After suffering a historic fall in March 2020,the markets have recovered a bit. But given the uncertainty, no one can say if they have bottomed out or the disease has been brought under control. Amid all this, many of my readers have been asking me to suggest some stocks that can beat the Corona virus crisis. That’s not easy as the entire business ecosystem has been impacted and is being transformed by this crisis. Not being able to operate, businesses are forced to take strict measures, including pay cuts and laying off the staff. Some others are innovating.

So, when I started the search for “Corona-proof” stocks, all I had was history. There are indeed some businesses that have weathered crises in the past. Such businesses have higher chances of beating the odds. Financially strong,especially cash-rich businesses, will have an edge as in the absence of operations,they are better placed to sustain themselves.

Based on my extensive research, below are 11 stocks that are well placed to weather the current Corona crisis and give great returns to investors. However, do consider these only as ideas and not as recommendations. Research thoroughly before you decide to invest in them.

Eicher Motors

Eicher’s Royal Enfield motorcycles have high aspirational value, which makes them almost immune to economic downturns. Over the last 10 years Eicher’s revenues and profits have increased by 18% and 43% respectively. Operating margins, too headed north-from about 4% to 31%. Its return on equity more than doubled from 9% in December 2008 to 25% in December 2019.

Why Eicher can withstand this crisis?

Over the years, Royal Enfield has created brand loyalty, which is difficult to replicate. In 2019, the company launched two twin-engine 650 cc cruiser bikes called the “Twins”. The company considers them as its next growth engine. With its presence in more than 50 countries and many under-penetrated markets in India such as Rajasthan, Uttar Pradesh, West Bengal, among others, the company is well-positioned to increase its volume growth.

Exide Industries

A wide range of offerings,pan-India distribution and low prices of lead-the chief raw material-bode well for the company’s future. Exide’s total debt stood at Rs.185 crores as of Sep 2019. However, the company has been net debt-free over the past 10 years.

Why Exide Industries can withstand this crisis?

While short-term hiccups are expected to continue, the long-term story remains promising. Being the market leader, Exide boasts of a wide distribution network of over 48,000 direct and indirect dealers. Although the demand for new cars has been subdued over the last year and may remain so for the next few months, the robust growth in car sales over the last few years has ensured the medium and long-term opportunity for replacement batteries.

For capitalising on future opportunities for electric vehicles, Exide has launched e-rickshaws and entered into a joint venture with Leclanche, a Swiss company, to build lithium-ion batteries in India.

Grindwell Norton

The company is a major producer of abrasives and silicon carbide and hence will see a faster turnaround as the situation improves. In the last five years till December 2019, Grindwell’s revenues grew by 8% YoY, while its net profit increased by 13% on the back of stable and improving margins and an increase in other income.

Why Grindwell can withstand this crisis?

The company has a strong balance sheet. As of September 2019, it had zero debt and a cash reserve of Rs.234 crore. A stable currency along with deteriorating crude-oil prices, should reduce the company’s input cost. Bad times for the industry often turn into good times for bigger players. Grindwell, being one of the market leaders, is in a good position to profit from the current situation.

Havells

Havell’s brand appeal and diversified offerings insulate the company from economic downturns. Also a high market share has enabled the company to strengthen its financial position. Over the years it has also reduced its debt and become a net-cash company. The acquisition of Lloyd in 2017 without any external support bears testimony to its cash-rich position.

Why Havells can withstand this crisis?

In 2008, Havells survived another touch phase, when its buyout of Sylvania-a European company 1.5X its size backfired leading to huge operational losses. These losses and a huge debt pile almost resulted in the takeover of Havells by its lenders. But the company came out of the crisis. Given its market-dominating position, minimal rent expense and 75% of costs being variable, Havells appears to be well placed to bear the impact of this crisis.

HCL Technologies

Transforming from a hardware company to a software one, HCL has displayed the knack of foreseeing changing times and quickly adapting to them. To reinvigorate its software business the company acquired seven products from IBM for $1.8 billion in 2018. This deal will likely diversify the business risk as the company will now compete with both service and software-oriented IT firms. In the last 5 years till March 2019, HCL generated an average ROE of 27, while its debt-to-equity ratio remained low at 0.1.

Why HCL can withstand this crisis?

In view of the Corona virus impact on March 30,2020, the management said that it did not foresee any significant impact of the pandemic on its Q4 Fy20 numbers. Moreover, the company has a well-distributed revenue presence across sectors. As of Dec 2019, the company had cash and investments worth $1.7 billion, which are sufficient to meet its borrowings worth $0.57 billion.

Hindustan Zinc

Hindustan Zinc enjoys a monopoly in the metals sector for Zinc and has very low-cost operations. Hence it shines bright even in gloomy times. In the last 5 years alone, the company has distributed dividends of Rs.90 per share, which is about 55% of its current market price. Its current dividend yield stands at 12%.

Why Hindustan Zinc can withstand this crisis?

The company is debt-free and has cash of Rs.19,600 crores on its balance sheet, accounting for 28% of its market cap and equivalent to around two years of its total expenses. Additionally, around 65% of its costs are variable which provide it sufficient liquidity to manage this lockdown. These make the company a low-cost producer. Another plus point is the Government’ stake in it, which inspires confidence in the company.

Infosys

As of March 2020, the company’s revenue stood at Rs.90,791 crores. Over the last five years till March 2020, the company’s revenue grew by 11%, while the net profit grew by 6% on the back of deteriorating margins. The company has won large deals in the recent past and continues to grow its digital business.

Why Infosys can withstand this crisis?

The company has a history of emerging out victorious from crisis. As of March 2020, the company had cash and current investments of about Rs.23,300 crores. It is debt-free. The management expects zero or negative growth for the IT sector in FY21 and its presence in sectors such as financial services and retail are likely to impact the business negatively. However, long-term business relations with clients, depreciating rupee and settled management should provide some cushion to the revenues.

ITC

The growing presence of ITC in the FMCG space, coupled with its cash-rich balance sheet, should hold it in good shape. ITC’s core cigarette segment is a cash cow, with a return on capital employed (ROCE) of more than 300%. This segment is the primary driver of the company’s exceptional free cash flows. Even after incurring a capital expenditure of Rs.25,000 crore over the last 10 years, the company has generated a free cash flow of more than Rs.61,000 crore.

Why ITC can withstand this crisis?

ITC has a debt-free balance sheet with a cash balance of over Rs.17,000 crore, which should be sufficient to pay salaries and meet its obligations during the lockdown period. Additionally, its plants manufacturing essential products like biscuits, soaps, sanitisers under the Savlon brand, aata, snacks and noodles are still operating partially. This should further help the company cushion the financial impact of the ongoing lockdown.

Marico

Time and again,Marico has leapt ahead through radical innovations. The present times call for yet another round. The introduction of plastic packaging and one-rupee mini bottles for Parachute coconut oil helped the company increase its market share. The company has delivered an average return on equity of more than 35% in the last 10 years. Its earnings per share have also grown at 19% per annum over the same period.

Why Marico can withstand this crisis?

Marico has cash of Rs.1175 crore, which is enough to meet its expenses during the lockdown period. The company is also operating its plants partially, producing edible oil and oats, which qualify as essential items. It also has a significant presence in countries like Vietnam and Bangladesh, which are relatively less affected by this pandemic. This may further expedite the company’s recovery.

Maruti Suzuki

Selling one out of every two passenger cars, Maruti has always been the car buyer’s first choice. The company is the leader in the mid and the small segments, which attract masses and first-time buyers. Despite being in a highly competitive industry, Maruti commands a market share of more than 50%. Over the last 5 years, Maruti’s cash flows from operations have been more than Rs43,000 crore. It has a strong balance sheet with zero debt on its books.

Why Maruti can withstand this crisis?

Several factors set Maruti apart from its peers. Over the years, the company has established its brand on the back of its distribution and service network, which provides its buyer cheaper spare parts and service costs. It has earned a reputation for producing cars with better fuel efficiency, lower maintenance costs, better interiors and higher resale value. Hence, the company may see continued high demand for its products driven by the low penetration of cars in India, higher disposable income and rising aspiration of the middle class to own a car.

Tata Consultancy Services

Being the second largest listed company in the country with capable management, TCS is one of the safest bets in the current market scenario. TCS is India’s largest IT services provider. Catering to over 2400 clients across sectors and geographies and having a market cap of more than Rs6.6L crore, it accounts for around 72% of the combined market cap of all listed companies of the Tata group.

Over the last five years till March 2020, TCS’s revenue increased by 11%, while its net profit grew by around 10%. With an increase in its client count, the revenue garnered per client also increased. Over the last 5 years, TCS cumulatively generated free cash flows of around Rs.1L crore.

Why TCS can withstand this crisis?

As of March 2020, the company had cash and investments worth about Rs.35,000 crore. In its last investor call, the management indicated that the major impact of the lockdown will be seen during Q1FY21 and things should stabilise by Q3. The management expects the current crisis is going to accelerate the growth of digital services, including cloud and automation. A diversified client base with long-term relationship, strong leadership and the ability to scale up business rapidly provide TCS with a unique advantage.

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