Who states you can’t take part in US tech business? Everyone in India is enabled to invest $2,50,000 abroad. Even Indian funds have US funds and you can go and participate in that, says Ajay Srivastava, CEO, Dimensions Corporate Finance.
Wish you a really pleased and prosperous and healthy 2021.
Thank you very much and all the very best to you. It is excellent news that now no one needs to work for themselves. They just require to put cash and someone else works for them.
However are you starting to question that design? Would it be as smooth cruising from the March healing that we saw in 2020 or do you think it is time to get a bit careful?
One needs to always beware. When you are purchasing C grade stocks, then you got to be extra mindful which goes for whether the market is at a low or a high because that is where the issue comes in most portfolios. C grade stocks difficulty the most and that is where you tend to put the larger quantity of cash.
Having said that, if you follow the federal government policy, you are definitely fine. It began with the tax cut– GST, LTRO– it is a brilliant way to provide cash to the corporates. RBI provides at 4%interest to the banks; the banks provide at 4-5-6-7%to the big business. Now what could have been better for them? There is a movement of outright wealth from the account of the general public. You tax the fuel however the tax rate for the corporates decrease. If you are a stock exchange guy, you much better make certain that these big business are going to get, they get on tax cut, they gain on LTRO and they acquire on all the tariffs barriers that are turning up now. Substantial tariff barriers are turning up in India at this moment of time.
The construct is extremely basic– big domestic companies are there and they will make the kind of profit we have never ever seen ever. The truth is that these business will make traditionally high earnings in the next 12 to 24 months and that is an offered on the back of a capital structure, the kind of liquidity which has actually come in. Lots of business have raised cash, lots of business have done QIPs and there is plentiful liquidity in the market.
Would IT belong to the pack? Today’s focus is on TCS’ revenues and after that will come Infosys and the rest. However the stocks are extremely expensive.
The beauty of these tech stocks is that tech is a major ingenious market and new players will come. But if you take a look at India, 20 years back, there were the same 3 leading four players in the country, maybe Tech M came up. The very same one exists 25 years later and they have become substantial in terms of being size, scale and consumer access.
Globally likewise, these business are now quite large and there are about 2 or three business which can compete with TCS or Infosys at this point of time worldwide. The digital transformation is just beginning and these companies are there to provide. There is no difficulty in these companies.
Does a company growing at 12-14%, should have a PE multiple of 40?
As a financier, clearly you would like to decrease the numerous to get in the business. The issue is that today if you look at what is taking place globally, a company like Snowflake is running 70 times.
The argument here is that these business have a moat which is practically insurmountable at this point of time and that provides credence to the reality that you have actually ensured annuity earnings and profits coming from them. You give them a premium for that, that is one.
Number 2, the last three years have actually decisively changed the formula in favour of the companies vis-a-vis the workers. Now that has settled down. Their attrition rates are down, individuals want to gravitate to bigger business and their greatest cost aspect for the very first time in history is under serious control.
The 3rd is you do not have a competitor and in the worldwide context, how lots of Indian business can say that? The last point which is more essential is providing money to the investors. These are tidy, neat business which do not acquire expensively.
Now if you state let us take 30 times, possibly in a year, two years time your multiple will decrease to 20 times; maybe if you purchased in early, you should purchase 30%now and another 20%if it fixes. The point is you can not live without them in your portfolio. That is the bottom line.
If Tesla is megatrend, EV is the future and if that is where the world is migrating, how can an Indian financier benefit from that?
Even Indian funds have US funds and you can go and participate in that. It has moved up rapidly because that is the only surrogate ecommerce business on a B2B basis in India in the listed space.
The 3rd one, this year is going to see the largest number of IPOs in this sector, in BYJU’S, Nykaa, and you have to be prepared with cash. One way to get in is shared fund. You can pay in rupees and obtain US properties at this point of time.
Also, Indian equivalent business remain in the fray and more IPOs are entering into the system. All those must be a great part of the portfolio and I make sure this assessment is coming also due to the fact that many people were not purchased these things. It is just what occurred to Bitcoin and now the catch up is going on.
If in India, your portfolio was mainly tailored towards cement, etc, now there is a FOMO effect or these sectors are trying to catch up and that is driving the appraisals of these companies. Take a look at the international construct; how many in fact have exposure to an Amazon or a Facebook or a Google or a Microsoft?
In terms of investment dollars, outside the US, hardly anyone. As the flavour captures on, can you imagine what is going to happen in the next 3 years as all Indians, Chinese, Africans and other nationalities start to designate 10-12%of their financial investment surplus to US stocks? It is going to be the trip of your life.