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00:00 Hemant Shah, Fund Manager of Seven Islands PMS Jones is right now on the show with his
00:03 thoughts.
00:04 Hemant, good having you.
00:05 Thanks for taking the time out.
00:06 This is Neeraj here.
00:07 Good afternoon.
00:08 Hemant, how are you approaching investing in the current scenario?
00:12 Are you taking a step foot off the pedal, even if the opportunity is presenting until
00:17 the election result is out of the way?
00:19 Or is that not holding you back if you see an opportunity?
00:21 Hi Neeraj.
00:22 Thank you for having me.
00:25 And let me start by saying that I've been watching you since so many years and I'm really
00:31 happy to connect you on your show.
00:34 So thank you for having me.
00:36 And yeah, as you said, I think we are positioning ourselves quite slowly, but in terms of buying
00:44 and we take this, I think, fall as an opportunity to buy.
00:49 I think it's just that I would say the election is just an exercise.
00:55 The result is known, I mean, quite known and quite obvious, but still there is ambiguity
01:01 and there is uncertainty.
01:03 And that's why there is a little bit of, you know, jittery in the market.
01:07 But I think we are taking it quite positively and we are positioning ourselves positively,
01:12 but slowly.
01:15 And in that light, what is, I mean, OK, so let me try and think what has impressed you
01:21 the most, for example, let's say in this results season, because we've seen, I mean, the pockets
01:28 of outperformance are known.
01:29 Autos have done well, selectively some of the commentary from the chemical companies
01:33 is looking OK, but we don't know your portfolio.
01:37 So just trying to understand what has impressed you the most from this earnings season.
01:40 So the earnings season has just started and I think I'm quite impressed with the manufacturing
01:46 sector's performances.
01:47 I mean, you take a look at all the capital goods companies, whether it's an MNC or whether
01:53 it's a multi Indian multinationals, they've posted really fantastic numbers.
01:58 And I think it has surprised everyone.
01:59 Say for example, SKF or Timken India by that matter.
02:04 And they have posted amazing results.
02:06 Some even at this base, they have posted so brilliant numbers.
02:12 And I think the manufacturing story in India has just began.
02:16 It's just a pause, maybe before the, I mean, this election and all.
02:21 But I think I would be very happy to see the same government coming with the same momentum
02:27 of growth for the India.
02:29 So what has impressed me is the India growth story.
02:32 Neeraj.
02:33 Hi Hemant, Manna here.
02:36 Great to have you on NDTV Profit.
02:39 And let's talk a bit about that.
02:42 Let's talk a bit about that growth story, which has been the recurring theme, I would
02:47 say in the markets for the last few years.
02:49 Now, how would you play that India growth story when it comes to ahead of June 4th?
02:56 No, I think June 4th is just a date, I would say.
03:00 So barring two weeks before and two weeks after, market will take its own course.
03:05 I personally feel so.
03:08 India's story is much bigger than June 4th, I feel.
03:11 And I think the ball is rolling in terms of the growth and the capex and the policies
03:19 of the existing government.
03:22 For example, the highest spend on railways, I mean, make in India policy, all this augurs
03:30 well for the coming few years for India, actually.
03:36 Only I think we are just hoping that the same government comes in play and continue the
03:42 momentum of the growth and the policies.
03:45 Have you been nervous?
03:47 Have you been, in this last one week when we've seen these election jitters and nervousness,
03:52 etc.
03:53 How have you looked at it, Hemant, in terms of your trades?
03:56 No, we have been actually quite sitting a little bit on cash, but we have already started
04:03 deploying some of the cash and we will be investing in tranches.
04:07 Where are you deploying?
04:08 I mean, in the sense, if you can give me some sectors and stocks that are working for you,
04:12 are you lacking defence?
04:13 Are you lacking railways?
04:14 Are you lacking capital goods?
04:16 Capital goods.
04:18 Specifically capital goods.
04:19 The valuation in defence, I think, is quite far beyond my understanding or my reach for
04:25 the time being.
04:27 But capital goods and manufacturing sector, we are quite interested in investing and also
04:33 started investing.
04:35 And one sector, which is of course a sunrise sector, is solar, where we have already invested,
04:41 we are not selling, in fact, we are just sitting tight.
04:44 All right.
04:47 In cap goods.
04:48 Yes, yes.
04:49 And that, barring, we are also looking now to invest in few large pharma companies also.
04:58 So they have also performed quite well, the large pharma companies.
05:02 Hemant?
05:03 Yeah, yeah, Tamanna.
05:06 Okay, what is giving you comfort about supply and what else are you liking in the pharma
05:10 bank?
05:11 No, I think the comfort is the numbers, the growth potential and the cycle of the pricing
05:18 pressure is, I think, we might see, we are at the end of the tunnel, I feel.
05:24 So we will be back to normalized pricing, normalized business growth and exports growth,
05:30 which has been a little bit lower, but I think going forward, we will see good growth in
05:35 exports as well as pricing.
05:39 So stable returns, stable numbers and better growth in exports, I think, attracts me particularly
05:46 for Cipolla.
05:50 Anything in the, I mean, large pharma is US generic based or some of the others like CDMO
05:56 or some of the healthcare names as well, Hemant?
05:59 No, I think few mid-cap pharma we can look at for CDMA play, I guess, but not the large
06:07 pharma.
06:08 I mean, frankly, no, not yet, because the valuations are quite high in the CDMO space.
06:13 Well, because Airtel is poking up, I think there is merit in just cutting the corn call,
06:19 which is on right now and hearing out Gopal Vittal as he speaks about the year ahead.
06:24 Let's listen in.
06:25 When the chipset shortages hit us and when chipset prices went up sharply, that led to
06:37 increase in smartphone prices.
06:40 The entry level smartphone prices at the time used to be about 5,000 to 5,500 rupees.
06:45 That suddenly shot up to 8,000, 9,000.
06:47 And we had conversations at that point as to the slowdown in upgradation.
06:52 And I mentioned that it takes, in any consumer market, when there's a price shock, people
06:58 take time to absorb the shock.
07:00 Somebody who wants to upgrade from a feature phone to a smartphone comes into the outlet,
07:05 suddenly finds that the price has gone up, goes back.
07:09 But then the next time they come around, they're determined to actually buy it because now
07:12 they're used to a new reality.
07:14 So I think that's what you've seen in the increase in smartphone shipments relative
07:17 to last year.
07:18 That has obviously benefited us somewhat on smartphone additions.
07:24 The overall REC additions that we've seen, the revenue only customer addition that we've
07:27 seen is a function of the large scale rollout that we've done.
07:32 I've mentioned that in many places that we are going, where we are expanding, our shares
07:37 are very low, almost non-existent.
07:39 So to that extent, there has been some pickup on customer additions as far as that's concerned.
07:48 On tariff repair, how much can be absorbed?
07:52 I would say we've seen several rounds of...
07:57 Actually, two rounds of tariff repair in the last couple of years.
08:01 And that has led to some SIM consolidation.
08:03 Every time there is some increase, there is some SIM consolidation that happens.
08:08 I would say at best, it's modest.
08:11 The upside benefit of the repair is much, much greater than some SIM consolidation at
08:16 the lower end.
08:18 And the fact is that the digital and mobility today has become so essential to people's
08:26 lives that people will adjust their spend to deal with any increase.
08:32 The quantum of increase will need to be determined.
08:35 Obviously, it will not go in one shot from 200 to 300.
08:40 That's not going to happen, but it will have a couple of rounds to actually get there.
08:45 And so let's see how that plays out.
08:47 Thanks, sir.
08:48 And just in terms of timing, do you think annual tariff hike is a possibility?
08:54 In the past, you've done one tariff hike every two, two and a half years now.
08:57 Do you believe that it can be quicker now?
09:00 Well, Kunal, I think this question is being asked in different ways.
09:03 I think, you know, I mean, I can't comment any more than what I've already done.
09:08 Okay.
09:09 Just again, last question on home broadband.
09:12 Like slightly muted.
09:15 Sorry, Kunal, I think we lost you.
09:24 Kunal, you may please unmute your side, introduce yourself and ask your question now.
09:36 That was a snippet of the Bharti Airtel call and as usual and as always, the big question
09:42 is always about, you know, tariff hikes.
09:47 When how much the reiteration of 300 rupees has been made in that call as well, saying
09:52 that RPA 300 will still be lower.
09:55 But the feasibility remains a question mark.
09:59 Hemant, what is your take on Bharti Airtel?
10:02 Do you think they're better placed than peers?
10:05 And how big a factor is tariff hikes?
10:08 I think, Tamanna, I'm very positive at Seven Islands.
10:12 We are very positive at telecom sector per se.
10:16 Right from the service providers to the hardware manufacturers also, because we see a huge
10:22 opportunity in terms of transmission to 5G and going forward to 6G.
10:28 And with respect to Bharti, we are again positive and I think I'll have a disclaimer that we
10:34 might be holding for our clients, Bharti Airtel.
10:39 We anticipate some price hike, Arpu, as the management always reiterates.
10:45 I think the speed of increase will be a little bit faster increase in the prices and Arpu,
10:54 what we have experienced in the past.
10:56 So in future, we see very much the possibility of a decent price rise.
11:05 Hemant, just before we wrap up, would Bharti be the better bet or would Vodafone idea in
11:12 which there has been substantial institutional investors and it's coming back of sorts like
11:16 a phoenix be a better tactical investment?
11:19 No, I think Bharti, we would be putting our money in Bharti.
11:24 Got it.
11:25 Okay, Hemant, lovely talking to you.
11:28 Thanks for taking the time out and being with us on NDTV Profit.
11:30 Look forward to having you more often.
11:31 Thank you, Nilesh.
11:32 Thank you.
11:33 It was a pleasure to have you.
11:33 Thank you.
11:33 Thank you.
11:34 Thank you.
11:35 Thank you.
11:36 (dramatic music)