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00:00Let us go across now to Mr. Anil Gupta, he is CMD of KEI Industries and he is joining
00:17us because of an announcement that has been made.
00:21They have commenced production from their Pathredi plant 2 in Alwar for LV and MV cables,
00:30so that is low voltage cables and medium voltage cables.
00:33This is an expansion in this space for the company.
00:36Mr. Gupta, thank you so much for speaking with us here at NDTV Profit.
00:39Can you give us more details about this plant and this brownfield expansion that you've
00:45seen?
00:46Actually, this brownfield expansion was started in April last year and completed in August
00:58and we commenced commercial production last week.
01:01So it has the potential to generate a yearly revenue of around 750 to 800 crore rupees.
01:09It is a brownfield expansion adjacent to our existing factory in Pathredi and going to
01:15manufacture LV and MV cables for power sector as well as oil and gas and other construction
01:21sectors.
01:22This year, the potential is to have a revenue of around 250 crore rupees in the next 6 months
01:33but on a full year basis next year, it will generate a revenue of around 750 crore rupees.
01:40So what is the further kind of CAPEX you're seeing for the rest of the year, Mr. Gupta?
01:47Our major CAPEX is now coming up at Sanand near Ahmedabad, which is a greenfield expansion
01:56at a cost of around 1700 to 1800 crore rupees and the first phase of it is likely to be
02:04commissioned by May or June next year and the overall full project will be commissioned
02:10by March 26, as of now.
02:14So the major one next is in Sanand, Gujarat, Pathredi is pretty much done, this is in that
02:19Bihari area.
02:20What is the kind of output you're expecting from Pathredi and do you expect it to scale
02:25up from here on?
02:26Give us a sense for what the targets are for this financial year?
02:30I have already mentioned that it has a potential to generate a revenue of 750 to 800 crore
02:35on a full year basis and in the first 6 months, we expect to generate a revenue of around
02:42250 to 300 crore from this facility but for next year, the full capacity will be utilised
02:49on the whole year basis.
02:51What would that be?
02:53What would the full capacity utilisation look like?
02:56Around 750 to 800 crore rupees on an annual basis.
03:00Got it.
03:01Let's just talk a bit about your margins, Mr. Gupta.
03:04You've maintained margins between 10% to 11% in the last few fiscal but now that you have
03:11more CAPEX on board or you have more facilities on board, do you expect those margins to go
03:15up and economies of scale to kick in?
03:18No.
03:19This year, since the growth will be limited due to the capacities, so this year we expect
03:29the margins to remain range bound within 11% but as the new capacities come up next
03:36year, we will try to improve upon it.
03:41I mean, revenue generation can grow by 15% to 17% in this financial year or maybe more.
03:48I mean, it's an initial guidance.
03:51Okay.
03:52So 15% to 16% continue.
03:54Let's just get your sense on exports.
03:57Exports were down last quarter, logistics issues, etc.
04:01Are you seeing that recovery already in quarter 2?
04:04Yeah, it will be.
04:06The recovery is there and it will be made up.
04:08We are expected to grow by 30% to 40% in exports in this whole financial year.
04:14I'm not talking of quarter wise but we have substantial orders in exports from our various
04:22overseas customers.
04:23Okay.
04:24So my last question really is the kind of gains you're seeing in the branded housing
04:29wire and cables space, Mr. Gupta.
04:33What is your current share and how far do you see yourself going?
04:36See, we are growing in branded house wire sector by around 25% on an average.
04:47So at the moment, our market share is around 6% and we expect to take it to around 9% to
04:5610% over next three years.
04:58That is our plan.
04:59All right.
05:00Thank you so much.
05:01Anil Gupta, the SEMD of KEI Industries, a buzzing stock and of course, some news flow
05:07coming in there as well.
05:09All right.
05:10Let's get to our big conversation this morning on Talking Point and, you know, our next guest
05:15is speaking to us at an interesting time for the markets.
05:18I would say that in the last week or so, there has been a mood change, very little doubt
05:22about it because you've had that 50 basis point come in from the Federal Reserve.
05:27It was something that was anticipated and being waited for in all global markets and
05:32in India as well in the context of what are the kind of foreign flows that will be coming
05:37in.
05:38Now, Friday's trade seems to suggest that most concerns, will we have a soft landing
05:44in the US?
05:45Are we looking at any kind of recession?
05:46Seem to be behind us.
05:48From an India perspective, foreign flows look poised to re-enter.
05:53So what really should be the outlook?
05:55Are we now set for 26,000 quite firmly on the nifty and what next?
06:01Joining me to talk on this is Mahesh Patil, CIO of Aditya Birla Sun Life AMC.
06:05Mr. Patil, a very good morning to you and a great time to have this conversation on
06:11what seems to be like a good day.
06:12Let me just come to you and I know you would probably say that it's just a number, but
06:17the distance to 26,000 seems like an exciting one, isn't it?
06:26I think you're on mute, Mahesh.
06:28Yeah, sorry about that.
06:30There we go.
06:31Yeah.
06:32I think, yeah, I think markets again, this year again, looks to be a good year.
06:36I think clocking in year till date, right?
06:39And it's been rising again to some extent driven by a domestically, I think the growth
06:47momentum continues to be fairly decent and strong GDP numbers have been strong.
06:52We've seen that the much awaited rate cut in the U.S. is also now kind of started.
06:59And more importantly, I think the liquidity, right, the money flow into the market continues
07:04to be robust from domestic investors.
07:06So that is keeping the markets really up.
07:10But also now I think post the rate cut and this thing, I think with dollar likely to
07:15weaken from here, we could also see emerging market flows of flows into India, which have
07:20been kind of tepid for the last year or so, could also tend to reverse a bit.
07:26So I think the direction of the market looks to be fairly on the uptrend, though I would
07:30say that clearly the market, while it would continue to probably move up, OK, but we would
07:37probably see some more volatility coming in down the line because you have elections in
07:42the U.S. again, the outcomes there could lead to some volatility on the global front.
07:49So that is something which I think one needs to keep in mind.
07:51But I think one interesting thing what we're seeing is that the while the Nifty and the
07:55other indices are making a new heist, the breadth of the market is now slowly starting to weaken.
08:03So what I mean by that is that if you look at the number of stocks which are down, say
08:07around 20 percent, 30 percent from their peaks in this year, I think the number of those
08:14percentage of stocks is now kind of increasing.
08:17So I think that's a slight change from what the market was doing, say, until, say, the
08:23beginning of this calendar year.
08:25But otherwise, I think earnings momentum is definitely slowing down.
08:30So I think that should slow down the pace of acceleration in the market is what I would think.
08:35OK, just to come to some of the factors that you mentioned, Mahesh, and I think U.S.
08:40elections, rightly so, is the next big thing globally to look out.
08:45At least the latest polls and these things change, but at least the latest polls seem to
08:50point towards a Harris administration next.
08:53What does that mean for U.S.
08:55markets and from an Indian perspective?
08:56I'm not talking about the politics of it at all, but from an Indian perspective, does that
09:01make a big difference to us and to the U.S.
09:03markets? Yeah, I think so, in a way, from a U.S.
09:10market standpoint, I think it would be probably continuation of the existing rule of the
09:16Democrats. So the policy of the earlier regime would continue.
09:21So I don't think that should lead to any large volatility over them.
09:26Obviously, the stimulus would be in terms of how do you prime the U.S.
09:30economy and ensure that there is a soft landing?
09:33And I think some of the measures which the Democrats and Kamala Harris has talked about in
09:39terms of generating employment, I think that should be positive.
09:42I would say that in that context, I think the volatility in the U.S.
09:47market should be could be much lower if that is the outcome what we are looking at.
09:53And even from India perspective also, I think I would say that it should be fairly normal.
09:57I don't see any reason because Trump would have mean that there would be more tariff
10:01barriers, at least the rhetoric there could have been slightly negative for India.
10:08OK, in terms of India right now, do you think, Mahesh, that we will see those global
10:14flows coming in? I mean, the numbers for Friday were astonishing.
10:19Some say it's because of the FTSE rejig and a lot of them are passive flows.
10:23I don't know what your take is on that, but do you see that sort of floodgate opening
10:28now? It's not like, I mean, we're not going to see the floodgates opening and big money
10:36coming in. But if you look at the data points, it suggests that probably you should see the
10:40reversal of the outflow of what we have seen in the better part of this calendar year.
10:45So, A, one is the rate cuts means that you will see that U.S.
10:52dollars starting to be there and that's been now quite apparent.
10:56OK, that would mean that more money into emerging markets and India should get its share over
11:02that. Also, a point to note is that India's weightage in the emerging market index or
11:10even the global index is at an all time high.
11:12It's now overtaken China also, which is to be around close to around 22 percent.
11:18And and relatively, if you look at the global funds, I mean, all the emerging market
11:24funds, fund managers globally are now slightly underweight in India.
11:29I mean, historically, they have been over India and it has been as high as around three to four percent.
11:35Right. That has now gone to marginal underweight.
11:38So I don't think there is room for FIIs or the foreign investors to really go underweight in India
11:45beyond this point, because India is a relatively better performing market.
11:50Right. So in that scenario now, I think I would say that you should see the flow starting to
11:57improve. Obviously, India is relatively expensive vis-a-vis the region, and that could always be a
12:02debate. That is what has kept foreigners away.
12:05But I think there won't be a much choice because India remains a good long term growth market
12:11and foreigners would want to participate in that.
12:13So I would say that you should see at least the FII starting to turn positive, though I would not
12:20rightly say that you would see a large number coming in because unless there is a correction and
12:24some moderation valuation where you could then see more money coming in in big quantum on the
12:30foreigners. And will that be coming into banks?
12:33I'm wondering how right now, Mahesh, you're feeling about banks, private banks.
12:37I know you will not tell me about HDFC specifically.
12:39Fair enough. But, you know, I'm wondering if you're feeling some of that concern which we were
12:46seeing at the end of the last quarter numbers on deposit growth, etc.
12:51Ebbing? Well, on the banks, I mean, one is on the technical side, if you look at it, that there have
12:57been huge sell down by FIIs in the bank.
13:00So when they were selling the bulk of the it was taken by the banking sector because that's where
13:06the larger ownership was, especially some of the larger banks, OK, where FIIs held a larger chunk.
13:12And that's where now I think the after the last selling, I think clearly the positioning in the
13:17banks on the partners seems to be much lighter and banks continue to be a large liquid name.
13:23Right. So whenever money flow starts to do what I think that's the sector which could probably
13:27attract some of that flows.
13:30Also, banks, if you look at the private banks in general, they have underperformed right in the
13:35last one year or so.
13:38And the valuations there are more reasonable if you compare that with the long term averages.
13:43Right.
13:44So clearly that the risk reward looks more favourable and you could see more money chasing
13:49than that could possibly be a rotation back into the banks.
13:52And you could see a relative performance over there going forward.
13:57So I think that could be a reason why I think you could see banks potentially doing well.
14:03However, the headwinds from the banks in terms of the deposit growth, I think that still remains
14:08right.
14:09OK, that is still a challenge.
14:11And that's the reason why there have been downgrades to the credit growth for the banking
14:16sector in this fiscal year to now around so around 12, 13 percent compared to around 14, 15
14:21percent earlier.
14:23But so I think that but I think the overall system liquidity, if you look at our liquidity is now
14:29starting to improve.
14:30So that should some give some relief in terms of the deposits.
14:35But clearly that remains the biggest challenge at this point in time for the banking system.
14:41Just last point from you, Mahesh, you know, we spoke a bit about banks, but in terms of the
14:47sector rotation that we've been seeing in the markets right now, what is looking most exciting
14:51to you?
14:52What are you most constructive on?
14:53And will rate sensitives like autos and reality make that list?
14:59So, yeah, I think in a way, I would say that there are a couple of things which we are
15:05positive on.
15:06One is consumer discretionary side, because that is more likely to be influenced by any
15:14rate cuts.
15:15We see a lot of now consumer decision buying happens based on leverage or loans and that
15:24any increase in the cut in interest rates in India, probably six months down the line
15:28could mean that you would see more disposable income at the hands of the consumer.
15:32And this is a sector which had underperformed last year.
15:35It's only starting to pick up now in the last three to six months.
15:38So structurally, we think that's a sector which can do well from here.
15:43Also, the rural economy is, again, there are some green shoes there about it picking up
15:50rural wages slowly.
15:52The real wages are starting to improve and the monsoons have been fairly OK.
15:56So you should see that picking up.
15:58So I think second half, I think rural demand could pick up and that could also drive demand
16:03for some of the rural places.
16:06So these are some of the themes which one can look at from a media perspective.
16:12OK, thank you so much, Mahesh Patil.
16:14They're talking about what the themes are and definitely consumption is one of them.
16:18I mean, we talked earlier today about the CLSA note, which managed to quantify all the
16:23angst and excitement about Coldplay tickets into a stock idea, which in their view was
16:28Zomato.
16:29So, you know, that theme definitely will continue.
16:33But as part of our special coverage of the JPMorgan Annual India Summit, my colleague
16:37Neeraj Shah caught up with the head of equity research for JPMorgan, Sanjay Mukhim.
16:42Listen in to a bit of that conversation.
16:47Well, we are live at the JPMorgan India Investor Summit and in conversation with one of my
16:52favourite spokespersons, Sanjay Mukhim, he's head of equity research at JPM, joins us.
16:56Sanjay, it's been a really long time, but glad to be here.
16:59It's a pleasure being on, Neeraj.
17:00Thank you for having me.
17:01No, the pleasure is entirely ours.
17:02So, Sanjay, big conference and I'll come to the detailing of the conference as well.
17:06But I'm judging by what you told me just before the conference, that the India interest
17:10is very, very high.
17:12This is arguably, if I'm not wrong, as somebody was telling me, one of the largest investor
17:16conferences that you've done at JPMorgan.
17:19That's right, Neeraj.
17:20It is a reflection of the interest in the Indian equity market.
17:24Our attendance ratios have hit a thousand delegates for the first time for a physical
17:28conference at JPMorgan.
17:30We are up, in headcount, about 30% YOY.
17:34The number of corporates who are attending, the number of clients who are flying in from
17:37overseas destinations to join our events, the kind of speakers we have at our main tracks.
17:42This is all a reflection and, I think, a vote of confidence in the markets and the economy.
17:46OK.
17:47And it's happening just at the right time, right?
17:49Because we've seen the first of the rate cuts from the Fed.
17:52Everybody's talking about we being in an easy cycle, though it's idiosyncratic because
17:55Brazil has raised, Japan is raising, etc.
17:58But largely, global central banks, as a pack, also cutting rates.
18:01How does that auger for risk assets at a time when valuations don't seem to be very favourable?
18:08So it will roll back into the very, very hot debate, Neeraj, of whether you're getting
18:13a soft landing or a hard landing.
18:15If you're cutting rates in a scenario where growth is OK, that's the best situation for
18:21risk assets, right?
18:23Equities, conceptually, are an asset class that benefit from low inflation and high growth.
18:28So if you get inflation coming off, which is where you get the rate cut, but growth
18:32is sustained at a reasonable level, asset prices will be supported everywhere.
18:36However, if the rate cut is happening because growth is slowing down significantly, then
18:42that's a very bad situation for equities or growth asset classes, right?
18:46I think the debate is still out which sort of a rate cut we've got.
18:51As of now, the market is of the belief that it's the former, that growth is fine, inflation
18:55has come off, it's great for us.
18:58And therefore, what we need to watch everywhere around the world, not just in the US to my
19:01mind, does growth hold up or not?
19:04Because if it doesn't, then equities might come under some pressure.
19:07What's your prognosis about the India growth, therefore?
19:10And what are you telling clients out here?
19:11A thousand-odd people, you said, right?
19:13What are you telling them?
19:14Well, mechanically, our printed growth numbers will come off, right?
19:16And this is just a math of the base effect and the way the deflator is calculated.
19:20We've seen that in the June quarter, and that trajectory of it coming off a little
19:24bit mathematically is going to play out over the next three quarters.
19:27The only thing that's worth noticing is that India has had GDP upgrades in the previous
19:32three quarters, where printed GDP numbers beat everybody's estimates.
19:36This quarter, we've actually got a minor GDP downgrade, where it's coming lower than, let's
19:41say, the RBI's expectation.
19:43And this is reflected, if I may segue, in earnings in the market as well, whereas for
19:48the previous three quarters, earnings were beating estimates, and we were seeing upgrades
19:52to, let's say, the NIFTY or MSCI India EPS.
19:55This quarter, around results season, we've seen downgrades.
19:58Two out of three companies have missed numbers, which is very rare for the first quarter.
20:02And we see a minor downgrade to the index EPS number as well.
20:05So on momentum of activity, whether it is through GDP or through corporate earnings,
20:09we've seen a minor deterioration in the market in the last quarter.
20:13OK.
20:14If FY26 numbers estimates out there look OK, let's work with that assumption.
20:20Are markets egregiously valued for you to tell your clients here that, hey, be very,
20:27very choosy about India despite the interest?
20:29Or do you reckon people will go out and say that India is amongst the few bastions of
20:34growth?
20:34I mean, Japan, Spain, India, maybe US, very few economies growing and very few economies
20:39showing earnings growth.
20:40So never mind the valuations.
20:41Let's put in the money.
20:42So again, you can make multiple stories out of this, right?
20:45If you look at the nifty 50, the top 50 large cap stocks in India, the weighted average
20:51PE is exactly the same as the S&P 500, right?
20:54So there is no premium.
20:55There is no discount.
20:56And we've traded in line with the S&P for many years.
20:59So in the context of a global equity valuation, India is not overpriced on the large cap basket
21:05at all.
21:06Yes, individual sectors may look well above average.
21:09And you can pick and choose those kind of data points.
21:13But the index itself, relative to equities in the US, is fairly priced in a way.
21:18However, if you go down the Ragniraj and you start looking at stocks in the 101 to 500
21:23or 500 to 1,000, and you take various cuts of that, all of those are at all-time high
21:28PEs, right?
21:29And PEs are difficult to contextualize because of the narrative of growth.
21:34If you then back work on a DCF, or if you look at the implied equity risk premiums,
21:38a very mathematical analysis of valuations, the equity risk premium in Indian equity markets
21:44is at all-time lows, meaning that the amount you're getting paid for taking the equity
21:49volatility is the lowest that it has been in decades.
21:53And this means that equity as an asset class is reasonably overpriced.
21:57OK.
21:57So therefore, my question, are you telling people to be very, very picky?
22:01Or are you telling people that still, India will be good enough for your dollars to come
22:08and get parked here?
22:09What's the message at the conference?
22:10Right.
22:11So look, we cannot tell people to stay away.
22:13Because if they have a mandate to invest in India, if they have raised funds to invest
22:16in India, they have to invest in India.
22:18So telling people to not buy India is not really helping my investors.
22:22However, there are two or three points to make.
22:24If you buy at elevated multiples, the future return expectations have to be moderated.
22:30And let me give you a data point.
22:31If you had bought at the top of 2008, which was the top of the previous bull market bubble,
22:37even today, which is all time high valuations, et cetera, your CAGR is only 8%.
22:44Right.
22:44So timing of the market does depend or does drive future returns.
22:48So if you're buying at elevated multiples now, please keep your return expectations
22:53moderate.
22:54Yes, Indian earnings will grow.
22:55Indian earnings will grow better than other people's earnings and all of that.
22:58But don't expect a 15%, 20% CAGR in Indian equities for the next five to six years.
23:03You have to moderate your expectations of returns.
23:06The second point that we make, and this is slightly different from what you were talking
23:11about, is liquidity.
23:13Right.
23:13And what always happens in every bubble everywhere in the world, the first thing people forget
23:19is liquidity.
23:20And what this means in the equity context is let's say you bought a stock today, which
23:23is trading $30 or $50 million today.
23:26In a down cycle, your ability to sell the stock as a large cap institutional investor
23:32gets diminished significantly because the liquidity disappears.
23:36So the second filter that we advise people apply in their India investments is a quality
23:41portfolio filter where stocks will continue to trade even in a down cycle.
23:45You will have the opportunity to buy and sell even if things go sour.
23:49Right.
23:49And things can go sour for a variety of reasons, global equity risk off or whatever.
23:53Do not get tempted by the hot tip that you got of a stock that's doing extremely well.
24:00Make sure you keep your quality filters on in your India investment today.
24:03OK, fair call.
24:07So future returns moderated, but pockets within the Indian landscape might still give you
24:13better than the average return that the index will give you.
24:16Right?
24:16Yes.
24:17So I'm trying to understand where is it that those pockets are and how are you choosing
24:21these?
24:21Are these on the basis of earnings growth?
24:24Or as you keep on telling me a number of times, earnings beat is more important.
24:28Correct.
24:28So let me talk about the second part.
24:30We've done a lot of quantitative work, correlation analysis.
24:34Stocks on a 12 month basis are driven more by earnings beats or earnings upgrades than
24:40to mere earnings growth.
24:41In fact, the correlation of earnings growth to 12 month returns is zero.
24:45Interesting.
24:46Yes, it's because earnings growth is probably already well understood and is priced into
24:49the market.
24:50Of late, however, we think some of that correlation deteriorate because it's becoming mid cycle,
24:55late cycle, whatever you call it.
24:57So the correlation with earnings beats is weakening a little bit, but it still has to
25:00be one of the key filters in processing stocks.
25:03In India, without being too bearish, if you ask me about the prospects of Indian growth
25:09and economic growth, we can be reasonably positive.
25:12There is a lot of upgrade happening in India.
25:15There is a lot of assurance of growth, whether it is 8% or 6% is a debate, but it is still
25:20going to be a world beating growth rate in many pockets.
25:23You're seeing, like I say, India benefiting from the increase in per capita incomes.
25:28So the few sectors that we think will continue to benefit, we like, let's say, the real estate
25:32space in the country.
25:35India is massively underpenetrated on residential real estate, plus there's a second driver,
25:40which in India is, what do you do with your money?
25:43See, one of the big reasons money is coming into equities is because fixed income is not
25:47investable, especially if you pay full tax, and therefore whatever savings are generated
25:52necessarily goes into either equities or real estate.
25:56So equities markets are doing well.
25:58We think the real estate market will continue to do well.
26:00We like that sector significantly.
26:02We like, let's say, power, where the power sector is reasonably tight.
26:07This is consensus.
26:08Everybody understands that demand supply is tightening fairly quickly, which stock, et
26:12cetera, is a debate to have, but the sector itself looks good.
26:16Banks are slowing, Neeraj, and they have significant challenges because of a lack of deposits,
26:21but that's where the valuation comes in, because it's the only sector where valuations make
26:26some sense.
26:27So if you have patient capital, if you're looking for nice quality, large cap companies
26:33where you can live through a bit of a weak growth phase near term, I think banks look
26:38great.
26:39They look great to us for three years, to be honest.