The infrastructure space in India is the biggest theme says Porinju Veliyath.
The government’s decision to spend Rs 3.96 lakh crore to build roads, bridges, airports and railway tracks will create huge opportunities in infrastructure stocks.
Porinju says that the market-cap of the stocks in the infrastructure segment will cross Rs 10,000 crore mark.
The Nifty Infrastructure index is up 20 per cent on a year-to-date basis, with Container Corporation and GMR Infra gaining over 42 per cent each. Adani Ports and CG Power have risen 40 per cent and 35 per cent, respectively, between January 2 and September 4. Among other top gainers from this space, Larsen & Toubro and Power Grid Corporation have surged 25 per cent and 18.50 per cent, respectively.
There are at least 20 companies in infrastructure in currently listed companies whose market cap can go beyond Rs 10,000 crore.
For an Indian equity investor this is like a dream come true scenario. The opportunity is large.
GPT Infra and GVK
GPT Infra and even GVK which we discussed a month ago. I have taken more than 5% stake in GVK which I disclosed publically. So, I am taking a bet. There are grey areas for example in GVK where there is a debt, there is contingent liabilities. Power projects are doing badly.
If you want to avoid buying this stock, I can give you a lot of reasons but I think it is near to zero, it is the value of this company today, maybe Rs 1800-crore market-cap. I started at below Rs 1000 crore m-cap recently. This company has very solid assets. The market is always focusing on the negatives because when there is a fear factor, then there are more concerns than looking positive about it. That is the general tendency of investors, trading community, the intermediaries looking at focussing on the negatives and the concerns. The positives are not valued fully. In infrastructure, everybody will agree India has a long way to go. Lakhs of crores of infrastructure spending is coming up… I am talking about trillions of dollars. Then only we will become a reasonably good level of accumulating 1.3 billion people. So we need to, it is compulsive kind of forces because of the political mismanagement of last 70 years.
Porinju also sees ‘enormous’ potential in the financial sector, where he has some holding including over 1 per cent stake in Emkay Global Financial Services.
Bombay Burmah Trading Corporation (BBTC) and Bengal & Assam Company
In December 2016, Porinju recommended Bombay Burmah Trading Corporation (BBTC) and Bengal & Assam Company and said they will become multibaggers. Bombay Burmah shares have risen 105 per cent since to trade at Rs 1,035.60 on September 4, 2017 from Rs 504.10 on December 28, whereas Bengal & Assam Company gained 73 per cent to Rs 1,718 from Rs 994.65.
Porinju is also playing on the turnaround theme. Recently, he acquired a small stake in Aarvee Denim. “It is a bet taken on turnaround plans,” he said. He bought the stock at Rs 36 on August 31, 2017 and it traded at Rs 47.60 in morning trade on September 5.
He is also betting on skincare, haircare and beauty solutions firm Kaya, which he believes is a great brand with a trustworthy management. Shares of the company are up 25 per cent year-to-date.
IZMO, Balkrishna Paper, DS Kulkarni, Cimmco, Palred Technologies and Aspinwall
IZMO and Balkrishna Paper are two other stocks where Porinju held over 1 per cent stake as of June 30, 2017. Among others, he also has over 1 per cent exposure to DS Kulkarni, Cimmco, Palred Technologies and Aspinwall.
In Emkay Global, do you think the brokerage business, the financing business has its niche pockets of outperformance is really a market share driven business? How much can you garner at what time? This is a theme I discussed one year ago when we had a market cap of $1.5 trillion. This means Indian market cap is at infancy and so the capital market, the intermediary activities have been at an infancy like we are nowhere. The broking or capital market related activities have grown manifold.
I was recommending Geojit (it was Rs 30), India Infoline and Motilal Oswal a year or even two years ago. These are the stocks I publicly suggested. I used to buy it also. In Emkay Global we are holding over 6% in our PMS. It is a bet we are making on a theme and something is available at Rs 100-200-crore market-cap with a potential of making it maybe half a billion dollars in the next few years time.
TCS, Infosys, Wipro and some ITC and Hindustan Lever
People go on betting on TCS, Infosys, Wipro and some ITC and Hindustan Lever. Better keep the money in the bank.
I did not buy HDFC Bank for the last five years in any case. It is great. People who bought it are smart guys but I have made much more money than HDFC’s growth.
I will not buy Bharat Financial. Actually one and a half years ago, I had tweeted basically indicating a sell on Bharat Finance and buy on Federal Bank. Federal Bank has given 140% return since then and Bharat Finance only saw some 20-30% up. So it is all about choices. We have so many choices in this country, one need not really go on a stock which media discuss or some 10 brokerage firms may report on it. Avoid such stocks, there will give you mediocre returns. You have to find the hidden gems and I am telling you-- we the investors in India they are so lucky it is a paradise for stock picking as I always put it. You have so many of hidden gems at any given time and this next two, three years our earlier theme of turnarounds see in a changing India, a structurally changing Indian economy, the real theme to bet on is turnaround companies.
One year ago Porinju recommended Bombay Dyeing on ET Now at Rs 60. I had tweeted about it also in which I talked about chor (thief) management meaning the not so ethical managements.
Porinju is bullish on Bombay Dyeing when the scrip was trading at Rs 62 a share. The stock quotes at Rs 141.35 today.
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