Among the top 20 companies from the Asia-Pacific region that can build on their competitive edge over the long-term and consistently deliver outstanding shareholder returns, Indian companies have the second lowest free float stock compared to companies from other part of the region. Of the 20 top companies covered by Morgan Stanley in its first edition of a research titled “Tomorrow’s Winners”, seven companies have been selected each from China and India , two are from Taiwan and South Korea and one each from Australia and Cayman Islands .
The Indian companies that have found place in the research report includes Bharti Airtel Ltd, IDFC, L&T, Pantaloon Retail, Reliance Capital, Reliance Industries and Sobha Developers.
An interesting analysis also showed that of the 20 companies covered in the report, Indian companies have the second lowest free float after South Korea ‘s two companies Samsung Techwin and Woori Finance Holdings, which had average free float of 49%. The seven India companies mentioned above together have free float of 53.4%. The seven Chinese companies that find place in the report, have an average free float of 59.63%.
The highest free float of 99.90% was found in Brambles Ltd, listed on the Australian Stock Exchange (ASX). The two Taiwanese companies had an average free float of 72%, while the lone one from the Cayman Island (Tingyi) had a free float of 54%.
Analysts said, low free float of Indian companies compared to their peers from the region indicates that there is a possibility of more head room for more investors including institutional investors investing in the company in the long run. Also, this gives promoters of the company more scope to raise the resources for the growth of the company.
Morgan Stanley said in its report that its fundamental research usually takes into account a period of 12-18 months to make any forecast, but for the purposes of Tomorrow’s Winners , however, we have relaxed that time horizon to five years. It said, to select the ‘winners’, analysts were asked to review their industries and identify companies they felt had a distinct competitive advantage that would drive share price performance over the medium term. The companies chosen lead their domestic competitors and are strong enough to withstand competition from abroad. The majority operate in industries that have high barriers to entry.
These companies’ expected growth rates outpace those of the markets and countries in which they operate, the report said.