Has your stance on auto and the consumer space changed altogether because you were not that confident on either but the expected festival demand and the GST rate rationalisation will boost the sector. The next one is the IT sector. Now the technology heavy index in the US Nasdaq is not doing that great, but the domestic IT players have made a comeback – be it the larger plays or the midcap IT companies. What is your take on the IT sector?Dinshaw Irani: Let us start with autos first. We were not comfortable in autos because of the emergence of EVs and we have picked up two EV stocks in the auto space. Basically, two-wheelers are something where we believe the bulk of the hits that EVs could have given are done and dusted. From here on, even the incumbent players who have been in ICE are picking up their game in the EV space and that is why we will see one more new name being added in the two-wheeler space from our side as such.
So, probably after a very long time we will be holding four two-wheeler players in our portfolio per se. Two of them are pure EV plays and one is Bajaj Auto. The fourth one I cannot disclose because it is not public as yet. But you will see it when my August portfolio comes out so that is what we have been doing and we are very comfortable.
However, having said that, we are still not getting into PVs. There is a lot of overhang left in PVs. Till now, demand is not that clear anyway. So, we will stay out of that space per se. Even the two-wheelers that we picked up, the ICE guys who are getting into EVs are mainly entry-level two-wheeler plays and they are big beneficiaries of this recent change in GST as and when that happens.
Having said that, we still remain negative on IT. Basically, one big overhang was obviously the way the US was going around, the tariff battles that launched across the globe, the businesses within the US itself are going through a very uncertain phase. So that is an overhang for this particular sector plus the fact that AI we do not know how that is going to pan out for the sector. As of now, IT looks negative. We will obviously take a very studied bet on this and that is why we are avoiding getting into IT right now.
Given the numbers, I mean upping your guidance by a percent and still remaining in low single digits topline growth I do not see much hope given that the PEs are still at 23-24 times which are way higher than what they were pre-Covid and by the way pre-Covid, the growth rates were much better than what they are even today. That is why it is better to avoid IT this year.What about the larger consumption pool? Any staples in there? Do they become attractive now post rationalisation, the most unloved segment in the market?Dinshaw Irani: FMCG products were taxed at 18% under GST, and I do not think that will change too much. Even if it does, just because my toothpaste is cheaper, it does not mean that I will be brushing my teeth four times a day instead of twice a day or something. So, it is obvious that that segment per se will be mainly driven by growth which today is not looking that great for them and given that the PEs also are at huge premiums, after the recent announcement by the PM, that sector ran up for no reason. We do not see that working out for us. So we avoid FMCG plays today.What about the other ways to play consumption? Everything from hotels to real estate and the peripheries, cement, pipes, etc? Anything that you like there?Dinshaw Irani: What we did conclude and very jokingly also that the fact was that if someone is going to save a couple of thousand bucks on his basket of products that he has been ordering, he would rather go in for quick commerce plays and buy some more of the Zeptos and the Zomatos and the Swiggys of the world. So that could be one area. But having said that, if the purse is becoming bigger for discretionary, the domestic plays, not only the consumer discretionary because that is not that great a play in the listed space anyways, apart from ACs which may see a clear reset in terms of GST from 28% to 18%. But even if that does not, anyway ACs are more of a play on the season per se and maybe they will wait out till the summers come in. But the bigger play would be in the hospitality sector. With these kinds of savings, people will look at domestic tourism more. We are playing it through that rather than through actual picking up consumer durable companies. I do not think that is going to work that much. Anyway, they are expensive.
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