If I got a blank check, I will go and buy Reliance Industries: Sudip Bandyopadhyay
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Synopsis
“There is an exponential growth potential in Reliance. While both retail and telecom are well established, green energy is a new business where things are improving and looking up. It deserves a much better valuation. I will definitely go and buy Reliance Industries if I am given a blank cheque.”
Well, I am extremely positive. This is, as you rightly said, this IPO is coming from the Tata stable after a gap of about 20 years. Forgetting the history, look at what the company is focused on. The company is focused on two of the most exciting trends at this stage. One is transition from internal combustion to electric, that is as far as the automotive part is concerned and also going forward, self-driving cars. Plus transition, they are very much a part of all the major automobile companies. And that is one area which everybody is talking about. This is the biggest thing which is happening in the automobile sector. So, obviously, they are going to benefit out of this transition. And they are already working with companies like, of course, Tata Motors. VinFast which is one of the largest Vietnamese EV manufacturers, Tesla they have a tie-up with and so on and so forth.
Apart from this, the other segment which they are focusing now on is aerospace. Now, we know this is another industry which is booming. And there is talk of space travel and private space travel and what not. Under the circumstances, this is one other area where there will be significant demands going forward and Tata Technology is involved in that segment as well. So, both the dominant segments where Tata Technology is involved are supposed to be and are exploding at this stage.
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The entire retailing space the premiumisation wave means companies like Vedant Fashions are doing quite well given the kind of uptick we are seeing in this discretionary spend?
You are absolutely right and this marriage season you should also probably add Raymond to this. They have also launched an ethnic range to compete with Vedant Fashions. Overall, this space is exploding really and we are extremely bullish on Kalyan Jewellers as well. Titan of course but Kalyan is also doing a lot of things right and their expansion is happening rapidly and we have to remember that they are expanding in the northern market and eastern market where the margins are much higher. They are also using a less capital intensive model for expansion which is partner based and the same model is being replicated in West Asia as well.
So overall, we expect margins and return on equity to improve significantly for Kalyan, so definitely for a medium to long term Kalyan can be looked at. As far as the other names like Raymond's are concerned, a lot of noise going around Raymond for multiple reasons but the fact remains that the core business post exit from consumer items, which are FMCG kind of items, the business looks strong and can be picked up for a long term at current level as well.
I will be extremely careful. There is some excitement building up because China is making the right noises and expectations are that metals demand will pick up once again in China on the back of supportive government policies but I think we have seen this movie too many times, let us see things actually happening on ground in China real pickup in metal demand and only then I think I will venture into this.
Stocks Recommendations
If I had to give you a blank cheque right now which stock would you prefer to buy? give me one name?
If you give me a blank check I think I will go and buy Reliance Industries. Some research report also came out which tries to explain why investors are not looking at Reliance Industries at this stage but the fact remains there is a tremendous value unlocking. There is exponential growth potential in this particular counter, it has moved up a little bit post that report today.
What is your view? Is this a better way to play the entire real estate theme through the building materials, through consumer durables and cable companies?
Definitely, building material is a segment which is in big demand and there has been explosive growth in pretty much all the segments whether you look at the cables, pipes, cement, plywood and sanitaryware. All these are definitely worth looking at. The only thing you have to do is figure out the right valuation at which you want to enter and look at the growth path which is still left.
I would tend to think that it is safer to play through either cement or cables, both of which are looking good. As far as cement is concerned, we like UltraTech Cement, the industry leader and some of the smaller cement companies which are in central and northern part of India where there has been possible price hikes and a little bit of a demand supply gap where the supplier which is the cement manufacturers benefit so some of these smaller companies as well as UltraTech.
As far as the pipes are concerned, we like Welspun Corp. This is one company which has moved up in the recent past but not as much as other companies in similar businesses and the market is explosively growing, both as far as construction Nal Se Jal scheme of Government of India and Har Ghar Jal, are concerned and so all these schemes help the pipe manufacturing companies. This is one of our favourite picks in the industry.
What is your view on Honasa Consumer if you track this one and let us put Nykaa in the same basket? Have you been tracking these two companies?
I will be a little careful on Honasa, predominantly on the fact that the valuation at which it got listed and where it is trading, a lot is being expected out of a new brand and a lot is being expected out of other brands other than Mamaearth to deliver, to arrive and sustain at that kind of valuation.
As far as Nykaa is concerned, I believe there is a rationale for this stock to break out now. In all the other new age companies which got listed around the same time, we have seen massive price up move in the recent past, whereas Nykaa has by and large stagnated. As far as the business is concerned, a lot of positive developments are there in Nykaa and I definitely believe that at some stage Nykaa will break out. Now, whether that will come very soon or within two, three months, is very difficult to predict but by and large, I believe Nykaa deserves a better valuation and I will definitely go for Nykaa as opposed to Honasa Consumer.