Sanjiv Bhasin, Director, IIFL Securities, says “three themes which have played out very well but you will have to see how you diagnose the risk reward. Real estate is doing extremely well. I think Indiabulls Real Estate has seen its woes of problem vis-a-vis merger plans with Embassy. At 95, 97 this has a very good risk reward of maybe doubling once the merger goes through and we know Embassy is a very credible name that will add on to it. The second stock in the lending space there is a stock called Capri Global. This can hit a market cap of Rs 40,000 crore in the next two years. These are two midcap picks. The third pick is a largecap, IOC. This quarter, the profit was Rs 12,000 crore. It will do 50,000 beyond profit in this financial year coming year.”
What is happening in Paytm?
Sanjiv Bhasin: Well, Paytm has taken away my sleep and unfortunately we have to live with the reality. It is a big blow. We will see how it goes about but there is no running away from the point that it is a very big blow and it is going to disrupt the entire UPI setup, the whole environment or whatever the digital app performance is. We will wait for more colour but it was a very big move and it will have repercussions in the short term.
What is the view on this entire manufacturing push because a lot of interest seems to be hinging on this space and there have already been announcements in terms of PLI, etc. How do you see this theme really playing out on budget day?
Sanjiv Bhasin: PLI was a very big move. We know slowly but surely the world is moving from China. It is not a one day or a one year or a two year effect but you can already see how much of inroads you made from textiles to semiconductors to cell phones. You name the industries getting the right momentum. Obviously, what we would want is the continuation of the government and the reform, but I think it is a very big step.
Also, in yesterday’s US correction, the yields have fallen. If the yields come to 3.8, Indian outperformance will continue. Notwithstanding today’s event, I think PLI is a major reform which the government has undertaken and there is no looking back.
What the outlook is when it comes to this overall rural theme playing. Do you think that the market is hinging on any sort of rural welfare schemes that could have an incremental impact on maybe some stocks?
Sanjiv Bhasin: Yes, rural was a laggard for the whole of last year and that was evident in the two-wheeler sales or the performance. But what a comeback! If interest rates are going to be status quo, inflation is moderating, the crop has done well, rural incomes are here to stay and there will be some sort of a fillip to that which is more to do with politics. But I think this government has been able to balance both the edges very well. We had record GST numbers. The deficit is at an all-time low. So, they can go ahead with a little bit of tinkering on this.
I think rural is a very good theme to play, particularly on the auto side where two-wheelers have been actually big outperformers and can continue. Just to tell you, Hero used to sell in one-and-a-half year back seven-and-a-half lakh motorcycle. It is still doing 4.5, 4.8. If it goes back to seven, then the stock can be even five-and-a-half thousand, that is what I mean.
Cannot let you go also, have to get a stock idea from you.
Sanjiv Bhasin: Not one, I will give you three ideas. Now look, these are three themes which have played out very well but you will have to see how you diagnose the risk reward. Real estate is doing extremely well. I think Indiabulls Real Estate has seen its woes of problem, but now with the Embassy there, the demerger will get done by the 12th.
Even stocks which are in NCLT and not working, are seeing a market cap of 1000. At Rs 5,000, you cannot have a market cap of one of the largest real estate owners. I think at 95, 97 this has a very good risk reward of maybe doubling once the merger goes through and we know Embassy is a very credible name that will add on to it,.
Two, in the lending space there is a stock called Capri Global. This stock has been an outperformer purely on the back of asset under management growing at 45% for FY24. It is expected to do 25% in FY25. It has a market cap of Rs 18,000 crore and a book of Rs 20,000 crore. 30% is gold loan and they do not have a single uncollateralized loan. All very asset light models with no uncollateralized loan and a book growing at the speed of 30% to 40%. 18,000 is a very-very reasonable market cap for an NBFC the size of which it is growing. It has 1050 branches. I think this can hit a market cap of Rs 40,000 crore in the next two years. These are two midcap picks.
Third pick is a largecap one IOC. This quarter, the profit was Rs 12,000 crore. It will do 50,000 beyond profit in this financial year coming year, together OMCs and energy stocks are the flavour of the day, month and the next year and I think IOC is headed to Rs 250 according to me, it can double from here purely on the back that refining is both soft and hard unlike Reliance and their market share is only getting better. So, IOC is my third dark horse.
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