Evalueserve, the leading knowledge services firm, has published an excellent report titled "
A Macro Examination of Financial Reporting in India - March 2012".
You can download the report here.
As I understood it, the report analyzes various shareholder returns ratios of Indian blue chips (namely, components of the Sensex) with those from the US (components of the Dow Jones Industrial Average).
Some of the ratios include
- Dividends payout %
- Accrual ratio
- Net income to total cash flow ratio
- Net income to operating cash flow ratio
- EBITDA to operating cash flow ratio
On almost all the parameters, Indian blue chips are score worse than US blue chips. In layman terms, they don't return as much as cash to shareholders in the form of dividends, and their cash flows (a true indicator of business health) are not as solid as indicated by their NI or EBITDA.
Besides, the liquidity in Indian stock market is clearly seen to be co-related to investments by foreign institutions.
My take:
India continues to have a risky, shallow market even among the blue chips. On top of it, these companies who flood the pink pages with feel-good news and interviews of their CEOs, are not really that shareholder-friendly.
