You believe there is still opportunity left in pharma. What would you be looking at within the pharma space?
I do not want to be company specific but I would say that traditional pharma will continue to do well as the US and other countries keep outsourcing. So the outsourcing part of that story will continue. By pharma, I mean the overall healthcare space and assuming that Covid is dying a natural death, one sector which will really pick up will be diagnostics and I see a lot of consolidation starting to happen. We have been seeing it, we have seen whether it is Metropolis, whether it is any of the bigger names like Dr Lal Pathlabs. They have been scouting around for M&A opportunities and in five years time, there will be very large all India chains which would be doing extremely well. So that is a space I like.
Hospitals will get a rethink from investors given what has happened with Covid. So our healthcare infrastructure in general which clearly was challenged during the second wave, would get a new trust and we are very bullish on that space in general.
Hypothetically, if one makes a basket of top three-four consumer staple companies — HUL, Britannia and Nestle — versus a basket of Zomato, Policybazaar, Nykaa and one more consumer tech company whenever it goes public — which basket will make more money for three to five years?
I think the new tech basket will make more money.
The challenge for any tech companies is that when interest rates go higher, the PE multiples contract and whenever interest rates go higher — whether it is one year or two years — the PE multiples start contracting. Don’t not you think that is the biggest challenge?
Yes, but there is no PE multiple today for the new tech companies anyway. So it is the same perception that if Zomato can become profitable by say 2027, will this company then morph into something even bigger than what it is today in terms of pure delivery? These are all possibilities and these companies are changing the way we live, eat, the way we go on holidays. These are companies of the future — whether it is Airbnb or Amazon.
Apple is again a hard product company but these are companies that have changed the way people live in the west and that is starting to come. In fact, let me add one more statistic that is interesting from the question on China tech. China’s digital economy is 40% of their GDP. Just imagine, what we are talking about? It includes everything from payments from the way you travel to right sharing the entire ecosystem, it is 40% of their GDP. We are not even close to that, we are not even a fraction of that.
So the scope of us evolving is maybe 20% or 30%. But the scope of India evolving into a more digital economy which the prime minister has been very focused on, will happen and the only way to play this will be these companies. I would rather put my money on the tech companies versus a basket of HUL, Britannia and Nestle.
There are a lot of companies which are adapting new tech; is an example. Reliance, which was a polyester company, has now become a quasi tech and platform company. How are you approaching this space where digital is becoming the co-driver?
Look at where Bajaj Finance is today. If it was a bank, it would be the third largest bank by market cap. Now what is next for Bajaj Finance? I think they will have to get into more digitisation and clearly if they do not, someone else is going to come and eat the lunch whether it is Paytm or somebody else.
So every company out there is seeing a disruption caused by two young kids who graduated five years ago from an IIT or an IIM or came back from overseas to launch something here. One cannot ignore digitisation and the overall tech space. You need to make your company, your customers and your stakeholders more tech savvy and basically improve the margins as a result and gain market share.
That has to be the mantra for every company out there whether you are a Bajaj Finance or a Tata Steel. Everyone is going to do that and there will be companies that will think this is just a fad and it is not going to happen. Those companies will suffer. I would still look at Bajaj Finance, irrespective of how big the market cap is and how it is done. There is a lot of faith in both Sanjiv Bajaj and Rajeev Jain, that they will reinvent themselves from a digital perspective and continue to gain market share.
