British investment bank Noble Group is foraying into India with its first product offering — a midcap equity research on Indian companies, catering to institutional investors investing in Indian stock markets.
The firm is initiating coverage in five sectors — technology, consumer, banks/financial services, power and infrastructure — with its target being stocks with market capitalisation less than circa $5 billion. In addition to fundamental research reports, Noble’s offering also includes pre-IPO research on Indian firms and access to industry experts from the broader business community.
Noble’s research suggests that 200 stocks below the top 50 have fundamentals comparable to the top 50 across a broad range of metrics. Despite this, they trade at a 20 per cent discount to the top 50.
In fact, on the ratio of price to earnings, over the past 12 months,the top 50 stocks have been re-rated by 17 per cent while the next 200 have been de-rated 23 per cent. The company’s research indicates that analysts neglecting stocks below the top 50 is the key reason for this situation. Below the top 50 stocks by market capitalisation, coverage drops to less than 10 analysts per stock and liquidity almost halves.
The company will make use of primary data networks in India and will make these networks available to its clients. Noble’s clientele includes around 100 foreign institutional investors across the world. In the first 18 months, the company aims to cover about 100 midcap stocks that include the likes of Crisil, Indian Overseas Bank, Motilal Oswal Financial, Bata India, Ruchi Soya Industries, Redington India, Apollo, Elecon Engineering, S Kumars Nationwide among others.
The investment bank recently took over UK-based Clear Capital, which has presence in India, for an undisclosed sum. The Noble Group also has intentions to eventually make available its full suite of products, ranging from investment banking to fund management in the Indian market. In the UK, Noble has 170 stocks in 10 sectors under coverage in the UK. Noble India has drawn people from various financial services firms in India and in sum, employs 23 people and is based in Powai, Mumbai.
In October last year, Noble Group had also signed a memorandum of understanding (MoU) with domestic broking firm, Almondz Global Securities. The purpose of the MoU was to establish an FII desk in London and Mumbai.
