The government showed willingness to withdraw something it had come out with in less than 24 hours after seeing the reaction on the stock market, and maybe figured out that taking earnings away from IRCTC will not go down well. Is there a case for re-rating the entire PSU pack after Air India and what happened with IRCTC?
The issue is very complicated here. First of all, the government coming out suddenly with a concession fee sharing rate of 50% itself was a surprising move. But nonetheless, the swift decision to roll it back even before it was implemented, shows the government is definitely looking at and hearing what the market is trying to tell them. It is a very positive decision.
But it is a key overhang which was there on IRCTC since its IPO days. In the past, at the time of demonetisation, the government took the entire commission fee that they used to charge on online ticketing and that is where the concession fee sharing with the government had ended. Prior to 2016 November, the government used to take 50% of the concession fees from IRCTC. But having said that, IRCTC by itself is trying to diversify and we also heard the government right now is saying that they are progressively looking and the way the government finances are stacked right now, to push economic growth, they plan funds from the market to form a key portion of their sources and hence being sensitive to the market requirements is a prerequisite.
The Air India divestment is really a game changer. We have seen a privatisation from a government organisation after almost 15-16 years I think and that is a welcome change. Yes there are other companies that are stuck and there are a lot of formalities and other speed breakers on the road for divestments but the government is taking steps — be it BPCL, be it Container Corporation, be it Shipping Corporation.
In case of IRCTC, the government needs to come out with its policy in terms of the concession fees and the sharing ratio which will remove the overhang for the company as well as have a clear stated policy for all its PSUs which are listed.
Do you think that PSUs will continue to get rerated? That is the space where you would see a lot of value being created?
Yes, it is a space in the market which is definitely offering you value in an environment where the entire market is trading at a premium valuation. We are looking for a pocket of value but also looking and trying to find out if there is growth.
A lot of PSUs, which are in the core industrial segment like power, commodities or those in banking are closely linked to the growth of the economy. So I think with the economic growth picking up over the next couple of years, PSUs as a segment of growth will pick up with government efforts to improve efficiencies and operating metrics. We are seeing how things are improving for a lot of government companies. I think with the comfort of valuation, the comfort of dividend yield plus a lot of them have cash on books. This is a pack which should do well going forward as well.
We have heard so much about the unlock trade. We have got fantastic numbers in line from . Look at the way the stock is doing today, it is higher by about 9%. What is your outlook on InterGlobe Aviation?
The entire unlock trade benefits from various segments that are benefitting. Aviation is definitely one of them and the biggest boost that they have got is from the government allowing them to go back to 100% capacity as they were pre Covid levels. Definitely that is a big positive but if you look at the dynamics that impact the aviation sector, there are variable factors with crude prices shooting up.
A better play to look at the unlock trade would be something like the hospitality space. With the weekend coming in, you would see that hotel bookings are running off the roof. There is hardly any space left and the cost pressures are also not that too high. One can look at some of the hospitality space stocks like Indian Hotels and Lemon Tree which are expected to do well over the next one year.
Apart from that, one can also look at the beverages segment, United Spirits came out with very good numbers. The unlock trade is helping them. People are travelling, going out of homes, the demand growth has been much better this year compared to last year when the unlock trade was happening. That is another space one can look at. Finally, one can also look at some of the luggage stocks like VIP which is again an ancillary to travel. So these are some of the preferred names that we like within the travel tourism space.
