Navigating #LokSabhaElections2019 with Gaurav Parikh

OutlookIndia

In this Q&A with Outlook Business, Gaurav Parikh of Jeena Scriptech talks about the impact of Elections 2019, the sectors that he sees value in and the sectors that he would avoid and his best pick for 2019. For investing insights, follow @outlookbusiness (https://twitter.com/outlookbusiness) and log on to https://www.outlookbusiness.com/  #Business #GauravParikh #Elections2019 #OutlookBusiness #OutlookMagazine #OutlookGroup

Transcript

00:00 Very little correlation between political parties elections and in fact in the last

00:13 four general elections, 1999, 2004, 2009 and 2014, we have actually seen very marginal

00:20 movement one month pre-elections and phase one and post-elections verdict, very much

00:27 except for a 22% run up in the 2009 and 2014, I believe there was a 10% meltdown, 2004 there

00:37 was a 10% meltdown after the verdict when Manmohan Singh came in.

00:42 And as I said post-election verdict, whoever comes, you're not going to see a big runaway,

00:47 one way street, there are lots of other factors, you mentioned risks which are there, other

00:52 than election, I've already said election I don't see as a risk.

00:55 We are actually looking at earnings, the economy on the backdrop of lower interest rates, lower

01:00 inflation rate, stable rupee and stable oil price, we should see earnings pick up and

01:07 as long as GDP growth rates remain at 7% plus, we will see an impact of structural reforms

01:15 continuing any structural adjustment like you had GST which was a big announcement which

01:19 is now factoring in and stabilising what's going to happen on those fronts and on the

01:25 global front, we are not an island, we are not independent of whatever happens worldwide

01:30 which is significant will impact and lead into India.

01:33 So we are looking at both economic and geopolitical factors globally which could cause things.

01:39 So this is where we are placed right now, so the caution flags are up, though there

01:43 is also excitement, I won't call it euphoria.

01:48 Clearly, those who have got debt leverage, you see interest is not an appropriation of

01:55 profits, dividend is, interest has to be paid.

01:59 So you will see companies which are in debt, which have got a high debt component, unless

02:04 it's the sector dynamics like power, they would be under pressure on margins, on performance

02:13 and therefore pressure on paying their EMIs and defaults would be, we have already seen

02:18 that happening, the power sector, we have seen the solar sector, we have seen Suzlon,

02:22 wealth destruction is simply immense and promoters are forced to pledge their shares and then

02:27 top them up and one problem leads to the other.

02:31 So vulnerabilities, look for companies, simply stay away from companies which have got a

02:36 debt exposure which is fairly huge and are going to face profitability compression on

02:44 their margins and the whole set of these sectors.

02:49 I am seeing value in the hospitality industry, I am seeing value in the banking industry,

02:55 select pockets, I am seeing value as I said in the disruptive sector, in the AIF, I told

03:01 you the start-ups, I am seeing some great entrepreneurial skills coming, entrepreneurship

03:06 which happened in 1990s and modern reforms came and I am seeing that happening, driven

03:10 by technology, you know the technological drive.

03:12 So I am seeing a lot of pockets, real estate, selected pockets, you can, infra, selected

03:19 pockets, I am seeing technology, selected pockets, I am seeing a lot of great value

03:24 in a lot of companies, PSUs, some of them you will be surprised when I say PSUs, they

03:29 say oh Gaurav they never go up, I would beg to differ, you know NBCC when it came out

03:34 earlier, so I will give you a hint here, you know, look at the PSUs that have come out

03:40 in the last two years with IPOs, even as recently as last week, I think let's stop there on

03:46 the hint.

03:49 The company is Bombay dying, I have conviction on it, I had issues, several issues covered

03:54 but you have a company whose market cap is around 3000 crores, whose got development

04:00 value of their land is around 30,000 crores in Mumbai, which will break out in the next

04:04 7, 6, 7 years, it's got land, forget the textiles and polyester, we are not buying

04:08 it for that, so it's Bombay living, not Bombay dying, Bombay reality is the story

04:12 actually, it's got, the whole group if you go back, annual reports of 10 years, you

04:17 will find they announced 10,000 when they wanted to monetize like lot of companies who

04:20 had land in Bombay, they said Mumbai, it's 10,000 acres we have in our group, 700 acres

04:27 in Mumbai, 70 acres in Bombay dying, so they have already started developing that, you

04:31 have seen island city centre, so over the next 6 to 7 years, you will see all this breaking

04:35 into the balance sheet, so just put yourself with a capital of just 41 crores, 2 rupees

04:41 or 21 crores shares, if your net worth just climbs to 1000, 2000, 3000 crores over the

04:47 next, you know just see what your book values would be and see what your price would go

04:53 up to, so what's the downside risk on this, do you own due diligence, I am not going to

04:57 go into, Vadia's is what he is and one more question, do you know that they own 75 lakhs

05:03 shares out of Bombay Burma, which is a Vadia group company, which in turn holds 50.70%

05:10 of through associated, through other wholly owned subsidies in Britannia, which has a

05:18 market cap of 75,000 crores plus at around 3000 rupees, so you can say about 38 to 40,000

05:25 crores is owned by Bombay Burma, if Vadia's had to close down everything and monetize

05:31 at the market price, you will get 40,000 crores coming into Bombay Burma from their investment

05:37 in Britannia.

05:40 (upbeat music)

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