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00:00Sandeep Agarwal, Fund Manager and Co-Founder at Sovelo Investment with us.
00:03Sandeep, very good morning to you.
00:04All right, let's talk about the big three that we've honed in on.
00:08So RIL, Wipro and HDFC Bank, the three big movers.
00:13Let's start with an RIL.
00:15And and, you know, sort of mixed views from a lot of houses this morning
00:19on whether it's still a topic in its space.
00:24City thinks three of the four verticals have not really performed.
00:28What is your take on RIL?
00:29And are you looking at, you know, maybe this heavyweight
00:33really pulling down the index today?
00:36So good morning and thanks for having me on the show.
00:39First of all, on the fundamental side of the reasons, if you see the OTC,
00:42OTC business has seen some weakness, there is some pressure from the gasoline side.
00:48And also, you know, retail has not done so well as was anticipated.
00:53So I think these two things have led to some, I would say, in line
00:57or kind of, you know, lower side of the expectation in numbers.
01:01And even, you know, the ARPU on the Jio side has been flat.
01:05So all in all, you know, if you see the results,
01:08while there is no big negative surprise, but there is no nothing
01:11also to cheer about it.
01:12And whatever benefit you will get on the ARPU front is forward looking.
01:17It will start from this quarter
01:18because the hikes have happened at the far end of the quarter.
01:21So I think, you know, from that perspective, this is not a number
01:24where people will rush to buy.
01:26But yes, the new energy commentary, if you hear a lot of positives there,
01:325000 acre complex for the module is almost ready to start production.
01:379.1 gigawatt is the capacity, the subsidies, all those things.
01:41You know, it is a futuristic business.
01:43The new energy is doing well.
01:45And I think, you know, while you may not see a big uptick,
01:49but at the same time, I don't see a very big downside.
01:52Also, this large heavyweight index stocks can go up five percent
01:57or down five percent on good or bad numbers.
02:00I don't see much more than that.
02:02But I think from a longer term perspective, you have a traditional piece
02:07which is doing which is, you know, cash cow and the new business
02:10of that flourishing wealth.
02:11So I think it is a it is going to be a very good story for next five, seven years.
02:16We take long term calls.
02:17So I think it is a good story from that perspective.
02:20Yeah, I understand.
02:21And I think, Sandeep, it's also Samina joining in.
02:23Well, I get your point that you got to make investments for the long term,
02:27and that's the only way to create significant wealth.
02:30So RIL is on your buy list.
02:31Just to quickly reiterate that after what we've seen on the earnings,
02:35Sandeep, yes or no answer?
02:37I will still wait because, you know, we want a better entry point.
02:41So we will still.
02:42But we are monitoring it very closely.
02:44We are monitoring, in fact, all the both the private banks, also
02:48the HDFC and the Kotak, and we want better entry points.
02:52But I think, you know, we are very close to them looking attractive now
02:57because I think there is a peak of pessimism in the private banks.
03:00And both things cannot happen, that economy grows
03:04and these banks don't do well because they are quasi proxy.
03:06What has happened is last one and a half, two years,
03:09the equity risk premium, the perceived equity risk premium in the market
03:12has gone down massively in the retail investors mind.
03:15And because of that, a lot of money, which a good portion of money,
03:19which used to go to the deposits have also been diverted,
03:23I think, into the equities.
03:24And because of that, the deposit growth is also weak.
03:27And also, you know, these private banks don't have much access
03:30in the remote areas where still deposits are the key saving instrument.
03:33And I think both the things together have come up and are hurting
03:36the deposit growth and deposit growth is not there.
03:38Obviously, you will have to choose between growth and margins.
03:41And obviously, it is better for banks to choose for margin
03:44and wait for growth.
03:45And that is what is happening in both the banks also.
03:48Sandeep, let's quickly change gears and move from Reliance Industries
03:53to the tech space.
03:55Wipro announced numbers on Friday with that the FAB4 IT companies
03:58have declared their earnings.
04:00So while TCS, Infosys and HCL Tech managed to beat street expectations,
04:05from the look of it, Wipro has disappointed the street.
04:08Which IT company are you buying post the first quarter earnings?
04:12So let me put it this way, you know, this business is a B2B business.
04:16And if you see last three decades of track record,
04:19it is leadership driven business.
04:2030-40 clients decide your growth and your future.
04:23And after 2007, I think except for a few quarters when, you know,
04:27they have done well, Wipro has been lagging and going through tough time.
04:31From this top leadership perspective, they had made few changes,
04:34outsider, insider, everything they have tried and it has not yet worked.
04:38And I will say that same repeat, same thing that, you know,
04:41till they get their leadership right from at least the top management
04:44and some portion of the senior middle management,
04:47the growth and other things will take time.
04:49I think this company is now a cash generating company kind of stock
04:53to play where buyback and other kind of supports keep coming in.
04:57But from the growth, it is always lagging.
04:59So I don't believe that Wipro should be seen from a perspective of the sector.
05:03It doesn't truly represent the sector currently.
05:07I think more closely, Infosys, TCS should be seen
05:11as representing the sector.
05:12But having said so, remember, this is the mature sector.
05:15So we will buy value picks.
05:18I run a PMS and my clients hold some of the stocks.
05:21So I will not be able to explicitly talk about one stock,
05:24what I would like to buy.
05:25But we like stocks in the large cap names, which are reasonably priced
05:29and where there are possibilities of, you know, turnaround.
05:32In the expensive mid-cap IT services, we don't like anything.
05:36And in the ER&D space, it is a structure story of 10, 15 years.
05:40So we have to buy it expensive.
05:41That is the way I would put it.
05:43Sandeep, in terms of now that we have enough visibility
05:47on how IT companies are doing, how would you rank
05:51TCS, Infosys, Wipro and HCL Tech?
05:55And which would be your top pie?
05:57So I think HCL Tech tick marks both growth
06:01growth and potential growth and also the valuation side.
06:05I think it should be the top choice and then followed by obviously,
06:08you know, Infi, TCS and last choice would be Wipro.
06:11Although Wipro significantly scores better on valuation, but at the same time,
06:16it is really, really lagging on terms of growth.
06:19So that is the way we look at.
06:21But we also, you know, would like to take Myndra because, you know,
06:24there is a leadership change.
06:26The telecom has almost bottomed out.
06:27So there is a big uptick which can happen primarily led by margin improvement.
06:31I see margin improvement, in fact, in the whole sector.
06:34And that's the reason I believe that, you know, this is the beginning
06:37of a great cycle of earnings.
06:38So EPS will continuously be upgraded for next three, four quarters,
06:42and that will lead to substantial returns in the sector.
06:46By substantial return, I mean 15-20% in such a year where, you know,
06:50last two years have been phenomenally good for the index.
06:52So in this year, if you get 15-20% safely in some names,
06:57it is a great return in my view.
06:59Right, Sandeep, very quickly from the banking names that reported earnings,
07:03HDFC Bank, Yes Bank and Kotak.
07:07What are your key takeaways?
07:09Are you buying any of these three banks?
07:11And also amongst the PSU PAC, the outperformance on earnings is phenomenal.
07:15We saw Bank of Maharashtra.
07:16We saw Union Bank this morning as well.
07:18So very quickly, your take on the three big banking reportings.
07:23So I think, you know, HDFC and Kotak will not give you immediate return.
07:27You will have to, you know, invest and wait.
07:29And that is the right way to, you know, make money in long term
07:33because they are going through some challenges on the deposit front.
07:35They have to choose between growth and margins.
07:37And currently there is a lot of confusion what to choose.
07:41Every quarter sends some different signs.
07:43But I believe at this price, you can go wrong on time correction side,
07:47but you cannot go wrong on the price front.
07:49So, you know, long term investor can start looking at these names.
07:54We are looking at these names.
07:56As far as PSU banks are concerned, see, remember,
08:00they have access to the remote areas where, you know, people still prefer
08:03bank deposit over other asset classes.
08:05And that's the reason they are benefiting and private banks are struggling.
08:10So it is the whole story of banking sector today boils down to deposit growth
08:14because that that is required for profitable growth.
08:18And that is lagging in the private banks.
08:21And it is doing OK in the PSU.
08:22So PSU will still have some run till, you know, the equation meets.
08:28Just just so HDFC Bank this morning is a buy or complete hold or a sell.
08:36One one quick call, Sandeep.
08:39No, from a long term investor perspective, people should look at.
08:42It is very difficult to give trading call because we we are more into
08:45fundamental side, we manage assets.
08:47So I will not be able to give a trading call.
08:49But I think, you know, these are good businesses and they will do phenomenally
08:53well if you look at from three to five year perspective.
08:55OK, so long term business and long term call is positive.
08:58Thank you so much, Sandeep.