Ambit's 11th Annual Singapore Conference
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00:00We're joined by Nitin Bhasin, head of Institutional Equities at Ambit.
00:03And he's joining to talk about their 11th annual Singapore conference called Ambit India Access.
00:10It focuses on the opportunities that we're seeing in India right now.
00:13So, Nitin, great to have you on. Very good morning to you.
00:16And glad to speak to you here on NDTV Profit.
00:19Let's begin by talking a bit about the conference.
00:21And why don't you set the stage and the context for us
00:24on what would be the key driver of the conversations you'll be having?
00:30You know, for the last 11 years, we've been bringing these companies to Singapore.
00:36And many of times, people have been asking investable companies,
00:39good quality companies and scalable companies.
00:42At a time in India, when everybody's excited about investing in India,
00:46you know, and we always have been saying that
00:49India has expensive companies in the mid cap and the small cap space.
00:53Investors still are very keen to meet companies in this market cap cohort.
00:58The discussion points would be around which are the good quality companies,
01:02which are scalable, run by management teams.
01:05And one can disregard the valuations in the near term,
01:09if one was to take a longer term view.
01:11It's not only across one team, but across teams.
01:14So that would be the backdrop of conversations with the investors in this conference.
01:21Just to elaborate on that, because this very clearly seems
01:25more like company specific and top-down approach,
01:28bottom-up approach in that sense.
01:30What are the parameters that you or Ambit has identified
01:34to determine the future leaders of tomorrow,
01:37which could be across teams and sectors?
01:39So what are those factors that are prime for you
01:42when you look at a company and say, look, this could be the future leader?
01:47Good question.
01:48I think this has been the thing we've been writing for the last few years as a team
01:53that companies which India is full of companies listed.
01:58And the last two or three years,
01:59we've seen closer to about 200, 300 companies
02:01getting listed in the mid cap and the small cap space.
02:04Yet scalability is not for everybody out there.
02:07So what are we looking for?
02:08We are looking for managements which are designing the business,
02:11which are designing the teams,
02:13designing the products and the processes to scale up,
02:17not only in the present product, service line, et cetera,
02:21but how they can create new markets,
02:23how they're actually building talent pool for that.
02:25So we look at how they're thinking about capital allocation,
02:29how they're thinking about team building,
02:31how are they building about building out their competitive advantages,
02:35which sometimes can be fleeting,
02:37but to see through that over the next two or three years.
02:40Give an example like electronic manufacturing services companies.
02:44There's so many of them which are coming up in India,
02:46but we think there are only a few
02:48which are doing it in the right manner and scalable,
02:51irrespective of valuations.
02:53I think there are only a few which will scale up.
02:55Similar lines on real estate companies,
02:57similar lines on healthcare companies.
03:00So we are looking at a few things which I mentioned earlier,
03:03team competitive advantages at the same point in time,
03:07going out and building optionalities to get into new markets.
03:11Nitin, just to get a sense of the kind of companies,
03:16we've talked about the fact that you're picking companies
03:19that you see as the future of the India story.
03:22So give us a few examples,
03:24which are the kind of companies that you have found exciting
03:27that are going to be part of this conference
03:29and what are the kind of conversations you see panning out?
03:34Companies like Amber, a company which is one of the leaders
03:38in the electronic manufacturing services,
03:40how they are transitioning themselves,
03:43just from simply being a room air conditioner assembly company in the past,
03:48now getting into the entire electronics value chain
03:51or even for the mobility value chain through their own subsidiaries.
03:54So that's the sort of a company.
03:57Perhaps a second company in the real estate space,
04:00like Birla Estates,
04:01which is part of the sensory textiles and industries in Mumbai,
04:04how they are building the land bank,
04:07perhaps going out of Mumbai to the other regions,
04:10asking them how are they identifying which markets to enter into,
04:15how to place their product in terms of pricing in the markets
04:19where they are new entrants.
04:20Or even another example of a company
04:22would be something like Poonawala FinCorp,
04:26where we have seen a very good quality promoter family
04:32has recently brought in a very good amount of talent pool
04:36from a leading bank in India
04:38and they're building the business model
04:41for scalability of five to 10 times from here onwards.
04:45And to have questions with them around
04:47how do they want to think about new segments to enter into,
04:50how are they thinking about building the collections,
04:52how are they building about building the team.
04:54So questions around that.
04:56So these are the three or four companies
04:58which we have at the conference
04:59amongst other companies like Sriram Finance
05:03or non-listed company like Kish or Vastu.
05:07They are participating in the conference
05:09amongst a dozen and a half companies participating.
05:12Okay, so an interesting mix there.
05:13Some BFSI kind of presence,
05:17a little bit of innovative presence.
05:19I'm just wondering, Nitin,
05:20are you as bullish on this whole premiumization trend
05:25where companies that are focusing on discretionary spending
05:29but premium discretionary spending
05:32are getting a lot of love from investors right now.
05:35Do you see this as a sustainable trend in the Indian markets
05:38and some of the companies that are on this track?
05:40So we incidentally, we also have Senco Gold
05:43part of the conference over here,
05:45which shows you clearly that how in the eastern part of the country
05:50or the other parts of the country also,
05:52people are transitioning themselves
05:54from buying local jewellery to branded jewellery.
05:56For the last one year or so,
05:57we've been highlighting this trend,
05:59that the premiumization trend,
06:00whether it is cars, whether it is asset management,
06:04whether it is wealth, whether it is travel,
06:07because another company that we have
06:08under coverage over here is Lemon Tree.
06:12So we're quite positive on this entire premiumization trend in India.
06:17And it's actually sort of percolating down in multiple sectors,
06:20whether it is jewellery, whether it is watches,
06:23whether it is cars, whether it is travel,
06:26or even for that matter, healthcare slash wealth management also.
06:32The thing that stood out for me
06:34is that this is interest from investors
06:36and some of the stocks that you mentioned
06:38have had a pretty strong run.
06:39I mean, a KEI Industries is up 90% in the last one year.
06:43A Lemon Tree is at a phenomenal growth run rate too.
06:46KEI Industries, of course, also recently,
06:48this very strong outlook coming in from UBS.
06:51Are your investors talking about how expensive India is?
06:55Because very often when we are sitting here,
06:58a lot of the FIs talk about how India looks expensive
07:00as compared to its peers.
07:02Companies have strengthened their markets.
07:04Is that the general feeling you get as well
07:07when you talk to these global investors?
07:12Perhaps, you know, for the last one year,
07:14we've been also writing this for the investors
07:17that small cap and the mid caps in India
07:19are perhaps one of the most expensive market cap cohorts without,
07:23but it doesn't take away the point
07:24that there are still companies in this cohort
07:27which have exceptional competitive advantages
07:31exceptional competitive advantages in their industry.
07:35So investors are worried about India being inexpensive,
07:38but as I said in the beginning,
07:40our collection of companies, good quality companies,
07:44where perhaps the growth road maps
07:48may be slow to about five or seven or 10 years,
07:50very clearly.
07:51Investors are ready to see through
07:54such sort of a near term valuations.
07:56They may have perhaps toned down their return expectations
08:00from a 20% in excess to those are like 14, 15%
08:03holding horizon for the next five, six years.
08:06But questions remain like this,
08:08but they also know some of the Indian companies
08:11are going to maintain this high team growth
08:13for a long period of time.
08:15So accepting those sort of stories for evaluation
08:19and we cannot take away the point that India is a country
08:22where companies are reinvesting for growth
08:25and some of these companies are reinvesting
08:27materially ahead of many of their global peers
08:29or even Indian peers.
08:32You know, I'm not sure if you track it
08:34or you have a view or you want to talk about it,
08:36but since it's the topic of conversation this morning,
08:39Nitin, I wanted to know if you have any take
08:42on the Zomato PayTM deal,
08:44because in line with what we were talking about,
08:46discretionary spends or companies investing
08:49in clear growth strategies,
08:50does this deal tick all those boxes?
08:56You know, we haven't written on it,
08:58but my preliminary view on this would be,
09:01it's a difficult business
09:02in which Zomato has allocated its capital.
09:06It's a business which has been built out by PayTM
09:10for the last nearly a decade or so.
09:12We know that the revenue scale
09:15hasn't been that satisfactory.
09:18So perhaps it's not that easy business
09:21and Zomato has been trying for the last five or six years
09:25for different business segments
09:26apart from its leading business of food delivery.
09:30So perhaps this is another bet by them.
09:34We'll see how it pans out.
09:35But till now, it has been a difficult ride
09:38for the incumbent who's selling.
09:40We've seen that with the success
09:42that BookMyShow hasn't been met with just yet.
09:45But well, markets do have a mind of their own
09:47and that's the reality of the story.
09:49But thank you, Nitin.
09:50Good luck.
09:51We'll catch you over the course of the next few days
09:54as you undertake the investors
09:57through, of course, the next big leaders
09:59coming from India,
10:00and getting some perspective from you
10:02as you kickstart that conference.