Look at large & midcaps with value: Sanjiv Bhasin

Sanjiv Bhasin, Director, IIFL Securities, says “if you are looking to put your money into some of the fintechs, PB Fintech is one outperformer. I think the broader market will continue to outperform, given that PSU banks, PSU’s ownership, real estate are going through the roof. Now, that may not continue once we go through the budget, there will be some flattening but I can find value in a lot of stocks, particularly some largecaps and midcaps where I see a lot of value and where one should be putting your money.”



What do you make of yesterday’s market action? The market perhaps witnessed pre-budget jitters. The star of yesterday was clearly the broader end of the market with the smallcap index hitting a record high.

Sanjiv Bhasin: Well, that has been the trend. People are missing the woods for the trees and there is extreme buoyancy and bullishness on the midcaps and that is where money is being made. Now, you can say that there is a bit of froth, but if you have been talking about that for the last four months, then you missed the rally.

By the way, Two days back, I gave you a SME stock idea – Electro Force – and gave you the reason behind that. In two days it hit the target of Rs 115 and hit Rs 148 by the way. I think the standout here today will be PB Fintech. I have been advocating PB Fintech and Paytm for a long time and PB Fintech has been my conviction since I met the management. Now, look at the numbers, EBITDA positive for the first time and that also with a huge margin jump.

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This company can talk of even jumping up to two-and-a-half thousand crore in the next five years. So, if you are looking to put your money into some of the fintechs, PB Fintech is one outperformer. I think the broader market will continue to outperform, given that PSU banks, PSUs, real estate stocks are going through the roof. Now, that may not continue once we go through the budget, there will be some flattening but I can find value in a lot of stocks, particularly some largecaps and midcaps where I see a lot of value and where one should be putting your money.

And what do you make of the data point, the fact that after seven years, Tata Motors has pipped Maruti Suzuki to become the most valuable auto company. This is, of course, using Tata Motors and Tata Motors DVRs combined market cap, but a feat nonetheless.

Sanjiv Bhasin: Well, stellar. It is really a true conviction. Hats off to the late Rakesh Jhunjhunwala, when he put his money where his mouth is. He bought four-and-a-half crore shares at Rs 130-140 level, when all was doom and gloom and look where Tata Motors is, it is riding its way. So, Rs 1,000 is on the cards

I think the numbers will be very strong and it is evident that their foray into EVs has played out very promisingly. I think if there is a placement here, it could even be debt-free in the next two years. So, I am very optimistic. As a disclosure, Tata Motors is also in our portfolio and I would suggest another Tata stock, Tata Comm. We have not seen anything from Tata Comm yet, the delivery, the undersea cable, the type of volume and breadth they are seeing from the management talk, I think Tata Comm is here to stay. This stock is another multibagger in the sense that this can easily scale up to Rs 2,500 in the next two years.

Let us understand the real estate stocks. I remember distinctly a couple of weeks ago, you said it is time to lock out real estate stocks. Why is that?

Sanjiv Bhasin: No, I felt DLF and Godrej had reached some pinnacles. We have not fully exited the stocks. We have booked profits because we want to get into other spaces and like you said, now the whole scenario is changing. Where have you seen even midcaps or penny stocks go up four times. So, we are invested. If you want, I can give you one pick, but I will keep it for tomorrow morning where I can give you one very-very good real estate name which I think can double from here. So, save it for 8 o’clock tomorrow morning, that will be my top pick on budget day and I think there will be a lot of money being made by investors in this real estate stock.

How are you reading into earnings from say, a Voltas? It is pretty muted in terms of the quarter gone by. They have missed profit estimates for 11 quarters, and then there was SRF as well, which pretty much on all counts was a bit of a miss. Are you reading?

Sanjiv Bhasin: We are aware that Voltas had some issues in the Middle East which they are providing for. It still has a very good market share in the AC market and this is a season where the north is going to be much lower on the volume side. It is a quality stock which is going to be the consumer arm for the Tatas and I would expect maybe this quarterly miss to get priced in.

It has been a laggard on earnings but we are looking at the future. We think the electrical business is doing well and sooner rather than later once the provisioning of this Middle East is over, they should have a better chance over there. SRF’s specialty chemical business is on the downside, but their nylon cord and the other businesses are doing extremely well. Yes, this quarter was weaker than we thought. But look at SRF in the hemisphere of the China slowdown for environmental and speciality chemicals angle.

That is coming back because now China is being rerated and coming back to the economy. There has been more money printed there. They want their industry to do well. If you are looking for quality stocks, then SRF will fit your bill on this weakness of numbers to be a buying opportunity.

What are your thoughts because it has been nothing short of a pretty stellar quarter by PB Fintech. How have you read into the numbers and what does this spell in terms of the road ahead for the stock?

Sanjiv Bhasin: So, thumbs up. This has been my top pick on your channel for the last many months and I told you, if you want to put your money, PB Fintech and Paytm on declines are buys. We have both of these in our portfolio. In fact, they are two of our top fintech holdings. PB Fintech numbers have really been very-very pleasing. The management is very optimistic of the growth and if I think among fintechs, this is one space where you want to be, then today is the day, put your money where your mouth is. This is hitting a 52-week high. A 30% upside in the next six months is very much on the card on PB Fintech. As a disclosure, this is in our portfolios and we have no intention of cutting down positions. In fact, if we do get an opportunity, we will add this stock.

How have you read into all that we have witnessed in Reliance Industries and the kind of volatility that we have seen in the stock price. We had the earnings reaction as well. It is, of course, multiple levers of growth. But what do you think are going to be some of the key drivers for Reliance Industries from a fundamental standpoint?

Sanjiv Bhasin: Now that it has reached the milestone of Rs 20 lakh crore, there will be little volatility and we know that HDFC Bank and Reliance have been the pillars of weightage as far as the indices go. Two days back, we saw the biggest ever rally in Reliance. Yesterday, there was a profit booking. But look at the unlocking, look at ARPUs which are growing, look at retail which is growing, the new energy business which is doing well, the OTC business.

At Rs 3,000, it is getting fully priced, so we have to be watchful. We will wait for more disclosures. The unlocking or the demerger of some of these businesses or the listing will be the key for them. But we still think that this is one power engine which you must buy on decline. It had its time in the sun in the sense of consolidation. It has given a very sweet upside. But now, I would be incrementally positive on some of the banks, particularly largecaps which should do a catch-up.

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Harry Byrne

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