Looking at the market’s reaction to TCS’s earnings, do you think that the earnings upcycle is over for IT and the best is behind us?
I think the answer is no. Temporary blips will always occur in such type of companies where the base is so high. The Street, in a way, would be disappointed. There was a marginal slip in terms of margins and in terms of revenue growth but listen to what the management said and look at their body language. They were confident about the deal wins. The commentary seems to be very optimistic. It is the start a multiyear cycle for IT and IT allied businesses. So if the Street gets disappointed by a marginal slip and if we see a correction that leads to a contraction of PE ratios, it augurs very well for people who want to buy this stock in the future.
IT will clearly keep on doing well. It is a good chance to add positions if there is a minor correction. The Street will also wait for results of other companies like Infosys, Wipro and HCL Tech for further guidance and how the IT sector shapes up in the next 3-4 quarters.
How would you look at the tumultuous ride that Tata Motors has been going through? What do you believe should be the fair value that the stock should command?
The deleveraging story has started to happen in the last 6-9 months. Tata Motors was always a volatile business, be it the India business or the JLR one. It turned around remarkably in the last 3-4 quarters. On the back of global demand for luxury cars, the show is going on well. But news such as a shortage of chips or not so great sales number across the globe will always put this stock in question.
If you want to play the auto story in India, local passenger car vehicle makers like Maruti and other two-wheelers would be a lot better than going for Tata Motors which is still dependent on JLR.
The stock has always been volatile. It is a very high-beta stock to get into the portfolio. For somebody who can digest this volatility, it is a good play on global recovery as well as the brand that it carries across the globe.
Where within the listed platform/internet companies you see value for investors?
There is a scarcity premium attached to a lot of companies which are listed in this space. InfoEdge is one such stock which always deserved a scarcity premium. It has done well. Zomato is now creating that type of buzz, though there are talks about higher valuations. It is in an infant stage in India. When such IPOs get listed, which are going to make losses for the next 2-3 years, one needs the appetite to digest that the company is still making losses. It will start making profits or generate an annuity income in the long term.
