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    Buy NBFCs, PSU banks selectively: Sudip Bandyopadhyay, Inditrade Capital

    Synopsis

    “Auto axillaries are doing well and the demand is increasing. We are definitely seeing upsurge in demand both in India as well as some of the global markets”

    ET Now
    In a chat with ET News, Sudip Bandyopadhyay, Chairman, Inditrade Capital, says Bharat Financial among NBFCs, and SBI among PSBs are his favourites. Edited excerpts


    ET Now: The basket which really held out and as has been the case year to date as well has been NBFCs. What are your thoughts after this consistent run up that we have seen in the entire pack. Is it time to take profit and are you still bullish on the space?

    Sudip Bandyopadhyay:
    I think there is a definitely a rationale for the financial services companies to benefit. Lower interest rates definitely benefits them. But having said that, I think the valuations in some of these stocks have reached a level where one needs to be cautious. So I am bullish on this sector but I will be extremely careful as to which stock I am selecting. To my mind, housing finance and microfinance sector still continue to remain attractive but I will be selective there. I am a buyer in LIC Housing Finance, I am a buyer in let us say a Bharat Financial. A lot of turbulence was seen in Bharat Financial but still I am a buyer there. I will also look selectively at PSU banks, SBI is my pick there.

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    ET Now: Since we are on the topic of NBFCs, the QIP has been closed in Bharat Financial and the company has successfully raised the money as well. It has been oversubscribed. What are your thoughts here particularly on Bharat Financial?

    Sudip Bandyopadhyay:
    Absolutely correct. If you really look at this microfinance sector pretty much all the other large competitors of Bharat Financial are becoming small banks. They will of course move into a different orbit. So Bharat Financial definitely needed to augment its equity to fight in the market because interest rates in the microfinance space is going to come down. They are already preparing for that and it is very well positioned to take on competition from the new banks like Ujjivan, Equitas.

    ET Now: What are your thoughts on the dairy companies?

    Sudip Bandyopadhyay:
    I am a believer in the entire dairy industry story and that has got many things, more than the GST benefit which the organised players in this sector will get. Yes, there will definitely be a benefit for the organised players in pretty much all industries because unorganised guys who have been handling things in a suboptimal manner will be at a disadvantage post GST and there will be pretty much a level playing field so the organised players will benefit. Otherwise, the dairy industry is seeing a surge in a demand, things are becoming much more organised and structured and the guys who are already existing players with distribution network will definitely benefit going forward. The market will grow exponentially and the existing players will definitely benefit.

    ET Now: The first one is a GNA Axles. Have you studied it?

    Sudip Bandyopadhyay:
    We did look. I think it is a good issue and I think auto axillaries are doing well and the demand is increasing. We are definitely seeing upsurge in demand both in India as well as some of the global markets and the valuation at which they came was not too rich so I think it should do well going forward.

    ET Now: What about the big one though ICICI Pru?

    Sudip Bandyopadhyay:
    It is a great story, people have to realise that these companies have spent more than 10 years growing the business. Business is kind of matured of course the moment you compare ICICI Prudential with HDFC Life the comparisons become you used to get into that comparative zone and start comparing product to product margin etc.

    If for a minute if you leave that aside ICICI Prudential is the leader, they have built a pretty good business and I think going forward they will start reaping the benefit of all the hardwork they have put so it was a good issue for the investors to get into. I am reasonably confident that when it lists it will list at a premium to the offer price and even after that it will keep improving, the shareholders who have got the allotment or who will buy after listing will be happy if they have one year plus time horizon.

    Remember ICICI Prudential probably will improve from here on because today ULIP is a significant part of their business but they are definitely changing the business mix and they will move towards higher remunerative product. ULIP gives them a cushion in terms of capital but the margins come through other cover products and they are moving towards that definitely.

    ET Now: What about your ideas?

    Sudip Bandyopadhyay:
    A couple of things. One is a defence play. Bharat Electronics. We find it in a excellent company a debt free, cash rich, about 35% of defence R&D in the electronics goes through this company. Being a PSU they will probably in a better position to get government orders going forward and with a defence indigenisation and Make In India going on they definitely will be a big beneficiary.

    The second company we are looking at is good old Jain Irrigation. The performance was nothing to write home about but the good monsoon and focus on micro irrigation is going to help. A significant amount of capital infusion which the company got in the recent past will bring down the interest burden. So over a period of time, we think Jain Irrigation will give fantastic return to the investor. We are recommending a buy in Jain Irrigation with one year time horizon with Rs 150 as a price target.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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