When we look at the primary markets it indicates how the retail investors are fully with the market at the moment. How are you looking at the IPOs?
Devyani IPO looks very good for its parent, Yum Brands, is the market leader. They have some very strong brands like Kentucky Fried Chicken (KFC), Costa Coffee, Pizza Hut and a couple of other brands. Yum has a very nice robust backend business model with shared HR, IT, staff training and waiters.
On the front end, there are different store fronts — KFC, Taco Bell, Costa Coffee etc. This model has done very well for Yum Brands around the world. They bring that expertise into India through Devyani IPO and so in the lockdown, the QSR segment has done well and will continue to do well. They are adding stores and are going to do an IPO to lower debt.
The current trend of IPOs has been to lower debt for new growth capital. Companies like Devyani will do well in the IPOs.
What is your view on the fate of Vodafone Idea? How is this situation panning out for Bharti considering they have really been the bravest of them all and were the first to hike tariffs?
Their post paid customers are a reliable bunch and the churn is very low. That is what they are targeting and they are also planning a number of triple plays where you have both the TV, the mobile connection all going into the same house. It will be unfortunate if Vodafone goes out of business like the way its promoter has been indicating. I think Bharti is better placed versus a Vodafone Idea. Then there is Jio. So clearly, Bharti is the market leader. It will probably remain so but it has its own high level of debt but the stock will do its little bit. I would really stay on the sidelines.
After DRL’s performance and the kind of movement that we saw in the stock as well as the underperformance of pharma at large in the last one month or so, would you use any of these dips in stocks? I am keeping out of this list. Is pharma now going into consolidation phase after the one-way up move since the March lows?
Many pharma stocks will continue to do well and are worth buying even at current levels. For instance,
is still quite an inexpensive stock. It probably trades about 14-15 times. It has got its IPO for its API division, a business which trades at a very low multiple. So if the market pulls up overall, then Glenmark IPO is likely to do quite well and that will probably rub off on the Glenmark stock itself.
Companies like Aurobindo or Divi’s Lab continue to look good. Dr Reddy has corrected fairly significantly given that right after it reported its earnings, its product launch book was very strong.
Whatever investigation that they are facing, its a part and parcel of the pharmaceutical business. Dr Reddy’s will also bounce back. So I think pharma has enough legs left to take the stocks up over the medium term.
