocks that trade at expensive valuations in Stock Market of India. Behind of their high valuations, there are some reasons too. We discussed some of them in all companies.
That is the end of this post.
Good luck : )
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