Just wanted your own sense on the capex theme, a long haul story it may be, but you think that the best could be right now perhaps behind us when it comes to capex because it is a well discovered story and the stocks as well have seen a fair amount of run up.
Deven Choksey: Maybe I would like to think after looking at the various programmes which the Reliance is conducting, Tatas are conducting, or the Adanis are conducting on the building of the infrastructure side. In Adani‘s case, it is a whole bouquet of infrastructure starting from airports to roads to railways to ports, power and transmission included, along with the renewable segment and the entire value chain of the renewable segment and so is the case with the Reliance wherein they are covering the entire renewable space as a value chain. I believe that this particular capex programme is only a beginning of the era which we are right now talking about. Maybe in the first few years, you are going to be seeing a lumpy investment and in subsequent period of time you are likely to see the ancillary investment taking place going forward.
So, certainly the capex programme is going to be robust and that is what is more exciting. Because when this kind of capex programme is undertaken for the new age sector that we are talking about, along with this capex programme also requirement is of the conventional commodities, in particular the metal commodities or the cement commodities for that matter or even the required segment of the optic fibre or the power cables, they all would come into demand going forward as well.
So, yes, on one side you are seeing the new age investment taking place, on other side the industry is supporting the new age investment with a higher amount of supply to some of the infrastructure play that we are talking about. One remains confident about the possibilities going forward and it also gives you the clarity that in next few years they are likely to see the sustained growth of around 15% to 20% in the earnings of the companies at the same time, so that is where probably one can keep an eye on some of the larger companies with the bigger capacities that they have, they would be in a better position to reap the benefit out of this expansion programme which is happening in the economy.
Do you believe that insurance has perhaps now peaked out or at least going out of flavour now and for NBFCs ideally a rate cut scenario is a positive time. What then explains the downtick on some of these names?
Deven Choksey: It is a brilliant opportunity to buy in the market because frankly this market is giving you this opportunity at a valuation which is not so expensive. On one side, there is a possibility of bringing down the rate of interest. On the other side, there is an uptick in the demand for credits be it retail credit, be it corporate credit through SME, MSME as well.So, from a perspective of looking at the banking space and the retail NBFC space as a whole, I believe that the larger the size, better will be the opportunity for many of these companies and that is where you are getting the opportunity to invest into them.
Many of these companies are currently quoting at two, two-and-half-times or even below two times in some cases like SBI as far as their price to book value is concerned and that is where probably you get an opportunity to buy into.
Insurance in particular, life insurance segment, I believe that the companies who have already spent 15, 20 years in the business, they probably are in a much better position now to attract A) the newer premium, the new business premium and at the same time manage their cost well because of the larger amount of infrastructure already in place.
So, I would think that insurance per se would find more inclusion in the portfolio of most of the fund managers because that is an underweight up till now, so certainly there is going to be a catch-up game going on to increase the weight in the portfolio from the insurance space.
So, we remain otherwise very positive about the entire prospects going forward for insurance companies. And fortunately, the valuation-wise, they have moderated. They have not increased, at the same time it is an opportunity.
Have you looked at the Bajaj Housing IPO and what would be your recommendation, subscribe or avoid?
Deven Choksey: No, it should be subscribed clearly because it is a pure focus housing finance company with multiple legs across the value chain within the housing space, be it affordable housing, be it prime housing, be it loan against property, or be it developers finance, or even the rental discounting. I guess this company has a complete portfolio in place.
And what I like most about them is that having created a complete portfolio, they are ensuring that they can keep on growing the books at the rate of 30% rate of CAGR growth, so that means every 2.5 years, 3 years, you are doubling the size of the balance sheet, which is fundamentally very positive.
So, if one is planning for next 5 to 10 years of investment in such kind of businesses, one is expected to get significantly large amount of capital growth in the portfolio. Clearly, it is a buy opportunity from investment perspective.