Ravi Dharamshi: HDFC Bank providing a fantastic entry point from a five year perspective: Ravi Dharamshi
What is the way, what is the first order impact and how to play this energy transition theme? Is it like getting out of the likes of NTPC etc. bet on , who are getting into it or is it Green and of the world? How to play this theme exactly in stock markets?
Obviously first there are the equipment suppliers. In any gold rush usually the first beneficiary is the equipment suppliers that you have to focus on who are going to be the suppliers to this supply chain. Clearly India does not have a play at this point of time, China is dominating over there but we are putting in place a framework where most of the supply chain we will try and have on our own. For example a couple of days back I think Adani announced that they are going in for a 10 gigawatt end to end in right from polysilicon to module kind of a structure. So those kinds of things are going to happen. People supplying glass, modules, wafers, are the guys who are going to benefit first. There will be a second order impact on metals as well because usage of aluminium is high in solar renewable.
There are groups which have got re-rated. It may be a coincidence but that is how markets have done for example. Chandra takes over Tata Group across the board gets rerated. 2022 hands down just about anything which has a prefix or suffix Adani got rerated did not matter what the business was. What to your mind could be that headline group for 2023-2024. I have looked at the compliance. Is there no regulatory problem if we talk about a group?
Let us understand what are the reasons why these particular groups rerate because there was the underlying value in the business. There were inefficiencies in terms of capital allocation, cost structures, and those were easy pickings but it still needs to be done. It is not like just because somebody new has come in it will be done but you can expect the old guard is going to be the last one to make those changes. Usually there are vested interests which prevent them from doing so. Whenever you see any kind of a change at the top those are the reasons to start looking at whether they are making the right noises. Where they are headed in this, whether your interests are aligned with the particular group or not in terms of market cap creation, the value creation if that is the case then for sure that will happen.
I think one group that has undershot itself yet and there is a lot of potential is Mahindra Group. I think there is a lot of scope for improvement over there. The change has happened at the top. I think all the right noises are being made, probably the pace that you would want is lacking over there but I think that is a group to keep on radar.
HDFC, HDFC Bank has underperformed, has underperformed, has underperformed?
Right but that underperformance I do not think is due to the fact that there was a leadership lacuna or the focus was not there. It was more to do with actually that it was undergoing a period where the focus was more on other things like getting the merger right, the synergies right rather than on getting the immediate factors like market cap creation.
So you are right from the next five years point of view
is providing a fantastic entry point again with disclaimer that we do own it and we are looking to probably add also. But again it is a five-year call, it is not a three month-six month call of outperformance. It is a fantastic entry point and one should be looking at it and evaluating it.
Apart from HDFC Bank what else do you own?
Our view has changed on HDFC Bank very-very recently. We do take a very concentrated bet and we focus on picking stocks one versus the other rather than taking a blanket call on the sector or making a basket call. So yes incrementally from this point on I think HDFC Bank is a fantastic opportunity. HDFC Life is underperforming more because probably the life insurance space is undergoing a competitive scenario. AMC is underperforming as the best of AMCs in terms of AUM coming in is behind us. Probably incrementally it is going to slow down, it is not going to be as much as it has been.
PMS like yours are gaining market share. Fresh flows are coming in and your growth is definitely higher than what the industry average is?
Absolutely, whether it is newer products which are taking away market share or whether it is underperformance of the scheme but I think the key factor in AMC business is the profitability. The yields have been constantly going down since a long period of time and that I do not see changing immediately. But some amount of stabilisation will come in and as you rightly mentioned because of the underperformance in the last four-five years some amount of value has come back again in the companies.
Have you made any bet in the public sector banking space?
No, we have not.
Do you feel like you have missed the bus, is there a FOMO feeling to it?
No, I think we were very clear. It is a tactical trade rather than a secular investment bet. We hold the view that if our interests are not aligned with the promoter, the promoter over here being the Government of India so at this point of time with the re-leveraging cycle with the credit cycle picking up the cheap stocks are also getting re-rated to some extent. They have a good liability franchise but I believe these are the players that are ripe for disruption over a five-seven year period. Their lunch is what is going to be eaten. I mean it has been being eaten away by private banks sooner or later. The new age fintech companies will also take away whatever the profitable part is left. So it is good for a 6, 12, maybe 24 months tactical trade but not beyond that.
Since we are looking back at 2022 and while this is not a FOMO moment for you, what is that regret for 2022 anything that you missed out on?
Clearly I would have had probably instead of taking a PSU even if I can find one particular bank which is government owned where I believe there is some amount of alignment of interest like maybe
or something we would have probably done decently.
What about 2023? What are the resolution markets, non-markets?
Spend more time with family, lose a little bit of weight. Do not lose too much capital.
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