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00:00Priyanka Biswas is joining us for more on that.
00:02Priyanka, hi, great to have you on NDTV Profit.
00:05And what a great day to have this chat,
00:08considering the kind of announcements
00:10that we've seen yesterday from the cabinet.
00:13Very clear capital goods infra play there.
00:17So let me begin with your take and how
00:19you have viewed some of these announcements
00:21and the trickle-down effect and impact
00:24we could have on listed players.
00:26Thanks for having me here.
00:28So we had actually highlighted, let's say,
00:31very recently when we had put out a report on L&D
00:34like some time before, that probably
00:36what is going to be the direction of the government
00:39going forward.
00:41And kind of, I would say, it sort of plays out along that.
00:47So we had already seen that the key ministries, for example,
00:51the ministers have been retained.
00:53Let's say the railroad, et cetera.
00:55So what we are kind of anticipating,
00:58let's say, for example, we were not really
01:00positive on roads earlier, because being an election year.
01:04Then we expect a bump up on that in this current year,
01:08especially in the ordering.
01:10Similarly, in the railways, we expect a positivity
01:13with the dividend.
01:14Let's say the RBI is providing a lot of headroom
01:17for the capital goods space to actually be
01:20a lot of headroom for the capital goods space
01:22to actually perform out there.
01:24So of course, there are a lot of areas.
01:26So we have highlighted, especially
01:28in power and the other spaces, like there
01:33is a strong pipeline, even for things
01:35like a non-renewable side.
01:36Let's say, for example, thermal power.
01:39Like based on our estimates, like 35 gigawatts of tenor
01:44are there to be coming up in the next few years
01:47itself, I mean, based on the published pipeline.
01:50So in a sense, yes, I agree that we have a very strong line
01:55moving forward, so be it data centers or even power
01:58transmission as well.
02:00So let's go project by project, Priyanka.
02:03And let me start with Wadhwan, which
02:05is going to be, once completed, one of the top 10 largest
02:10ports in the world.
02:12It's going to be an offshore port,
02:14and obviously, in Maharashtra, Palghar district, et cetera.
02:20First of all, do you see the timelines
02:22for this as being feasible, and the kind of companies
02:25that will be involved?
02:27It's, of course, being led by JNPA,
02:29but the kind of private players that could also be involved?
02:34And so we had actually, when we had put out
02:38a thematic on the ports and logistics sector
02:41sometime in March of 2024, so we had actually
02:46discussed the potential of Wadhwan in that.
02:49So the issue that happens is JNPT
02:52is kind of almost congested, so as to speak.
02:56So today, JNPT is doing something
02:58like a 7 million TUs plus.
03:01And there is a potential to expand it
03:02to maximum of, let's say, 10 million TUs.
03:05And what do you do after that?
03:06So of course, the Wadhwan decision makes rational sense.
03:11But having said that, we also have a track record of projects,
03:15let's say a Western DFC or something,
03:17which has taken a fairly long period of time.
03:21So I would say that the project is definitely needed.
03:25And if we go by, let's say, the Vision 2030, or even
03:29the Vision 2047 maritime documents,
03:32clearly the government would want
03:35to go in a landlord sort of a model.
03:37So eventually, the terminals, whatever comes up,
03:41will get privatized, essentially a private terminal operator.
03:45So that will follow.
03:46But honestly, very difficult to comment whether the timelines
03:51would be met.
03:53On the other hand, we are, at the same time,
03:55seeing interest from private players,
03:57let's say, beyond Wadhwan.
03:59So for example, JSW Infra, which we
04:01had highlighted in our more recent report,
04:04putting out a bid for Murupe, which is, again,
04:07quite close to Wadhwan, actually, as an alternate port.
04:10So those sort of developments are happening in this space.
04:15Priyanka, good morning, Neeraj here.
04:16So I'm trying to now bring the investing in the markets
04:19angle to this as well, based on either the RFQs or the cabinet
04:24decisions or port development promises made
04:27by private players, and the capacities of the players
04:31who execute some bit of those projects as well.
04:34Where is it that you believe the biggest bang for a buck
04:38over the next three to five years lies?
04:40Is it in pure play, Infra, and construction companies?
04:44Or is it in the pick and shovel suppliers,
04:47which might be ancillaries to some of these projects?
04:51How do you view this pocket from an investing lens?
04:56So from an investing lens, we have
04:58to see it both from, let's say, the growth prospect
05:00point of view and, let's say, where, essentially,
05:03in the valuation heat map, things stands out.
05:06So that's at least how we look at things.
05:09From that, what we say is that I would rather prefer,
05:13let's say, asset-based models, essentially.
05:18Like, for instance, as I was just briefly highlighting
05:22just a while before, let's say, for example,
05:25a JSW Infrared company.
05:27So they will typically be participant in this,
05:31let's say, the port privatization angle.
05:33Rather, I would say birth privatization angle.
05:36And we have seen this quite in play,
05:38let's say, when they had taken up assets in Paradim.
05:42So I won't be surprised.
05:43And we had put that out in our reports
05:45as well, that we would actually be betting on such players who,
05:51I mean, relative to, let's say, the industrial space,
05:54would have a relatively fairer multiple.
05:56Of course, they have rallied as well.
05:59Even after that, I would say that it still makes sense,
06:03I mean, on that front.
06:05As far as, let's say, the capital goods point of view,
06:10there would be capital goods companies which
06:12would have some place in it.
06:13But I would say it would be fairly limited in that,
06:18because a lot of the companies, let's say,
06:21or Adani, or, for example, JSW, tends
06:26to do a lot of activities in-house, let's say.
06:31OK.
06:33Priyankar, what is the runway of growth?
06:35Sorry, one last question from mine.
06:36What is the runway of growth for some of these?
06:38Because a lot of times, people tend
06:40to look at the rearview mirror and say, for example,
06:42L&T has gained so much in the recent past.
06:44Can it do more?
06:46How long is the runway for growth for something like L&T?
06:50Yes, so based on project pipelines
06:53that we have assessed across various sectors,
06:57I think for L&T, a 13% order inflow
07:00can go right up to FY30 is clearly doable.
07:04And that is assuming that they are
07:06able to maintain their win rate across various sectors
07:10at the same level as it is today.
07:12So we are not assuming any gains out of that.
07:15Given that the project sizes are becoming larger
07:18in a lot of spaces where the competition may probably
07:21be a bit lower, so the growth rate
07:24can even be higher than that.
07:25So I would say a 13% order inflow, Craig Kager,
07:30should be a reasonable estimate for, let's say, an L&T,
07:35let's say, the core space.
07:37So this is, of course, a combination of both India
07:40and, let's say, the Middle East.
07:42We see, actually, growth being strong, actually,
07:45at both ends.
07:46So one part is, of course, let's say the power transmission
07:50side of things, where in a total nutshell,
07:53we are expecting maybe close to 3 trillion rupees of APEX
07:57in all.
07:58So that is required for integrating
08:00this 500 gigawatt of renewables that needs
08:03to be put into the system.
08:04Then we have the issue of peak power deficits
08:08suddenly cropping up.
08:10So in that sense, we have a capacity shortage in thermal.
08:13So government is speaking of 80 gigawatts
08:16of thermal power projects.
08:18And based on our prospect analysis,
08:20we have done around 36 gigawatt is visible right now
08:24in terms of tendering pipeline.
08:26In case of renewables, we did a similar prospect analysis.
08:29103 gigawatts of prospects are visible right now.
08:32So on a base of close to 200 gigawatt,
08:34you have a visibility of 100 just right away.
08:38So in a sense, this is a path that we are going through.
08:43Then in other spaces, like data centers, for example.
08:45So we are slightly under 1 gigawatt.
08:48So Priyanka, I'm sorry.
08:49I'm completely out of time.
08:50So just wondering if I can lay a number to that.
08:52You think the runway is there for the next five
08:54years at the very least?
08:57Yes.
08:57So at the very least, at least till FY30 is how I will put it.
09:02OK, got it.
09:02Sorry, Priyanka, but completely out of time today.
09:04But we need to have a deeper conversation on this
09:07because you've written a fantastic note on Larsen
09:09and Toubro amongst others and would
09:11love to probe some of the finer points of something
09:13like that kind of work.
09:14But thanks for joining in today.
09:16Thank you.