russia vaccine: It is ridiculous to build DRL earnings expectations based on Russia vaccine tieup: Sandip Sabharwal
You have liked DRL for a while. Is there further conviction after this news coming on partnership with RDIFon the Sputnik V vaccine? Of course, a lot depends on whether the vaccine gets the regulator okay in India or not?
The analysts were trying to build in earnings estimates based on this tie-up. It is the most ridiculous thing I have seen. First of all the Russian vaccine is not approved vaccine, hardly any trials have happened. We have seen that in the AstraZeneca case despite such huge widespread trials, issues had led to the suspension of the trials. Here the phase three trials have not yet started. Typically these trials are done globally. So I do not know whether any other country is allowing them to do the trials also. I think it is pretty ridiculous to build earnings expectations based on this.
It is just the state of the market where bullish news flow is taken up very positively. That is what is happening in DRL. I do not think people should be building in any earnings estimate based on this.
Listed at 111% premium to its issue price, what is next for Happiest Minds? Would you still ascribe a buy or wait for a dip to come in?
The thing which worked for Happiest Minds was that the IPO came right in the midst of a time when people became bullish on the technology side. So technology sector stocks were doing well. In fact, most of the largecap technology names have moved to all-time highs and in the midst of that, the IPO has done exceptionally well in terms of listing price. So the listing price captures most of the upsides I would think that could be there for the stock. Obviously it is a good management team with the proven track record. People need to now wait it out till they get better opportunities where they can buy or then they can look at other midcap IT companies which might be cheaper than Happiest Minds.
Do you see a cluster of banks performing anytime soon?
It is tough for the financial sector in India to do exceptionally well in the short run given the moratorium and again legal issues surrounding it. Plus the issues which many of the smaller companies are facing in terms of getting their businesses up, generating cash flows, etc, will create issues and retail delinquencies are expected to peak out. In this context, financials remain the weakest link for the market and that is why it will be tough for them to come back soon.
The rest of the market, ex of financials, are at all-time high. Given where the economy is, there is a question whether that itself is also sustainable or not. But that is a separate matter but financials will have volatility and September quarter results might not look very good as the moratorium ends.
We have been hearing about GST cut on two-wheelers for a while. What are you making of the kind of commentary we are getting in from North Block?
The finance minister made a random comment that we are looking at duty cuts on two-wheelers and that set the expectations high and it was highly improbable. In my view it is even now every improbable. States are not getting their dues. How are they going to support a GST rate cut on anything?
I do not think we are going to get GST rate cuts because the government thinks that recovery will happen on its own. They do not think they need to give any fiscal stimulus. In that context, I would think it is better that this denial comes because many of the companies were sceptical about a GST rate cut going to happen. They were of the view that if people start expecting that there is going to be a rate cut, then the buying will get deferred and the green shoots which have started and the sales uptick could suddenly die out. So I think it is a good thing if they come out and say that they are not doing any duty rate cuts. That way whoever wants to buy can make a decision to buy based on the current duty structure. Any denial or clarification is actually supportive of the industry at this stage rather than negative.
Does Vodafone merit a relook or is it still a trading bet?
I think it will continue to remain a trading bet as long as we do not get a greater clarity on how the balance sheet is going to be restructured in terms of the huge debt that they carry. The good part is that they are restructuring and a new customer focus indicates that they want to now retain customers and try to sustain whatever market share they have because they have been losing customers significantly and even high end customers have started to move out from there. They did have many high end customers given the fact that they have been one of the earlier operators. That is where it stands. It is very tough for any serious investors to take a bet on this company I would say.
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