Do you think that the key for the market is FII buying and whether that continues or not?
Yogesh Mehta: It is a purely liquidity driven market and the FII flows from October till date is more than Rs 1.5 lakh crore. It seems the driving factor is pure liquidity because fundamentals are now going quite beyond their horizons and liquidity is chasing only growth. Overall it seems that now FIIs push is more prominent than selling by DIIs and HNIs. The Indian economy is on the cusp of a bottom right now. Overall growth is visible right now in each and every sector barring one or two like entertainment and real estate. But overall growth is visible to FIIs and they are pouring in money relentlessly and that is a driving force.
Within the broader markets, are there any clusters or sectors that you would be bullish on or even stocks that you would advise investors to look at for the long haul?
Largecaps have already done their bit. Only Reliance has retracted back but rest of the leaders are still on an upward journey. I believe there are a few pockets we can look at or individual companies where there is still quite a big headroom. There are a lot of opportunities in individual midcap IT names like Tata Elxsi or Mindtree from current levels. Also, CoForge has been outperforming.
On the telecom front, everybody is looking at Idea and Bharti which have raised the numbers of subscribers and ARPU raise and there have been debt restructuring plans. But the biggest beneficiary is Indus Tower. It will have a good balance sheet and the recovery will be much better. Also the business outlook remains very promising. Indus Tower which used to be Bharti Infratel earlier, seems to be very promising and I am recommending it to my customers.
What is your view on real estate given the spike across most of those counters?
It seems that after the reduction in stamp duty, a lot of liquidity has shifted from different variable assets to fixed assets of property because it is available at deep discounts. The pent up demand has suddenly risen to an extent that nobody had dreamt of. I believe in the metro cities and tier-3, tier-4 towns, demand is still improving and real debt-free companies like Oberoi Realty and Godrej Properties are shining very well and they are in a sweet spot right now. Even DLF is reducing its debt and it is a discounted one. Also to be noted is Prestige Estates, a Bangalore-based company. The outlook for the business for the remaining three months is still visible and the management is quite confident about improvement in the business. So I feel yes, there is still enough headroom for these stocks to grow from here.
What is it that you are making of the private sector banks? Compared to IT which has seen an 11% gain on the index month to date, Bank Nifty has shown an uptick of only 1%?
Overall, if we compare Bank Nifty with Nifty in the calendar year or maybe from March low to now, it is still underperforming wherein Nifty has made a new high. Overall, in the banking space, we have to discount PSUs right now but in the private names like HDFC Bank, HDFC or Kotak Bank, FII flows are much higher. Everyday they are pouring in Rs 800-1,000 crore into HDFC twins and Rs 600-800 crore into Kotak Bank. Even MSCI has increased allocation towards Kotak Bank.
Overall, business outlook is very strong for the private sector banks because the wallet share has been passed on from PSU to private banks and the return ratios and the functional ratios are improving right now. Overall, there is visibility of demand and the way the economy is reviving right now and the demand is coming back to normal to pre Covid level shows that loan growth and lower interest rates are fetching good business for the private sector banks right now.
It seems that Bank Nifty may recoup with interest from FIIs as well as domestic HNIs. I believe HDFC Bank and even Kotak Bank have reached life-time highs which no one had imagined. This kind of price to book ratio is only commanded by Bajaj Finance among the NBFCs right now and now it is Kotak Bank. There is still room to go for at least becoming at par to the Nifty and HDFC Bank post this pause of the event which has come about the technical glitch but HDFC Bank will not pause here. It is the darling of portfolios and will remain that.
How have you looked at Mrs Bectors in terms of financials of the sector in which it operates in as well as the overall growth?
These are new age sub category companies post QSR. which have come across post Britannia. So I believe that yes, a long way to go as a consumption theme will remain there and take off and the revenue will grow as the management is highlighting that 9% CAGR growth for at least next two, three years is visible in the biscuit category. Even in other categories, the way the capex has been planned, it should earn a good revenue on the EBITDA front also.
In the first half they have already done Rs 37-38 crore and it is not comparable because the first half was a pandemic situation but overall on the valuation front, from a EV/EBITDA basis t the current price, Mrs Bectors is still around 50-53 times EV/EBITDA and these are the companies which can be valued in the range of 60-65 EV/EBITDA.
Post this 100% run on the debut listing, another 10-20% upside is there but the downside seems to be very limited for this company if everything is executed as per the plan. For example, Burger King went up to Rs 220 odd and then again came back to Rs 190 odd right now. I believe in Mrs Bectors, the headroom for an upside is very limited even on the basis of FY21-22. Any correction would be a good opportunity.
