Pashupati Advani, Founder, Global Foray, says “PSUs with high earnings and high dividend payouts are the ones that look attractive. I would rather not go into the list of names, but they are out there and you can do your own research and see which are the ones paying high dividends and which are the ones that are making good earnings. Anything leaning towards defence has got an extra boost this year.”
Two big upgrades have come in today. One from Morgan Stanley, the other from Goldman but largely the gist of it is, barring election volatility, the elements of the market look okay. Would you agree to that? What is your reading? Have you had a view on these two notes?
I agree, I have not seen these two notes because they have just come over the weekend. I definitely agree but the thing that concerns me is that there is some FDI selling still going on. That is not a good sign. But that could also be because people are trying to book profit before the end of November and get their NAVs and maybe we get a good January effect like we have had probably eight years out of 10. So I think we are off to the races.
Definitely the comparative trade between India and China looks better for India. But we are also on the higher side. Therefore, people are taking profits against their overall emerging markets portfolios which have some dogs in it because of Russia and because of what has happened in the Middle East, they have probably lost some money there. They are trying to book some profits in 2023 because most of the funds are in the calendar year. So those are my thoughts.
PSU banks have gone through their fair share of consolidation even after good results. Look at SBI, it has not even been able to cross Rs 620, the recent peak. Some others have had similar fates. But the sense is that capital goods, mining PSUs where efficiencies are coming now, could be a good place even from here on. Which end of the PSU basket do you favour?
What the government is doing is very clear. It needs to spend on infrastructure to make sure that there is job creation. So anything in infra that is going to come along would be a good place to be. On the other hand, you are talking about the other PSUs and the government also wants a dividend. So from the ones that are actually generating good cash flow, they want to try and promote those and they are also trying to do divestment.
So the juicy ones which have got high earnings, high dividend payouts are the ones that look attractive. I would rather not go into the list of names, but they are out there, you can do your own research and see which are the ones paying high dividend and which are the ones that are making good earnings. Anything leaning towards defence has got an extra boost this year, because the government is spending more on defence and these guys will also get better earnings and also make higher dividend payout so that is my thought on the PSU bucket.
Coal India is being seen in a new light right now. Look at how NTPC has surged to almost a 14-year high. Does it appear that this ESG kind of a discount which some of these legacy power energy companies like NTPC and Coal India were getting has peaked out? Is the market taking a fresh look at these kinds of plays?
For sure, the ESG factor has become a little less and people are beginning to be a little bit soft on it. But, Coal India is a typical company where it has high earnings, high good cash flow and is a typical candidate for a high dividend. So, it is definitely going to get better results and probably declare a dividend in March or maybe April based on this year. It is part of the government’s philosophy of getting money back. They are going to spend money on the one hand and on the other hand, they want dividends and disinvestment.
So, Coal India is the best candidate for getting the dividends and perhaps even selling off a few percent of stock into the market. So, that is a possibility as well.
One sector which has really emerged back after the haydays post Covid outbreak has been pharmaceuticals. IPM value growth has clearly doubled in October versus what we saw in September. Volume growth has also shot up quite a bit. Sun Pharma, Mankind, JB Pharma, IPCA have managed to beat IPM growth. Are you tactically looking at any of these pharma plays?
I have liked the pharma sector for a long time and unfortunately watched it go down for whatever reason, probably mainly because of the fact that they were all getting what I call bad chits from the USFDA and having to fix their facilities. But having fixed them, having got them back on track, those companies are back to solid growth. Sun Pharma as one of them. They had to digest the Ranbaxy acquisition and then they had some problem with one of the plants that came with it, but they fixed it. Everything has been changed with state-of-the-art equipment and so we are off to the races.
I think it is fantastic for the whole Indian pharma industry as a group. They have got their act together. And those that have not, the rest of the industry is pushing them. So it is probably a good sector to be in. I am very comfortable with whatever shareholdings I have in that sector.
You spoke about infra up till now. We have seen Siemens, ABB version, the private sector, large capital goods guys which have really done very well. Cummins has done well also on the market as well as earnings. The PSU basket has been mixed. Would you take a bet here?
BEML is a good stock. It is being run properly and it is doing well. They have also got a niche where they are going into some new technologies, which also has been very innovative from the government side. I think that it is again high earnings, high dividend, and therefore another candidate for potential disinvestment. So it ticks all the buttons.
We have been in the IPO market for a little bit of time, but we have not seen too many government IPOs. We will probably see some government IPOs in the first quarter of 2024. And let us see what happens. That is good for all concerned because we will have more paper in the market.
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