If somebody has to capitalise on the big trend centred around ethanol blending in India, apart from Praj, what are the other names?
We are playing it through
and some other sugar companies like . DCM has a large ethanol capacity. That gives us an added advantage of not just being dependent on Praj which is a capex story. Initially, when one starts the distillery, you will need them but the regular requirement of ethanol will be met by these other guys. Second, they can now manage sugar surplus or deficit with ethanol blending. So companies which have larger ethanol capacities are better placed because the volatility in earnings because of the sugar cycle will be lesser. That is why we would like to play with sugar companies more than the straightforward machinery manufacturers like Praj.
Of course, people say Praj is not only just ethanol there are many other machines but in the last 12 years they have not delivered what they were supposed to. We have put more faith in Balrampur Chini,
and DCM Shriram. Those are the ones which we like.
ET Now: What about infrastructure as well as construction ancillaries like cement and paint companies?
Daljeet Singh Kohli: I do not think the second Covid wave will be too negative for these companies because in most places, despite the lockdowns or restrictions, construction can go on with some kind of arrangements like labour living on the site etc. So construction is not going to stop as such. It might reduce a bit or some people might want to migrate backwards to their hometowns and that might have a small impact but we are not expecting a major impact.
In fact, we are very bullish on cement. We feel that the government’s impetus on various infrastructure projects and the construction demand will keep the demand for cement companies very high. and on their efficiency part they have already improved their EBITDA per ton.
We prefer Shree Cements, Dalmia Bharat and Ambuja Cement. Ambuja after many years announced that they are going to expand their capacity. That shows the kind of faith they have and the belief that this kind of demand will sustain over a period of time. We are quite bullish on most of the cement pack but the preference is for larger ones. They are part of our portfolios. I do not personally own any of these stocks but we have recommended to our clients and they may be holding these stocks.
