Porinju Veliyath on Raymond deal, the next basket for multibaggers & more

Porinju Veliyath, Founder & Fund Manager,Equity Intelligence India, says it is not going to be easy to create alpha investing in the well-known largecap companies. Of course, investors can still invest in those companies. We believe in the India story. I still believe that India's era is just starting. India is where China was in 2007, before the Global Financial Crisis and China took really advantage of those things.

Porinju also said not only the central PSUs, even some of the state PSUs, are very wealthy. Better managed, some of these companies could be multi-baggers.

How have you been?
Yes, it is great going and very comfortable about the market and good times are there.

Good times are there, especially given that you bought Raymond, what, one-and-a-half-year ago?
Yes, one-and-a-half to two years ago. We discussed it a couple of times when we were talking about changing investor perception about promoters and companies. I always believe we have more and more Raymond in the midcap segment in the Indian markets, dozens of them. That is where direct investors should seriously look at and in the next, two, three, five, ten years, it is going to be a great opportunity for the investing community to create alpha.

That time your conviction was not centred on the fact that they will become a real estate company or will sell their male grooming segments. It was centred around the fact that here is a national apparel brand and was available at a market cap of less than $2 billion; that is the reason why you bought into Raymonds.
$2 billion is far away. It was some Rs 2,500-3000 crore market cap two years ago. We were lucky to have that conviction and we went on to buy nearly 5% of the company for our clients and it was really amazing. So, when we talk that Raymond sold for so much money or whatever, it basically means all these values, these assets were there in the company. That is how one should look at it, they need not really sell it. Even otherwise that value is there.

For long-term value investors, all these are very integral parts of it. As we discussed, that trigger for me was the planning of IPO by Manyavar. In those days, the media was reporting that it was going to come out with an IPO of Rs 20,000 crore. I was really surprised. A company which is only a fraction of Raymond is quoting 10 times of Raymond. There is a huge mismatch or gap in valuation.

So, it is not an easy thing, all the new IPOs coming in or approaching investors, had a different kind of valuation dynamics than the traditionally established brands and companies. A lot of people, promoters perhaps of the listed companies, used to feel we should delist and come out with an IPO next year to fetch a much higher valuation. Anyway, we have gone through a two-three year period. Again, things are stabilising and the fancy for the IPOs is sobering down. I think markets are getting much more healthier and matured.

What have you acquired? What we are discussing today is the stock you bought two years ago. Now markets have discovered it. I am sure you must have done your homework on which is the next big one.
Many of them we are holding already and which are still to be discovered by the markets. Markets have grown so much and have become much more sophisticated. The regulatory things are much more in place. We have a very sophisticated capital market system in India and a very large number of players to say to grow further.

It is not going to be easy to create alpha investing in the well-known largecap companies. Of course, investors can still invest in those companies. We believe in the India story. I still believe that India's era is just starting. India is where China was in 2007, before the Global Financial Crisis and China took really advantage of those things. Many of those things were in favour of them and they had superior growth since 2007. Of course, they were growing earlier also.

But today, with the new geopolitical developments in the last one-two years, the Russia-Ukraine war and many other economic developments, India has proved to be lucky and we are in a sweet spot. I have been maintaining that equity investors in India are very lucky. Look at the way how most other markets including the western markets are behaving, how they have made huge erosion in value of the investing community. India is doing very well.

But what makes me more excited is that for the next 5 to 10 years, the macros are so much in our favour. The political leadership is doing a wonderful job for the long-term sustainable growth for the Indian economy. The financial discipline we are holding today is amazing. Indians should thank the current government for the financial discipline, the way our financial and banking segment, that sector has been strong in the balance sheet and complete clean up, the required law, enactments like IBC.

We are in a very different kind of India today. Maybe, we should come beyond that petty politics and think of the economy, long-term growth and sustainability and most importantly, the stability. All those ingredients are in place. Today, India means scale. Look at the scale of infrastructure projects and other aspects of the economy. We are not only making the tallest statues in the world, we are also making the tallest railway bridge, great expressways, the Vande Bharat trains…

Soon we'll be making something really small, we are also setting up semiconductors facilities. So tall and small, big and beautiful, everything comes here. But if you really have to translate that into a thought. For example, you bought Raymonds, you bought into Tata Communications, you bought into Tata Consumer, you were betting on the Tata turnaround a couple of years ago. What is the next turnaround you are betting on?
I remember two years ago, when you asked me what I was looking at, I talked about the Tata Group. I think there are still companies in Tata Group with very big potential for sustainable rewarding of investors, many of them are still there. Tata Consumer, of course, has gone really like a 10 bagger and is staying steady at that level, consolidating.

Pharma is something we recently talked about, it is already moving. Pharma has been beaten down for a while and there are very steady, stable pharma companies which are very attractively priced and some of them have gone up by recently, maybe 20-30-40% after decades of depression.

One has to be very selective in pharma. I am not in a position to talk about individual stocks out there. Two days ago, we were talking about Gujarat PSUs. There were indications a year ago, some of the government officials were talking about it. It is a paradigm shift happening in the culture of managing PSUs. Gujarat as a state has taken that initiative. They have been focussing on capex. If there is a corrupt bureaucracy, it is easy to make money when the capex is done. But if you pay all the dividends to the investors, they do not make anything because they are not shareholders. So, this has been a culture since the last many decades in India. There is a very big shift happening in this culture.

It is very structural, I would say PSUs, not only the central PSUs, even some of the state PSUs, Gujarat has taken the initiative, that is also as a sector, some of them are very wealthy. Better managed, some of these companies could be multi-baggers.