Goldman Sachs says buy these 12 Indian stocks who have enough cash flow to thrive despite the Covid-19 crash

• Free cash flows put companies in a better position to weather the current market conditions.
• Goldman Sachs report shows 12 companies which are expected to give an FCF Yield of at least 5% by March 2021. The average FCF Yield stands at 7.8%.
• Companies in the Utilities and Oil refining sectors are expected to offer the best yields at an average of 14.5% and 7.5% respectively.

The Coronavirus crisis has destroyed economies and wiped out years of savings. In times like these, for both companies as well as individuals, cash in hand allows you to continue your operations and incur costs without having to borrow money which has its own cost (interest).

“We think in the current challenging environment, markets are likely to reward companies that are generating high Free Cash Flows and thus could manage their debt (deleveraging) and other obligations, including dividend pay-outs,” notes Goldman Sachs in its latest report.

What is Free Cash Flow?

Free Cash Flow (FCF) is the cash that a company is able to generate after meeting its operational and fixed costs.

When a company’s Free Cash Flow is positive, it means that it is able to generate more cash than what is required to run its business.

When the Free Cash Flow is negative, it means that the company is spending more money than it is generating.

In simpler words, if your monthly income is ₹10,000 but your expenses are only ₹6,000, your Free Cash Flow is ₹4,000. However, if your expenses exceed ₹10,000, then your Free Cash Flow is negative.

What is FCF Yield?

Free Cash Flow Yield measures the free cash flow per share with the market value per share.

For example, if a company has Free Cash Flow of ₹50 per share and the market value per share is ₹500, then the FCF Yield is 10%.

Generally – and especially in these times, higher the FCF Yield is, the better it is from an investor’s point of view.

Goldman Sachs expects these 12 stocks to have a Free Cash Flow yield of over 5% by March 2021

Company	FY21 FCF Yield	FY21 EPS Growth Estimate	Last 1 Month Return
Reliance Industries	7.00%	20.00%	15.00%
Infosys	6.00%	1.00%	6.98%
Bharti Airtel	7.00%	Not measured	7.67%
ITC	6.00%	6.00%	26.55%
Power Grid	11.00%	8.00%	3.45%
Bharat Petroleum	8.00%	130.00%	-2.54%
Tech Mahindra	9.00%	-4.00%	-14.21%
Eicher Motors	6.00%	9.00%	-18.93%
Larsen & Toubro Infotech	5.00%	-1.00%	-3.89%
Aurobindo Pharma	5.00%	10.00%	34.51%
Apollo Hospitals	5.00%	18.00%	-3.35%
Tata Power	18.00%	19.00%	-14.22%

Source: FactSet, Goldman Sachs Global Investment Research, NSE

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