Gurmeet Chadha, Managing Partner and Chief Information Officer, Complete Circle Consultants
What are your thoughts on the changes in railway land leasing policy in the recent cabinet briefing?
It should be positive. I’d like to look at it in more detail, but the bigger trigger remains the imminent divestment. Policy changes may lead to revaluations. Regardless, operating performance has been good and the mix of import and export and non-export income has been changing, but this may need to be looked at in more detail. We are very constructive in the logistics area.
How do you bet? Is it manufacturing names like Dixon, Amber, and the overall manufacturing growth we’re seeing domestically?
Optionally, Dixon is one of our portfolios that has clearly seen some corrections from past high multiples. There is negative news for Xiaomi and some other companies, but they are likely to gain market share in the segments they operate in – be it mobile phones, consumer electronics or LED panels. They are one of the biggest beneficiaries of the PLI program.
Also, I think, their asset allocation is very concentrated, I think India is moving away from simple labor arbitrage related manufacturing jobs to original design manufacturing and OEM, which in turn will bring more added value. So we’re very constructive about it, it’s still our portfolio stock.
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When it comes to brokerage notes, there are also views on where Credit Suisse maintained its outperform rating, saying its vast network would be a huge beneficiary, as IRDAI allows insurers to launch products with prior approval. Are there other stocks in the space that catch your eye?
Both general insurance and life insurance performed somewhat sluggishly for a number of reasons, rising claims, regulatory changes. As far as ICICI Lombard is concerned, there has been a lot of changes in the regulation of third-party pools as auto insurance is a big part of it, but we remain constructive on Lombard.
In life insurance, we continue to like HDFC and SBI Life. What we need to differentiate between insurers is that we shouldn’t be carried away by growth in sum assured or new business premiums because a large part of it is risk underwriting and there may be short-term growth.
It’s like borrowing; you can get a lot of growth at the expense of your underwriting standards, and you have to look carefully at parameters like cost-to-income ratios, especially persistence ratios for the number of policies spanning 13 and 55 months. HDFC stands out with a very diverse product portfolio, the perfect mix of par and non-par and protection and their reliance on bancassurance as a channel appears to be disappearing with many digital initiatives.
The past two or three years have been very tough for all life insurers, mainly HDFC. Probably from here, it should solidify. This is a great portfolio stock for the long run.
How do you see the retail space as a whole? We got very positive reviews for the channel check from Shopper’s Stop. What’s your biggest bet in the field?
It’s part of a wider reopening of trade that we’re focusing on, which includes textiles. We are looking at it very carefully. It is a big beneficiary of PLI, and China plus an import substitution policy is also playing out.
Stocks we track in this space include Gokuldas Exports. They are making professional clothing for American brands like H&M.we track
. This is a great portfolio and things are improving now as Covid restrictions are eased.
They have a clear goal in terms of revenue and rate of return for the next two or three years, which is what we track.At pure-play retailers, we’re looking at some of the niche ideas in this space that aren’t yet part of the portfolio, but across our entire universe, including
There are several more names.