ETMarkets Smart Talk: Renewable energy could produce next multibaggers but tread with caution: Arun Chulani

“Clearly, there is a roadmap for India to reduce its reliance on carbon energy with the government’s push on clean and alternative energy from renewables to biofuels,” says Arun Chulani, Co-Founder, First Water Capital.

In an interview with ETMarkets, Chulani said: “Multi-baggers in this (renewables) sector can possibly be found in this sector, but good companies don’t always represent good valuations, so proper research would be required to identify which ones,” Edited excerpts:

How do you rate the Interim Budget on a scale of 1-10 (10 being the best) and why?
Arun Chulani: Given that this is an election year, no real changes or surprises were expected. With that in mind, then it’s pretty positive. It’s generally been a continuation of the previous themes with a continued emphasis on Infra.

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Rs 11.11 lakh cr – a number which has caught the eye of many. What do you make of the current outlay and the impact it will have on the economy?
Arun Chulani: At face value, capex spends increased from INR 9.5 trillion to INR 11.1 trillion and again this is a continuation of the Government’s efforts to make India an efficient country to do business in.

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Though, if one looks at the underlying sectors of roads, railways, and the like – it would appear that spend is poised to grow in single digits.

Much of the emphasis is on debt and equity infusion, which in some cases will lead to further capex from PSUs.

This is just the interim budget, so post-election there may be some further tweaks and impetus, but strong infra definitely has a multiplier effect on the economy as India should benefit from “last-mover advantage”.

By this, hopefully we should be equipped with the latest technology compared to some other countries that rolled out their infra perhaps decades ago.

A lower-than-expected fiscal deficit target of 5.1% of GDP for FY25 and even lower 4.5% by 2025-26 – how do you read this?
Arun Chulani: The Government has on face value shown a disciplined approach, likely relying on the premise that private capex will follow the Government's lead.

This can be seen by announcements in the basic industry sectors, especially steel. Improved tax collections have also helped reduce the deficit.

What is your call on fixed income space? Yield dropped post Budget – does that hint something?
Arun Chulani: Gross borrowings came in lower than expected. I can hardly confess to being an expert in this space, though it would appear that the Fed is likely to cut rates this year, which may influence India to follow suit perhaps in part.

Which sectors are likely to benefit the most from Budget 2024?
Arun Chulani: Given that there has been continuation, at face value it would be the same ones that have been experiencing good tailwinds – on a high-level, the infra space and the industries that feed into it such as cement, steel, and other commodities.

For salaried investors how should one be looking at the Budget – are there any tweaks required for an MF portfolio?
Arun Chulani: There are too many elements to this question in order to give a comprehensive answer. The Budget in itself is unlikely to have much of an influence on a salaried investor.

But given that the market has risen decently, some may opt to partially rotate into large caps or partially de-risk. Others with a stronger appetite & deeper pocket may yet still average into the market.

So, there is no one size fits all. It depends on risk appetite as well as the mental and financial ability to absorb negative volatility.

Guessing what happens in the short run is not something that we can profess in doing, this maybe the top of the current cycle or it can still continue.

Although the Budget highlighted continuity of policies and more outlay – are there red flags that you saw in the Budget?
Arun Chulani: Nothing major, I guess we wait for the full Budget post elections.

What is your take on the rising interest of the government on renewable or green energy? Will this space produce maximum multi-baggers in the near future?
Arun Chulani: Clearly, there is a roadmap for India to reduce its reliance on carbon energy with the government’s push on clean and alternative energy from renewables to biofuels.

Crude and its derivatives are by far the largest import into India, with around 26% of total commodities imports.

The Government is right in focusing on this sector in order to strengthen our Balance of Payments and reduce our exposure and reliance on a commodity that can be volatile as seen by recent events.

Of course, given the tailwinds, multibaggers in this sector can possibly be found in this sector, but good companies don’t always represent good valuations, so proper research would be required to identify which ones.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of the Economic Times)


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