Do we see some more cool-off on Tata Motors? Would you be willing to buy into afresh?
The fundamentals of the company have not changed except for the fact that they have a supply side situation to fill due to chip shortage. But the majority of players are now addressing that situation and slowly things are improving on the supply side.
The JLR portfolio of Tata Motors continues to attract a good amount of demand and this is where I am more comfortable. Had they been facing a demand crisis, I would have probably derated the stock. But it is a transitory situation and more on the supply side, I am fairly confident that a couple of quarters down the line, things will improve for them.
On the other hand, the domestic, particularly the commercial vehicle portfolio, is something to cheer about because that business is really improving. The scrappage policy still has not been brought into force. Once the scrappage policy comes into effect, commercial vehicle demand will likely go up very systematically along with the growth happening in the economy on the infrastructure and the industry side.
The commercial vehicle portfolio in the domestic market definitely is a case to look into. Along with that the passenger vehicle portfolio has dramatically improved its acceptance into the market place and in the domestic market so again I think I would be very confident. The current situation is possibly asking us to wait a little bit longer as far as the investment is concerned but to me these uncertain times provide an opportunity to buy and accumulate this stock into the portfolio.
Is Zomato a buy, sell or a hold?
We have subscribed to Zomato IPO and continue to hold it. My confidence level would be high when the company starts improving the numbers and that is where I would remain more confident to accumulate further into the portfolio. I like the business model. It is an asset light model. They have established themselves as a brand. The numbers of order deliveries are increasing, which is a good point. At the same time, adding newer verticals within the business like Hyperpure and also the grocery vertical suggests the contribution coming from those verticals could also possibly take care of the larger amount of business.
Having forged a relationship with customers, it also gives them an opportunity to cross sell particularly through the grocery vertical. I guess this particular company should be kept in the portfolio though exposure will be limited.
We have just got news that China may impose more steel export tariffs. In India, steel prices have corrected a little bit. Do you think that this is just temporary because we have the seasonality factor kicking in?
Commodity price behaviour is always very difficult to analyse but most of the manufacturers do not have any big greenfield project for implementation at least for next two years. Tata Steel is going ahead with the implementation and 2024 would be the time. But generally, greenfield capacities have not been coming.
On the other side, the demand scenario is buoyant. The domestic demand scenario is extremely buoyant for metals and particularly steel. I am not too sure how much the Chinese development would have an impact on the margin, etc, because the input costs are going up. There is a general trend in the marketplace that when prices go up, prestige producers have to balance the price increase along with the demand improvement into the situation in the country.
I believe as long as we do not see higher supplies in the global market, steel makers will be able to maintain the margins going forward though they may not be able to increase it the way we have seen last year.
HDFC Bank, and Axis and ICICI Bank have reported uptick in the retail delinquencies. But if that is the case, that means retail or the salaried class are under pressure. Then why is residential housing price going up?
It is mainly replacement demand coming in from major cities wherein people from smaller houses are shifting into larger houses. Developers are saying 3BHK, 4BHK residential apartments are getting sold out very fast. Thanks to the work from home situation, people are shifting to larger houses.
The second point is the shift to tier two, tier three cities. It is more of a demand coming from the affordable housing side. This again is necessity driven, more incentive driven. All in all, the buyer is comfortable putting in money in the housing real estate largely because of the fact that the cost of interest remains low.
At the same time, people who have borrowed money on the personal loan side, are probably deferring their instalment payment etc. largely because of choice. But in case of housing as an asset class, the buyer usually makes payment of housing loan instalment the first priority vis-à-vis the vehicle or any other personal loan. So, from that perspective, I would be relatively sure about housing.
This is one area where we will probably continue to go in a steady manner. Housing finance companies are having relatively better times compared to what it was before. A 20% CAGR growth is happening as far as the housing finance business is concerned. I would remain carefully involved into this particular investment and at the same time, be confident about a couple of companies which are at the top end of the spectrum in housing loan activities.
Just wanted to understand where within diagnostics and the healthcare universe would you find comfort to buy afresh?
Most of the stocks are running ahead of fundamentals. Largely we put out the fact that there is going to be change in the business model for most of these companies. At the same time, see there are not too many players in the market where the allocation of money can go into. So the money will be going into the existing companies.
I am carefully watching the health tech space wherein many of the companies are registering some different kind of programmes. Telemedicine is an expanding area. Satellite hospitals are expanding into consulting on a virtual basis to a greater extent on the platforms. These are some of the new models which I am observing in the PE space. It could be interesting to watch as and when they come to the listed market.
