‘We Es­ti­mate Earn­ings Growth to Touch 14-15% Next Fis­cal’

The Economic Times - - Money -

In­dian mar­kets are just a few per­cent­age points away from all-time high lev­els, but in the con­text of strong growth pos­si­bil­i­ties go­ing ahead, the val­u­a­tions are not ex­pen­sive, said Vikas Khe­mani, Pres­i­dent and CEO, Edel­weiss Se­cu­ri­ties. In an in­ter­view to Anandi Chan­drasekhar and Sanam Mir­chan­dani, ahead of the launch of Edel­weiss’ In­dia Con­fer­ence, Khe­mani said the shift from un­or­gan­ised to or­gan­ised sec­tors will be a key in­vest­ment theme go­ing ahead, within which mid-caps will do par­tic­u­larly well. Edited ex­cerpts:

What is your sense on the bud­get an­nounce­ments? There were no neg­a­tives, which was a good part. It was a growth-ori­ented bud­get and money was al­lo­cated where it was needed — spend­ing in the ru­ral econ­omy and kick­start­ing the in­vest­ment cy­cle. The bud­get has ad­dressed all the needs of the econ­omy at this point by loos­en­ing the fis­cal, keep­ing cred­i­bil­ity in­tact yet al­lo­cat­ing money for the needy sec­tion of the so­ci­ety, and leav­ing money in tax pay­ers’ hands in the form of lower taxes. fac­tored in most of the com­pa­nies’ val­u­a­tions.

How will the on­go­ing elec­tions in some states af­fect mar­ket di­rec­tion? It is an un­cer­tain event. I don’t think this can re­ally change the game big time de­pend­ing on the out­come. There might be a short-term im­pact if there is an ad­verse out­come. If there is a pos­i­tive out­come in favour of the cur­rent cen­tral gov­ern­ment, it will give big wings to the mar­kets.

Within mid­caps what are the themes you are look­ing to play? In­vest­ment cy­cle is one theme – power, rail­ways, roads – a huge amount of in­vest­ment is hap­pen­ing in these sec­tors. An­other as­pect is the shift from un­or­gan­ised to or­gan­ised, which cuts across var­i­ous sec­tors like in­dus­tri­als, con­sump­tion, fi­nan­cial as­sets, health­care, tex­tile, re­tail, di­ag­nos­tics, pack­ag­ing ma­te­rial, dairy and food pro­cess­ing. In fi­nan­cials as well, the growth would be un­prece­dented in the next 3 to 5 years.

In NBFCs, the de­mon­eti­sa­tion im­pact has not been as bad as feared but val­u­a­tions are still ex­pen­sive. Will you be a buyer in this space? Yes, I will be, be­cause de­mon­eti­sa­tion has not changed any­thing. If the val­u­a­tion is higher than what one might want to pay, it is scarcity pre­mium. Even if you pay a lit­tle more right now, growth will com­pen­sate for it.

With val­u­a­tions of tele­com com­pa­nies at rock bot­tom, is it time to fo­cus on this space? Con­sol­i­da­tions are key and a lot of in­dus­try dis­rup­tion is at work with a new player com­ing in. It makes it dif­fi­cult to say how it will play out. I would say it is bet­ter to wait for some time, there is no point in tak­ing a con­trar­ian call un­til you know where you’re mov­ing.

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