Top Indian companies

ENERGY AND INFRASTRUCTURE

India's government plans to increase power generation by 78,577 megawatts (MW) by 2012 – a necessary target given that more than 40 per cent of its population has no direct access to power. That said, India missed its previous target of adding 41,110MW in the five years to the end of 2007 by a staggering 49 per cent. This was blamed on delays in technological alliances, insufficient funds and natural disasters. So there is no guarantee that the new target will be met within the stipulated time frame, although it will be met at some point, so power, energy and infrastructure companies should be seen as long-term plays.

Hardy Oil & Gas

Hardy Oil and Gas joined Aim in June 2005 and has become one of India's biggest success stories on Aim. It graduated to the main market last February and so is no longer part of our index. The energy group has built up a strong portfolio of assets in India and Nigeria. The shares outperformed the Aim All-Share, trading at 799p as at the first week of May. But the group's only producing asset, the PY3 oilfield in India, has recently hit problems. One well had to be closed due to excess water, while oil from the other two wells took longer than expected to reach the critical mass required for shipment. Good news may emerge from Hardy's other assets, but, in the absence of any announcement, the shares remain high enough on the back of slashed production estimates.

KSK Power Ventures

Another darling of the Aim India Index, KSK Power Ventures joined Aim in November 2006. The group, which develops power plants, is well placed to capitalise on India's deregulating energy market and, according to analysts at Seymour Pierce, KSK has an eight-year track record of delivering power solutions. Shares in the group have consistently risen since flotation and now trade at 64 times full-year forecast earnings for 2008, which is expensive. This is set to fall to 37 in 2009 as assets gain capacity and come onstream, which goes hand in hand with India's growth story.

For investors with a long-term appetite, the shares may be worth buying. However, at 595p, they look a little pricey.

What's more exciting is that the group has floated an energy fund – KSK Emerging India Energy Fund – on both Aim and on the Channel Islands Stock Exchange (CISX). The fund plans to invest in India's underdeveloped energy infrastructure through a range of energy projects, including hydro-electric and wind turbine programmes. It has already identified 14 investments.

Greenko

Greenko runs clean energy projects in India and other parts of Asia. It operates six biomass plants in India and is building two hydro projects in the south of the country. A third stream of income comes from the sale of carbon credits in Europe.

Trading at just 92p, the shares have slipped since our last update (Buy, 100p, 8 Jan 2008) but it remains a buy – especially for investors looking for a solid long-term play.

ENTERTAINMENT AND MEDIA

According to research by PricewaterhouseCoopers (PWC), India's entertainment and media industry reached an estimated size of £6.25bn last year – an 18 per cent increase on the previous year (£5.3bn in 2006). What's more, PWC expects the industry to reach £14 trillion in 2012. There are three Indian media companies on Aim: Eros International, UMP and Indian Film Company.

Eros international

Eros has an established movie production unit and churns out 30 to 40 new films a year. It benefits from an international distribution arm, which spans 50 countries. The group controls almost 50 per cent of the Indian film distribution market, and is well poised to take advantage of consolidation in the sector.

The shares have plunged to 295p after hitting highs of 545p last year and Citigroup has a price target of 425p on the stock, but labelled it as high risk due to 'opaque' disclosure and the rising competition for content in India.

Given the group's strong market position, the shares are good value.

Indian Film Company

Indian Film Company was one of the six stocks picked for our 2008 bargain portfolio because of its strong production pipeline and efforts to improve marketing and distribution.

At 74p, the shares are still well below the listing price of 100p, and are good value.

UMP

UMP, a subsidiary of UTV Software Communication, recently posted its maiden results after floating on Aim last summer. The group posted pre-tax profits of $15.85m on the back of almost $40m in revenue and is expecting a strong year, with the release of a co-production with 20th Century Fox and revenues from movies I Think I Love My Wife and The Namesake due in 2009, which provides some much-needed visibility.

Trading at $2.05, the shares are good value.

PROPERTY

The Indian property market is still young and undergoing change as the government moves to address major issues such as poor infrastructure and poverty. With an estimated 70 per cent of the population living in rural areas, mass migration is inevitable as people seek better lifestyles. This should support companies investing in low-cost housing developments. Research house Libertas estimates that India’s hotel sector has a countrywide capacity of 105,000 rooms, of which less than 10 per cent are rated five-star. This, coupled with India’s surge in tourism – Libertas expects arrivals to grow 35 per cent in the next three to five years – provides good reason for investing in hospitality and retail property.

Hirco

Hirco is a real-estate investment company that came to Aim in December 2006. At 31 March, Hirco's net asset value (NAV) was 682p a share, which is notably above its market price of 387p a share. The group is well positioned to take advantage of the growing demand for retail, commercial and office space in India, and is involved in the development of two large-scale mixed developments in Chennai and Mumbai, which have a combined 66.4m sq feet for development.

With a large portion of funds still available for investment (£116.4m), there is plenty more to come. Good value.

Ishaan Real Estate

Ishaan came to Aim in November 2006 with the aim of investing in development projects in southern and western India, with a particular focus on investments in special economic zones and technology parks, as well as commercial, hospitality, retail and residential developments. Since listing, Ishaan has invested in a range of developments and its last reported NAV stood at 96.2p.

Trading at 98p, the shares are good value in the long term.

West Pioneer

Investment group West Pioneer is looking to capitalise on India's growing commercialisation by investing in commercial, retail and hospitality developments in India. The group owns a 750,000 sq ft mall in Kalyan, a suburb west of Mumbai. The first anchor tenant, Big Bazaar, has taken 62,000 sq ft of space. The group also has projects in Aurangabad and Nashik. The group's NAV is estimated to be 156.9p a share, according to Libertas.

This is a large premium to the current share price of 115p – and this target does not take account of any future cash flows from rentals. Buy.

Trikona Trinity Capital

This property investment company remains one of our favourites. The group was the first Indian property investment company to realise a significant return on its investments through the sale of a £32m stake in four properties, which generated a 108 per cent return on cost.

Trading at 109.75p, Trikona's shares remain well below Numis Securities' forecast 2008 NAV of 154p a share. Buy.

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