One cannot take eyes off the Tata Group names! With all the talk around Tata Sons, look at the move on Tata Power, Tata Chemicals, Tata Steel. All group companies are holding up.
Sudip Bandyopadhyay: Absolutely. I think the buzz around listing of Tata Sons is gaining momentum considering the timelines suggested by RBI when they came out with the new set of regulations. There is a strong speculation that Tata Sons will get listed in the near future and the best way to play that will be probably through Tata Chemicals; that is the conventional thinking in the market and that led to this kind of massive rise in the share price of Tata Chemicals.
Other companies are also benefiting from that halo effect. I am not saying they are not doing well. Whether it is Indian Hotels or Tata Power, Tata Motors, all of them have their individual reasons for getting a good valuation and doing well. But this is the halo effect of Tata Sons IPO and its effect what it can have on Tata Chemicals shares and shareholders. So, pretty much that is what it is. If somebody has to look at the Tata Group, I would think Tata Steel is still the best possible buy. The way the steel industry is poised, the way the global steel manufacturing and demand is shaping up, the strong demand of steel in India considering the massive infra and construction spends we are witnessing now and likely to witness in the near future, Tata Steel at current level is a good long-term buy.
You run an NBFC, you have worked in one and you have obviously invested in many. The slight nudge at NBFCs as RBI the Governor himself alluded to, has led the froth being corrected from many of these NBFCs. Bajaj Finance, IIFL Finance, JM and many others. Some fell in sympathy which had nothing to do with some of the most conservative names from the south also fell. Would you recommend buying any of those, utilising this fall and getting into some good names?
Sudip Bandyopadhyay: There was regulatory action on India Infoline (IIFL Finance) in gold loan business. Muthoot and Manappuram definitely were good buys and they continue to remain good buys. The restriction on IIFL definitely benefits Muthoot and Manappuram. Out of the two, Manappuram, considering the valuation, is interesting at this stage. As far as other NBFCs are concerned and the RBI action is concerned, obviously the action is on the back of non-compliance of regulations and some kind of violations which RBI is cracking down on.
This will, in the long run, bring much more discipline and it is good for the overall industry structurally in the long run. Of course, when some action like this gets taken, the shareholders gets nervous and the price correction, price action permeates across the industry and sometimes it looks unfair. Some of these stocks corrected though they had no reason to correct based on action on JM or IIFL. Obviously that was overdone and they are making a comeback. But if I have to buy an NBFC, I still will go for Manappuram at this stage. Other NBFCs are doing good work, but the valuation at this stage looks full in most of the cases.
Among new age companies, Paytm has been in news. What about the other names Delhivery, PB Fintech, Nykaa? Zomato is currently around Rs 160,170. Do you see that trending higher?
Sudip Bandyopadhyay: Absolutely. if you see the new-age companies, leaving aside Paytm, the realisation came pretty fast that in the listed space profitability is extremely important and without that investors are not going to like and give the valuation which they are demanding and that is why though the course correction by pretty much all these companies and we have seen the results.
As far as Nykaa is concerned I always believe that the beauty and fashion is one business which globally has been doing very well. We all know of LVMH, one of the richest companies and one of the top performing companies for the last one decade almost and the owner is the one of the richest persons in the world, so if you are in similar space, pretty much in an organised and structured manner, you are bound to do well and Nykaa is getting its act together. I heard the commentary and we are seeing the performance improving. So long term, it is a good story.
As far as PB Fintech is concerned, again insurance is an area which is grossly under penetrated in India and PB Fintech is the only company which has till now successfully digitally started sourcing insurance in a big way and that puts them in a unique position. The performance parameters have been improving dramatically and I think again they have a good runway. I am also positive on Delhivery. This is an age-old business, Logistics is thousand-year-old business. They are just trying to bring in technology and do it more efficiently. So, yes, once they get their act together, that is going to be an excellent company. They have not performed well as far as the quarterly numbers are concerned for quite many quarters, but it may be the time for the investors to start getting into Delhivery because the turnaround may come very soon.
What is your view on Tata Power and Tata Chemicals?
Sudip Bandyopadhyay: As far as Tata Power is concerned, we like Tata Power. In fact, all these power producing companies, which are predominantly thermal power, are transitioning beautifully into a mixed company which is they will continue to have thermal and they are also setting up massive green energy capacity. Tata Power has been doing that. The green energy part is very interesting and that is coming up pretty well.
As far as the entire power sector is concerned, the demand is robust and the only challenge as far as Tata Power is concerned was the Mundra but we believe that that also is getting close to resolution and that should do wonders for Tata Power’s balance sheet. On the whole, we like Tata Power, but if I have to pick up one stock in this space, it will continue to be NTPC. We like NTPC over Tata Power, but Tata Power will be the second pick. As far as Tata Chemicals is concerned, they have done phenomenally well over the last few quarters. I am not talking about stock market performance, I am talking about financial performance. I think they have done pretty well. Their soda ash business has been doing well. Now, the question remains, the current excitement. I think that is pretty much on the back of Tata Son’s listing because Tata Chemicals will probably benefit the most if that listing happens.