I wanted your view actually on Mahindra & Mahindra. The fact that they are expanding their portfolio as well with this sort of an acquisition and a very marquee one at that. What is your take on Mahindra & Mahindra?
Sandip Sabharwal: Yes, Mahindra & Mahindra has been doing well across its various businesses be it vehicles and also the tractor segment which has started to grow last year and is expected to do well this year also. The acquisition also seems to be reasonably priced. So, it will only add value to the company because the acquiree SML ISUZU has a good brand image in the segments in which it operates. This acquisition per se I would think is a positive development.
You like Mahinda & Mahindra. You still own it?
Sandip Sabharwal: Yes.
So, we spoke about three stock ideas from you as in on the budget day, one was Bajaj Auto, then it was KEC and I think the third one is L&T. L&T, Bajaj, and KEC.
Sandip Sabharwal: Yes, so all of them have done nothing till now.
Which is why I am asking this question.
Sandip Sabharwal: So, the two wheeler industry has been grappling with some demand issues in the domestic side, but overall picture is not bad.
So, it is still my view on the macro side like and I keep on repeating that that improved liquidity, reducing interest rates, higher disposable incomes, higher government spending, all of these are positive for consumer durables and as such positive for autos. So, the impact of that should be felt on demand and these stocks have fallen. The auto stocks have fallen reasonably, especially two wheelers and Bajaj Auto. So, that is the reason it is reasonably valued. L&T started to do well, then there were concerns because of tariffs, etc, lower oil prices. There will be some project cancellations which historically does not seem to have too much of basis and the company has not indicated that. So, as the results come out, we will have a better idea on that. And KEC obviously like other transmission companies is a big beneficiary of Middle East investments, RE investments globally and it is a cheap stock now and it also benefits as interest rates go down because it has reasonable leverage. So, all these three stocks I still think should do well over the next year.
How do you read into RBL Bank given the underperformance and given all the concerns with respect to their asset quality and their book? Do you believe that the worst is behind for RBL Bank and maybe it is time to look for it?
Sandip Sabharwal: Unfortunately, I have not tracked the bank closely, but on a macro side I can give a view that all the banks were coming out with results seem to indicate that on the micro finance and unsecured side the stress seem to have peaked.
So, if that is the hypothesis and that comes out to be true, then many of these banks which include RBL Bank should see much better days going forward. But specifically on the stock, I do not have a view.
The other sector I wanted to touch upon is the cement pack because well, of course, today the major UltraTech Cement will be coming out with its numbers, but what we have seen in the trend so far the numbers do not look that bad and what these brokerages are highlighting is that for the month of April there has been yet again a price hike and that seems to be sustaining. Do you believe that cement is the place to be?
Sandip Sabharwal: So, there are couple of things on the cement side. One, obviously the companies who have come out with results have given a reasonably positive guidance, margins have held up better than what was expected and the cost cutting which these companies have been able to do due to either raw optimisation, waste recovery or going into renewable energy is so strong that it has helped them cut costs even when prices of cement have not moved up at all over the last few years on a net basis.
But the valuations are not cheap of the sector, so that is the only concern about the sector, otherwise in terms of outlook of improved earnings growth as well as volume growth this year on both these factors should be good.
