What is your take on diagnostic stocks?
Once the pandemic rush is over, then probably the business could start looking normal and the normalisation of the books would start taking place. For the last one-and-a-half year or so, most of the diagnostics companies have had a great run and have been the biggest participants in a situation where consumer healthcare had to be taken care of.
From that perspective, they had done reasonably well along with many other diagnostic companies. As I see it, the situation is likely to get normalised. Hereafter, we would be expecting the business to grow more on the efficiency and innovation parameters. Currently, these stocks trade expensive. They have been trading expensively over the past few months and maybe quarters. At these kinds of valuations, it makes sense to wait for your turn to buy because if not, there can be time correction in the bull market and that could be the time once again we look at these companies.
What about Piramal Enterprises? After it got that bid for the DHFL book, we have seen a nice up move of almost Rs 800 in the share price of . How are you looking at this business today?
From the reported numbers and the commentary, we gather that the pharma business has probably shown an exceptionally high level of growth both on the hospital’s generic side. The company has been registering an impressive growth along with the improvement in the EBITDA margins. That is an area where the investors have probably given up on the stock price. Monetisation of these businesses would be the reality. So while looking at companies like Piramal Enterprises, remember pharma is one of the portfolios where probably unlocking of the valuation or monetisation would start happening at some point of time.
Secondly, in the reality business, most of the companies have declared that their inventory levels are absolutely cleared and that is where they are probably very happy to take up newer developments. So that is another reason.
Of course, the DHFL integration and thereafter the larger part of the story unfolding — all in all has put together this particular stock into the limelight. It is not very surprising though in my view point, the market has a phenomenal amount of appetite for both pharma as well as real estate businesses and that is where this company is up until now though it was not participating as much into this rally. It has started catching up.
Where do you stand on the cement sector as an investor?
One, cement is a domestic commodity, a local commodity. So, if one creates a local footprint, then one has a better chance. Most of these companies have been moving with this particular approach, particularly the likes of UltraTech Holcim Group and . These companies have created an extremely strong presence in the local markets wherever they have operated. This remains a very convincing story.
What I also like about Shree Cement’s approach is that they systematically want to grow the additional capacity. For the next three years, they want to add five million tonnes of capacity every year. Here we are talking of doubling the size in the next eight-nine years. In the commodity business, if you use your cash for creating additional capacity, that means you are running the business more systematically as opposed to putting a large sum of money to create debt in the balance sheet.
At this point of time, I feel the demand scenario is likely to remain extremely strong for cement. Most of these companies are likely to grow on a systematic basis and the big getting bigger. That means that the larger cement companies would probably have the ability to grow even bigger by way of inorganic growth. Going forward, I am extremely positive on cement given that India is in a capex and infrastructure development mode which is likely to be the 2035 story.
IndiaMart will be part of F&O now. Trent is now part of F&O but I sometimes wonder why D-Mart is still not part of F&O?
One of the reasons could be the free float in the market. I am not completely sure because I have not studied that enough. Should they fall in line with the free float requirement in the market, then the stock might get considered to be part of the F&O segment.
What is your take on Zomato maiden numbers today? The stock is already sitting on a huge premium. Is there scope for disappointment and if so, could the scope for a fall in the stock be much higher?
It is always going to be a challenge. This market does not give a scope for any kind of a margin of safety. The market should probably not be very kind if their numbers disappoint. However, in my understanding, the numbers are likely to be steady to better and that is what I understand largely in the quarter gone by, they have had one of the better times as far as their share of revenues collected from the restaurant, hoteliers and peers are considered. From that perspective, they are likely to have relatively better per order intake as far as the realisation is concerned from their point of view.
Another important point to watch out for would be that number of orders delivered in a quarter. They already assume the run rate of around 15 crore orders per quarter which means 60 crore deliveries for the year has already come up. They could also end up producing better numbers from the new line of activities across the business before the end of the year when they start this operation. The market would be relatively more confident on the assumption that the company is well on the track. At this point of time, the promise remains high.
