In 1932, the father of Security Analysis, Ben Graham wrote an article in Forbes called “Is American Business worth more dead than alive?” .He cited many instances where businesses where sold for a fraction of their net quick assets.
The wealth destruction in the Indian markets in small and mid cap stocks in the last six months has lead to many instances of good businesses being sold for less than their liquidation value
Take for instance Emkay Global..
Started in 1995,Emkay Global is one of the leading brokerages of India with around 350 retail outlets spread across the country.Its finances and stock price has taken a knocking in line with the markets.
For the year 2010-2011,its consolidated results show the following:
Long Term Debt:2.94 Crores
Net Current Assets: 114.15 Crores
Quick Liquidation Value = Net Current Assets- Long Term Debt i.e 111.21 Crores
Quick Liquidation Value/Share= Rs.45.57
Current Market Price of Emkay Global (as on 13 April, 2012) =Rs 29.3
Conclusion: As per the Indian markets, Emkay Global is worth more dead than alive