How are you looking at the very cautious commentary from ? They have lowered their growth guidance quite significantly.
We are in a situation where retail is going to remain under stress. Any NBFC or lender facing that kind of market will have to roll back and cannot be expected to grow very aggressively. The fact that they are not growing is actually good news and to that extent the books can be protected. The valuation makes it vulnerable in the stock market. It is one of the most expensive player. The valuation can sustain only if you assume that the growth rates will remain upwards of 40% and the credit costs remain subdued which will allow you a fairly high ROE.
Is the metal basket getting a little toppish in the near-term?
The rally will still continue for some time. The price difference between India and the US cannot sustain for too long. Broadly, metals will remain firm in terms of prices and consequently the profitability of these companies will also remain very robust. The bottom line is that you should buy these type of stocks when they have just come out of NCLT or they are going to present themselves for the next big up cycle.
What are your thoughts on some of the recent listings? Also, what is the expectation from the likes of Zomato?
Well, I do not track new listings simply because I would like to see them trading for a while to understand how the stock works. They work differently when they are privately owned and differently when they are publically-owned. Companies which are not making money and dependent on constant infusion of capital have that kind of problem, especially when they get listed.
Zomato is a trend setter in the sense that it has some good metrics and some not-so-good metrics. The growth is coming at a lower margin. More companies are going to come in the food distribution space. There is going to be some pushback from restaurants in terms of margins. The valuations are factoring in much of the upside. But then it is a global play and there is a scarcity premium attached to this kind of business because not too many of them are listed in the Indian market.
At this stage, if you are looking for those kind of internet plays, I would suggest that start looking at global markets rather than trying to force yourself into buying things which are based only in India.
What about the entire agri and sugar basket?
There is no better way to play agri than through seeds or fertilisers. Both these sectors have rallied, but they can give you some more upside. If we are going to move towards ethanol at a faster speed than earlier, the outcome becomes more stable for sugar mills in terms of their profitability. They will perhaps become less seasonal and more steady. From a short-term investment perspective, you can look at this sector.
What is your outlook on the defence space? Any particular stock that has caught your attention?
In defence, it is the government PSUs. Private companies are largely unlisted and you will have to play them through proxy plays. From that perspective, Bharat Forge or Mahindra may offer you an opportunity but they are not direct opportunities. In the government space, the choice is fairly small. Therefore, it is best to take a basket view and build a portfolio across stocks like
or BEL or one of the shipyards.
