Would you chance your arm in any of these companies which would benefit directly or indirectly because of Tata Sons listing?
Deven Choksey: Well, it is a good point that you brought out and probably we believe that the business condition of each of these companies, particularly demands are very close. All of them fundamentally look very solid to me. Steel as a structural story, the boom run continues in steel as a commodity for the next few years, that is what we believe. More because of on one side infrastructure spending, on other side the energy costs coming down directly benefiting the metal commodity players like Tata Steel. We like this particular business proposition.
Same is the situation, we like Tata Motors business proposition. The company has done all corrective parts of math including the JLR portfolio and the commercial vehicle segment is the one which is showing the robust signs of growth going forward. Tata Power similarly looks like a pretty interesting company from the investment point of view, even the kind of focus that they have got on renewables.
The hospitality segment with asset-light models in Indian Hotels is again a very appealing kind of a business proposition. So, most of the Tata Group companies today remain very convincing from the point of view of investment thesis. Maybe this market gives some opportunity at a corrected price level. They would become once again a buy in the portfolio from current level.
At juncture, which is a good Adani Group stock to own because all of them have corrected, nothing exciting is happening there. Suddenly a lot of stocks are also not showing signs of momentum. But if somebody has to invest and the time horizon is three years, which is the one Adani Group stock which can give 40-50% return from here?
Deven Choksey: Adani Enterprise clearly should be looked at along with Adani Ports. Both these companies are showing robust signs of growth. Adani Enterprise is talking about de-merging their assets be it airport assets, the road assets, even the business of data centres. I believe these businesses are likely to get demerged in the next one-and-a-half to two years’ time and that is where the monetisation value unlocking takes place giving advantage to the investors.
In Adani Ports case, given the kind of integration that they have done between the Eastern Coast and the Western Coast and the kind of internal logistics also they have systematically set, this company is easily talking about growing at a scale faster than what the normal scale has been. 500 million metric tonnes of cargo handling capacity has already surpassed and the company is going far ahead in the direction of expanding further into the larger amount of cargo handling with the value added components in it as well. I would think that both these companies remain distinctly positive from the point of view of giving value to the investors in the next two to three years’ time.We were talking with Milind Karmarkar, who was talking about how IT as a sector needs to reinvent itself. What is your outlook on the kind of trajectory that we have taken and how technology is upping its game? We have been seeing Gen AI and how IT is harnessing it.
Deven Choksey: The clear cut understanding from coding to computing is the time that we are now going to be experiencing from Indian IT companies particularly. The coding becomes more of an easy play because of the involvement of AI and at the same time the computing is getting more of a demanding play because of the requirement of every user industry which is basically asking for the larger amount of AI-based applications generating under the demand of sustaining their business model or even efficiency improvement, etc.
In our understanding, the Indian IT companies are undergoing the change as far as the business model is concerned. Many of the companies are developing the middle layer of tools, which are basically required for underlying processing based on the cloud infrastructure that the companies are adopting. These tools are basically AI-based on which the use cases are getting developed be it in the agri-tech, be it in the health tech.
Each of the areas in which these particular AI tools are being used right now are the ones giving the fantastic amount of growth opportunity for the business per se. I will not be completely surprised if many of the Indian IT companies start offering platform as a service to most of their customers in different, different verticals and that should be the area which one will have to look at. Yes, they are already in a larger base, so you cannot be expecting a quantum jump in their revenue immediately, but I do believe that from what last two-three years of muted performance that they have done, probably they deserve the case to come back into double-digit rate of growth at around 12% to 15%.
So, one can remain relatively confident about the IT companies and particularly engineering R&D space in which some of these companies, mid-tier IT companies are operating, they look reasonably good because of the vertical that they are catering to.
Is Kotak Mahindra Bank a good buy at these levels? It has underperformed. Whatever could go wrong has gone wrong. Now incremental news for Kotak Mahindra Bank could only improve because earnings are down, RBI problems are at its peak, and valuations are also at a rock bottom?
Deven Choksey: In the last three-four years, this company has been more careful than otherwise in expanding their book size. They probably wanted to create a significantly large amount of strength backbone in form of the processing parts, using the technology, the blockchain part of the technology.
In my understanding, the bank has made all its efforts and consolidated itself in the last three-four years’ time and is now ready to take the call for further expanding the size of the activity. I would not be surprised if you see organic along with the inorganic growth strategy this bank demonstrates in the coming period, both in corporate loan book size as well as in the retail side of the loan in that situation.
All its franchises, the company’s verticals which are basically there under Kotak Mahindra Bank, they are all doing well, be it NBFC, be it AMC, be it insurance, stockbroking, I believe that each of these verticals are actually doing well in creating larger amount of value which is not getting fully reflected into the bank. So, from the perspective of looking at the company, though it has underperformed, it holds a significantly large amount of promises to perform better than others in the coming years.