So, what happens next?
Dipan Meta: The pain will be postponed for 90 days. There is still a lot of uncertainty to address over the coming weeks and months, but I really don’t know the consequences of these Trump tariffs. Our rating is that even a 10% tariff will certainly lower US growth and global growth rates, which will also cause collateral damage to our economy.
So, I think it’s still better to play a little more carefully, but I’m not as negative as before. At that point, we would say that the proposed tariffs led to a complete freeze of global transactions, as there was a complete paralysis of global financial markets and repeated views of proposed collateral being proposed. of structure and this kind of business system.
Let’s take a closer look at India. We are the first big market of this so-called Trump tariff sales. The end of yesterday was very impressive. So we need to deal with the finality of 90 days, what should we do for the next 80 days?
Dipan Meta: We are planning on entering the revenue season ahead and I think we need to look at everything and focus on it. Usually there is a lot of company-specific volatility at that point, and great investment ideas can also emerge.
Many businesses would have seen Trump’s tariffs. In certainty, I think Indian tariffs are around the current range. That’s what I understand. So it’s very important to think that what managers are managers and management will continue to move forward based on this scenario.
So for the next 80 days you’ll need to look at the company on a bottom-up basis with a focus solely on Micros, then see if there are any good investment ideas, or rebalance or restructure based on what came out of management and the actual figures in Q4 FY25.
Let’s talk about Jio Financial Services. Like a mystery stock. This means that this new child from the Ambani group was hoping for something amazing. But operationally, they have not taken off yet. It’s almost 18 months.
Dipan Meta: that’s right. It doesn’t meet that possibility. It introduces all the right people, processes and, of course, the support of Reliance Group, but somehow it has not lived up to our expectations.
And there are better stocks to buy in the Financial Services Space, NBFC Space. The NBFC space appears to be fairly decent due to low NPAs and lower interest rates, and the weight of the risk of NBFCS has also been reduced.
You own this, but are you planning to own Jio Financial Services? So, do you say I’ll make a leap of faith here?
Dipan Meta: No, I don’t think so. As a measurement disclosure, we have no Jio finance as we were very positive in Bajaj finance. And to that extent, our portfolio is an overweight NBFC for Bajaj Finance and Chola Investment and Finance, and these two companies have reached their all-time highs for almost five years, and both of these companies appear to have also appeared in new stages of growth. So we see these two companies are overweight in a possible future and probably not that much Jio finance.
Do you think the next trigger in our market will really be profitable?
Dipan Meta: The focus will undoubtedly move towards revenue, with certain triggers likely moving upwards, unlike actual numbers and what management forecasts are, or what assessments are for the current environment.
Therefore, investors need to focus. A good number should come from two or three sectors. One is, of course, banks, NBFCS, so you need to report decent numbers with NPA provisioning flattening year-over-year.
The second is that good numbers may come from Engineering, Construction Company, Larsen & Toubro, Afcons, NCC, and more. Runs pick up on these months so that should be good.
Cement also reports purely good numbers for general improvements in the basic effects and industry cycle and general improvements in urban retail companies, specialized retail companies. The last quarter itself saw decent numbers coming from there.
So this revenue season has great pockets of outperformance and good numbers. But look at it, and you need to bear the ratings in mind.
So if the numbers exceed our expectations and ratings, it’s a sufficient standard to buy into stocks, but it’s also a bigger issue as we expect very disastrous figures from high-tech companies to pass.
Do you think most of the negatives are priced? So we all know it’s going to be a disastrous quarter. These stocks have already fallen 25-30% since their peak. Is it when you’re totally sick of it, or do you think it’ll take a while before the news gets positive?
Dipan Meta: You can put in a trading rally anytime, but the long-term secular growth rate for software services companies is effectively declining. Just like with FMCG, it is at its low single digit or at that time. And there is a secular headwind.
There is a competition with the GCC. The overall AI opportunity isn’t like that at least for software services companies, and they want to grow at least 14-15% in their portfolio when they look at their portfolios and want growth at least 14-15% in their portfolios.
You’ll be surprised to find out Wipro’s 10-year revenue growth rate is 7.5%. TCS was around 9-10%. Wipro’s earnings per share have increased by 5.76% over the past decade.
So these companies are growing and falling completely off the grid of these companies. So I won’t see myself buying from a software service company as much as I would in the next few years.
What I hope for next is that, because growth is really crumbling, large integration within the sector, it could have some arbitrage opportunities and positive feelings, but at the end of a day when there is no growth, we don’t want to be there.
The other sectors focused today is city gas distribution, and companies like IGL, MGL and Adani Total Gas have announced that APM gas allocations for these companies have been reduced in the range of 18% to 20%, making it a key to note. Of course, these actually affect numbers. It was already announced a few months ago and is now implemented, and companies have to source gasoline at a higher price, which definitely has to affect their finances. But the good part is that lower oil prices are expected to bring some easing. But will you help us with your understanding and the impact of this newsflow on the sector and any of the stocks between IGL, MGL that you like at this point?
Dipan Meta: I am completely eschewing the gas distribution department. There was a time when they were growing their territory and gas use was increasing and increasing, but it seems to be suffering. Numbers from these companies have been largely stagnant over the past few years. The stocks aren’t burning.
At the same time, the long-term trend is currently favoring EVs not only for passenger cars but also public transport. And in the past, public transport has been a major growth driver for gas distribution companies, and at this point it’s not happening too much.
As many public transport moves to EVs and the increasing penetration of electric vehicles will reduce demand for gas.
So, at this point I want to avoid all gas distribution companies. The Indian Gas Bureau has other businesses, such as petrochemists and gas trading and gas transport, if you want to see, but it’s not actually a distribution of city gas. So, while numbers are unstable there, the ratings are very appealing.
Is there anything worth looking within the EMS space? Of course, these stocks are already expensive, have exhausted a lot and most of them already owned, but if you’re considering adding them to a fresh position or even an existing position.
Dipan Meta: We are not investing, but we have one company on our radar and see that it is Syrma SGS. The quarter prior to the December quarter was a bit disappointing, but the number of quarters in December was very impressive.
The management commentary is positive. They have won some good contracts, have excellent revenue visibility, and the ratings are not banged completely. In other words, it used to be traded 100 times plus, but now it’s more reasonable in the 50s or so.
So we are waiting for the right opportunity to look at this company more positively. And while there are great growth dynamics throughout the EMS space, the evaluation is a real concern.
So if you win a good business with a reasonable rating, it should certainly be interesting for investors. But things like Dixon and Amber are already pretty expensive. We own them, but I’m not comfortable adding to those positions.
Everything within the specialist chemicals, as these two already show a considerable number of trading bounces. But is there anything you like especially when it comes to specialized chemicals?
Dipan Meta: Now, our focus is on companies that are mainly India, and I think we can hold trade gatherings on specialty chemicals. Many specialist chemical companies have also expanded their capabilities significantly, and they will need to acquire streams over the next few quarters.
The basic effects are also useful for specialized chemical companies. However, from an evaluation perspective, we are not used to current evaluations as the fact that these companies are also very cyclical. But certainly there may be trade gatherings.
Investors should also note that these are complex businesses and are extremely difficult to understand and track. From that perspective, we are generally inadequately weighted specialized chemicals, but we are confident that we can better understand these companies and better understand these companies depending on the stage of the cycle in which the sector is trading.
