Things have started improving both at Axis and ICICI and even at Yes Bank. I would not get too perturbed with the rating downgrades which are coming now, says Sudip Bandyopadhyay, Chairman, Inditrade Capital, in an interview with ETNOW.
Do you think the polarised nature of move in the largecap space will continue?
It has been continuing for quite some time. If you see what is happening – the largecap stocks have generally been doing well, whereas midcap and smallcaps have actually been beaten out of shape and this has been continued for a consistently long period of time.
Even in a largecap universe, there is a section of stocks which are attracting all the attention and liquidity whereas a large portion of the market is being neglected. There are reasons for it and the reason predominately has to do with the sector and its fortune as things stand today. If you look at the automobile sector, there are concerns and the sector has been beaten down. Banking is doing yo-yo. Today the banking stocks are moving up but by and large, it has also been under pressure. Pharma is not the market favourite at this stage.
Focus has continuously been on the darlings of the market which is the HDFC twins, Bajaj twins SBI and Reliance. There is a significant amount of liquidity available in the market both domestic as well as international. To a great extent, that is keeping the market buoyant.
Banks would be selective and one of the key things to watch out for. How are you reading into these downgrades that are coming in for some of these names. DHFL of course, got a derating earlier; there was a downgrade in ICICI as well as Axis Bank earlier. Now, we are getting news flow that Moody has placed Yes Banks rating under review for downgrade. How do you read into these downgrades?
I would like to say it is too little too late. These rating changes should have come at least one year or at least six months back. As things stand today, we believe that things have started improving — be it Yes Bank, ICICI Bank or Axis Bank or even DHFL. At this stage, the downgrade is a matter of academic interest. The market will react to this kind of negative rating coming in but the reality is, they have been wise after the event. The event when they had the problems is past them and they are now on the path to recovery. Yes Bank will take quite some time before they are back to where they were or even close to the kind of performance they had shown earlier. They will have definitely challenges in raising funds from the market either equity or debt.
Axis and Yes Bank also are having their share of challenges but definitely things have started improving both at Axis and ICICI and also at Yes Bank. I would not get too perturbed with the rating downgrades which are coming now.
What do you make of the entire situation on DHFL? Part payment was done over the weekend. They got Rs 800 crore from Blackstone and paid another tranche which was due to NCD investors yesterday. Would you say that it is best to completely avoid the stock now?
Unless you are really somebody with a strong heart and an aggressive investor, it is better to avoid. But having said that, I like to point out that they have been trying to do all the right things. They have sold their subsidiary and associate companies like Aadhar Housing Finance for which they got payment from Blackstone. They have also sold Avanse which is education loan company and Warburg is supposed to be paying for that very soon.
So all this liquidity is coming back in the group. Liquidity is going to be distributed between DHFL as well as the promoters. They will have a good amount to settle with the debtors, which they are trying to do. Also remember they are looking at the change in management kind of a scenario where they are working on getting new investors in DHFL itself.
The problem probably will get resolved within a period of time. There is some more pain, and probably there will be some more of this kind of uncertainties coming because there is a regulatory approval process post the transaction also. That sometimes takes an unusually long time which probably should be, considering the circumstances but that is reality.
We have to be prepared for a tough ride if you are holding on to DHFL or planning to buy DHFL but at the end of the day, if you are an aggressive investor, there is no harm in buying DHFL at these beaten down values. You will have a changed management, you will have a functioning company with most of the debts getting cleared very soon.
What is your perspective on some of these deal stocks that are going around,? You mentioned DHFL but there is a Zee which is looking out to do a deal as is Dish TV. A lot of other companies are looking to sell some of their non-core assets. Should investors chase this deal market?
Absolutely, I am very clear the investors should definitely look at both Zee and Dish TV. Fundamentally, there is absolutely nothing wrong with Zee. In fact, they have been increasing their market share and if you leave aside the sports bouquet which they do not have, in the general entertainment space, they are emerging as leaders, ahead of Star and the combined TRPs also have improved and they are shade behind Star there which has a massive sports bouquet.
If you look at the performance, that has also been improving continuously. The OTT is a little bit of uncertain at this stage and there are some concerns as to how much money they will be spending on OTT, but leaving that aside, the company has been performing very well.
The problem lies with the promoters and their other businesses and that is the reason why they need to do a deal and they need to bring in either a strategic investor or maybe a financial investor if they can. That will augur well for the shareholders of Zee Entertainment and there is absolutely no harm in looking at buying into Zee TV at current levels. It has been beaten down and definitely there is an opportunity of value buying here.
I would say the same thing about Dish. Again there is a transaction in the offing. One does not know with certainty whether the transaction will happen in the manner it is being talked about but if it does happen, a consolidation on that side of the business also will strengthen both the involved players and they would be in a better position to take on competition as a combined entity rather than Dish and Bhartis direct to home (DTH) business alone.
It is good for the shareholders of both the entities if the transaction happens, the sooner the transaction happens the better it is and today they are available at a significantly discounted valuation or an attractive valuation and it is definitely worth buying for an aggressive investor.
What do you make of the insurance sector? Are a lot more deals likely in this sector?
Absolutely. This is one sector in BFSI which has been chugging along pretty well. All three listed life insurance players had corrected a bit from where they were but the fact remains that they are looking attractive at current valuation and we expect all three to do well going forward. If somebody has to take a pick, I would probably reRead More – Source