Dipan Mehta, Director, Elixir Equities.Dipan Mehta, Director, Elixir Equities, says Hyundai compares very well with Maruti. It may trade at a slight premium to Maruti also because of its product profile and the kind of distribution expansion opportunity which is there for the company and its superior EV strategy as well. If you are a long-term investor with a two, three, five-year view and prefer consumer-oriented stocks, then Hyundai fits that criteria. But, it is for the long haul and one should not expect a quick buck on listing.
What are your thoughts on the Hyundai IPO? There was a steady response on day one. But it lacks that zing or that X factor that makes investors excited when it comes to the prospects on listing. Do you concur?
Dipan Mehta: That is a good IPO to apply for and that’s how we are advising and a disclosure, we ourselves will be applying in the IPO. But you should not expect an amazing listing like what we have seen with other IPOs. It may be a more tepid listing because of its size and because of the sentiment in the auto industry as well. Even post-listing, you may have a situation where two-three quarters may be quite weak because we are seeing a transient slowdown in the auto sales and that may impact the profitability of all auto companies, Hyundai included.
On the whole, it compares very well with Maruti. It may trade at a slight premium to Maruti also because of its product profile and the kind of distribution expansion opportunity which is there for the company and its superior EV strategy as well. So, if you are a long-term investor, two, three, five-year type of view and you prefer consumer-oriented stocks, then certainly Hyundai fits that criteria. But, it is for the long haul and one should not expect a quick buck on listing.
The movement in Reliance was tempered by its earnings. The O2C business did not fire. I guess that is quite reflective on the way the stock has been. It has breached some of the key levels and technically looks quite weak right now.
Dipan Mehta: That is right. It is a great company operating under a challenging environment. Scale also plays a role over here. But there is really no trigger for you to go and buy Reliance unless they decide how to unlock the businesses which are existing in Reliance Industries and that can make a 10-15% difference with the pricing because if you are going to be just a straightforward IPO where Reliance becomes a holding company, then that is not that great for minority shareholders and you could see even further correction.
Whereas if they split the company, I am pretty certain a 10-15% upside can be expected. The management has been delaying a decision on this aspect, on this strategy. But sooner or later, a call has to be taken. As I said, there is no trigger to buy into these companies. Also, Retail and Reliance Jio now have reached scale and are gradually getting into the maturity phase as well. I am not sure, they will pay that much of a higher PE multiple. So, the scope for re-rating has also diminished a little bit.
With the rupee languishing at 84 to the greenback, what is your view on exporters?
Dipan Mehta: It is a mild depreciation in the Indian rupee and exporters are struggling with the demand situation. See what has come out from TCS and HCL Tech. The Street was expecting higher turnover, better demand, but that has not yet come through. Otherwise also, because of election pressures in the US key market and overall slowdown in Europe and the rest of the world, exports have not picked up in volume terms. So, a mild depreciation will ease the margin, and provide some flexibility to offer some discounts. But the depreciation of the Indian rupee is not a trigger to buy into export-oriented stocks.
I want you to address what is going on with Avenue Supermarts because there seems to be a structural challenge. The management has alluded to the fact and said that Q-Comm is eating into their business, at least in the major metro cities. A lot of innovation is happening in quick commerce. Blinkit last evening said they are now going to introduce easy returns under 10 minutes as well in some of the large metros.
Dipan Mehta: Well, that is a very high degree of innovation. And if Blinkit is able to successfully do it, then that is great news for Zomato shareholders like us. But let us see how it rolls out. There are a lot of execution issues in something like this. Choice also is a matter. But coming to Avenue Supermarket’s online sales, quick commerce is eating into the incremental volume growth, especially from stores which are in the urban areas, in the metro cities and that trend will continue. Valuations also are still on the higher side.
So, I would just avoid Avenue Supermarket for the time being and this is happening across the board in many industries where a slowdown could be structural, seasonal, or cyclical and that is the challenge for equity investors because if earnings slow down, then how are we going to support these high PE multiples?
