You track some of these new-age tech companies quite closely — Paytm, Policybazaar, etc. What do you make of the earnings they have delivered so far?
Ashi Anand: In what has otherwise been a fairly bleak earnings season, new-age digital platforms have clearly stood out. Take Paytm, for example, which has achieved profitability well ahead of market expectations. In the quick-commerce space — with players like Blinkit and Instamart — where investments were expected to remain high, we’ve actually seen a peaking of quarterly losses, again ahead of expectations. You’ve also seen the market reaction to Zomato (earlier referred to as Eternal), which has been positive post-results.
When we launched our Digital Disruption Fund, we were very clear that the markets already understood the strong long-term growth runway for these companies — that they could grow faster than most others. What was less understood was that their underlying business models are not just profitable, but highly profitable. Quarter after quarter, as these companies continue to outperform street estimates on profitability, more investors are beginning to recognise and factor in their long-term profit potential.
At the time of launching the fund, most of these companies were still reporting hundreds of crores in quarterly EBITDA losses, but our models projected healthy margins over the long term — we’ve built forecasts out to 2030 and 2032. As these businesses mature, they can continue growing without the same level of investment in customer acquisition or transaction incentives. A large portion of their cost structures is linked to the hyper-growth phase; once that moderates, some costs even decline in absolute terms.
With a largely fixed cost base and rising revenues, there is significant scope for both operating and financial leverage. Our models show clearly that the long-term profitability of these companies will be very attractive, with strong free cash flows. The combination of scale from hyper-growth and healthy profitability is a powerful recipe for value creation. This is why, not just in the short term but over the next decade, we believe digital platforms will remain a major investment theme — and the results so far have been encouraging.
Let’s talk about Tata Motors. The JLR division has faced uncertainty from tariffs, weak demand in some key markets, and valuations have corrected sharply — the stock is almost half its all-time high. Do you think this is a good entry point?
Ashi Anand: Tata Motors is interesting. One part of the investment case is relatively straightforward — the domestic business is doing well. In passenger vehicles, over the past three to four years, Tata Motors has launched strong products, gained market share, and built a strong position in electric vehicles, which is the direction the market is heading. In commercial vehicles — a duopoly with Ashok Leyland — Tata has also regained lost ground.
The domestic business is therefore the easier call, with clear value. The challenge lies in JLR. Here we’ve seen large fluctuations in margins, balance-sheet health, and demand. JLR has strong brands, but faces global headwinds — such as tariffs affecting the important North American market and intense competition in China, particularly from BYD. There’s also growing competition in developed markets.
From a long-term perspective, JLR’s positioning versus BMW and Mercedes is a concern — both rivals are further ahead in electrification, and JLR will need significant investments to catch up. Valuing JLR accurately is challenging, and this uncertainty drives the volatility in Tata Motors’ share price. While the recent fall may make the stock look attractive, the key variables will be the evolution of global tariffs and overall demand.
So, avoid Tata Motors until there’s clarity on tariffs?
Ashi Anand: It’s not so much about avoiding it entirely, but about understanding the relative tariff picture. For Tata Motors, what matters most is the US’ tariff on the UK, and how that compares with tariffs between the US and China, as well as other markets. Once there’s clarity on global tariffs — and on global demand — the investment case becomes clearer.
The latest quarterly earnings were encouraging on the profitability front. Given the stock’s sharp correction from its highs, buying even at current levels might not be a bad idea. But for a stronger conviction call, I’d wait for more certainty on both tariffs and demand.
