원문 보기
Welcome to this special conversation. I'm Suri Upadhyay, and if you're wondering where I am right now , I'm at the 22nd annual Motilal Oswal Investor Conference. With me is a person who needs no introduction: the group chairman, Mr. Ramdeo Agrawal. Sir, thank you very much for joining us. I was just thinking about how it's been 22 years, I started my career about 20 or 21 years ago in this city, so it's just fantastic.
and I think this time the conference is taking place at a time when the mood is a little better, right? But your first thoughts: what is the atmosphere at the conference, what is happening this year? When I came yesterday, yesterday was more about technology and AI, that was yesterday's topic, okay.
So I met an old friend of mine who came from Hong Kong, he is a real foreign investor in the sense that he gets global funds to invest in India. So he said, Ram, the trend is definitely changing. Good. Yes. He is receiving more inquiries from foreign investors. In fact, some of them are already sending him money to invest.
I asked: have they stopped going out? Of course, they stopped going out and he gets requests for visits. So I think the trend is clearly changing. Foreign investors, at their own discretion, I think, oversold India, and the share of capital fell from 21% to 11-12%. And yet they are underweight, in the 21st year at their peak they were 4-5% overweight.
So you know, it's kind of a cycle: from under- distribution and underweight to under-distribution, eventually you get to, yeah, overweight and over-distribution . Yes. So this wave will come too. We will all see this. It may take a few years, but that's the beauty of the market. Absolutely. I think of the market as a pendulum: when it swings, it always goes a little over the limit in either direction.
But I think the reason for the general sense of relief in the air is that after I don't know how many years, even when we track corporate earnings, for the first time we're not making headlines about another disappointing earnings season or anemic 5% earnings growth. So tell us, what is your take on the pulse of corporate India: what have you heard, read and seen this reporting season?
I met many corporate representatives here, they were playing, and of course BFSI—you don't have to ask, everyone is booming there, you said that all NBFCs and banks are doing very well. regarding the consumer sector, which has been quite sluggish for a decade . Yes. or six or seven years, they had high multiples, but were very disappointing in terms of growth.
This was a low- single-digit growth. So this morning I was talking to someone at Balaji Wafers, which is a mass-market product. Growth at the level of 20-25%. Growth of 25%. I've talked to people in the consumer sector, they say Starbucks is finally having 8-10% same- store growth. So, you know, I think the consumer revival is spreading to people.
And it's spreading everywhere—from small to large goods, so we see that demand is very strong and growing. The automotive industry — no need to ask, all automotive companies have growth of over 20%. Mosha, they don't have the capacity to meet the holiday demand that's just around the corner. So I think it all started with the reduction in the Goods and Services Tax (GST).
Mhm. Mhm. From 28 to 18%. I was amazed that it was bigger than the budget itself. Yes. You know, 28 to 18 on all Indian taxes. So this is a big step, the government was really brave and well advised to do this. But I think more important than that is the growth of credit flows. Mhm. Mhm. Last year it was 9%, now it's 19%.
And it continues to grow. This is a complete paradigm shift, because you can make goods cheaper, but if you don't give credit... yeah. Lending provides purchasing power. You have income, but if you don't have credit... then credit increases your income. Let's say, with a 20% growth of 200 lakh crores, you get 40 lakh crores of additional purchasing power in the hands of the consumer.
True, true. So I think the combination of good lending and the GST reduction created this miracle. And this continues, and I think the only question now is whether inflation will start to rise. Yes, that's a valid question. So, lending growth accelerated. Yes. The consumer spends more. Yes. The question is, how long will this last?
Because with a car, you will start to encounter a high base of comparison. Yes . From October-November, right? So how do you assess the pace of this consumption growth ? Well, leaving aside inflation, which I'm not sure about—let's say 4% or it will continue, because the war in Iran is ongoing. So politicians should be a little more tolerant for a while.
but if the credit inflow next year stays at 14-15% from that base on a 28% basis, if they do 14-15%, I don't see demand for cars slowing down. Of course. And in fact, some of the purchasing power may start to flow into more discretionary consumption. Of course. As we see, for example, in the FMCG sector and things like that.
So I think the consumer economy will thrive. Now, what will be the form of inflation? I think that's something that's on everyone's mind, even on a global scale , if you look at yields in the U.S., which is not something that's currently happening, but I mean, if they have to raise rates, if inflation, if bond yields go up another 50 to 60 basis points, probably their regulators, their Fed, etc., could raise rates, and then we would n't have a choice, so.
This is what the bond market in the US is pointing to , looking at it so it looks, I mean, this is another source of concern that is not close to us, but still I think it is, but for now let's enjoy the success this is only the second or third quarter of demand growth there are many more quarters ahead, and hopefully the earnings growth that has fallen to mid- single digits, about 7% which this year is certainly about 18-20%, the uptrend itself—about 16 mid- cap— about 22, so large and small caps —it's over 30.
So everything will fall into place, but my feeling is now earnings will be double digits. Let's say low double digits, 12-13%. Of course. I think that this scenario should be very sustainable, and I just hope that the regulators don't create an "on- off" situation, you know what you mean by that, which regulator?
No, no, under I am the regulator. I control everyone, Delhi, Mumbai, because I don't know who is pressing which button? That's why I say regulators mean the government that governs the economy. May the environment remain favorable. Yes. Be positive and do everything predictably. Drive very slowly. You know, there are drivers who pull the car.
They brake very sharply. Mm. And some of them are very smooth. They also brake, but very smoothly. So I'm saying that of course regulators need to regulate and steer the ship very nicely and smoothly and so using AI and all kinds of data available, high-frequency data, that needs to be there. I think we need to be very prudent, and not necessarily make very drastic decisions.
Of course. Since the economy is currently growing at about 7.5–8%. Let it just go with the flow. Good. Got it. I mean, let's start with a stable 7–8% before becoming more ambitious and aiming for 9–10%. Yes. Boss, you know, it's consistently at least seven, at most eight— that's how it is. Okay, so from what you've said, we're in a good situation.
In very, very good condition. So, Ram Ji, the question now is about the estimates: how much is already included in the price, what can we still expect? What do you think about market valuations, especially for mid- cap companies in sectors where earnings look strong? Look, the index is at around 20 P/E.
Compared to long-term averages, this is a completely different market than in 2020. Back then, there was no such participation of retail investors, no such SIP flows. Look at demand, domestic demand— of course, the estimates will be a little higher than before 2020. The documentary period. So if you take the averages after Covid.
That's about 20 times. So we're at level 20. Um, we're right at the average. But the growth rate now is not as strong as after Covid, because then the growth was about 25%. And that supported multiples of 22, 23, 24. I would say a PEG ratio of 1. That's a very good support line, but for a P/E of 20-20%.
I think we need long-term growth at 12–14%. 20% can be supported. Mm. Now the problem is that we are at 20 P/E, I don't think so. Uh -huh. And this is at the Nifty level. At the Nifty level, and if you sum up the mid-cap and small- cap, different numbers will come out. Therefore, I believe that our market is very well adjusted.
No one knows which number is correct. Even God doesn't know. I'm saying that we've been standing still for two years. Someone wrote an article in the Times of India today. That August 15, 2024, 25, 26 years—it's all the same . The 24,200 level is more or less the same, so it's obvious what happened.
The market did not crash. Because of the stability of internal flows. If there were no internal flows. We would drop to 16,000–17,000. Due to the outflow of foreign investment . I suppose so. Foreign investors would have done what they did. But thanks to our internal flows, we held on to 24,000. Now, what's the way forward?
If you haven't fallen, the correction is not complete, you can adjust in time. You just wait. I mean the multipliers in '23-'24 , in 2024 they went down to 20, so you adjusted the multipliers; you know, you adjust the multiplier either over time or suddenly go down and then adjust the multiplier, that's what happened over time we went through, the earnings caught up, the index multipliers stayed in place, so my multiplier adjustment M-g multiplier went from 24 to 20 times now.
Yes. And I'm talking about TTM. I'm not talking about the forwards 27-28 right now. So, and now profits are rising, and if, uh, God willing, this situation with Iran gets sorted out, then suddenly you'll get a very good, uh, good push to lower inflation as well. So we can get the duration of the current low inflation of 3-4% for a longer period.
I think overall, uh, the markets have adjusted, the downside risk is limited, the downside risk could be again, I mean, there could be further stress elsewhere again and we could fall 2,000 to 3,000 points, but I see, uh, the upside potential of 10,000 points, oh you know, I mean, not tomorrow , no, of course, of course, so in 2,000 to 3 years, I see the upside potential of 10,000 points and the downside risk of 2,000 points, that's a great place to be, you have to be in the stock market or any stock, you rarely get an opportunity that's asymmetrical: my downside risk is one, my upside potential is five almost five, yeah, phenomenal, phenomenal, so against that backdrop, I mean, it's obviously a great time to invest and put capital where would you put fresh money to make it work?
I mean, would they go back to your old favorite ideas, capital markets, you run it, so I give them my money, so you now actually need to go to them, find out what they're buying, what stocks they're buying. But on a larger scale, uh, you know , what you can talk about is, you know, look at banks, thank you, banks are available at unlike other times, banks are available at much more reasonable prices, right, especially the big banks, the bigger ones, no, all banks, if you can be very clear, if the leader is cheap, nothing can be expensive.
Oh, okay. Nothing can be expensive. If Nariman Point grows at half the rate, do you think Bioli will be expensive? Can't be? Well said. Well said. Yes. So it's something like this. So, so that means you still see value not just in the big banks, but also in the mid-sized ones, wherever there is adjusted growth, there is value .
Good. In this sector. Good. So it's a very large sector. We just discussed a third of the market in terms of profits. Then you have financial companies. Sorry, capital market companies, so which ones do you like, of course, and this is also my business, so I know how well they work, I think this is, this is a multi-year boom, I can say this, this is the path to Vixit Bharat, something like that, okay if you have to pick one industry for Vixit Bharat, buy capital markets and forget about it, okay, I remember, I remember that, but coming back to the lenders, if someone wants to form a basket and, you know, invest money, is it more appropriate to allocate more capital to banks or NBFCs right now, and how do you decide, I mean, how do you look at these companies, no, no, look at the banking NBFCs—they are also an extension of the banks, yes, I mean, the door-to- door lending and fundraising is done by NBFCs, but the money comes from the banks, right, so if you look at SBI, SBI certainly provides funds to all the NBFCs, all the home insurance companies, for liabilities, right, so you know, it's not that they're separate, it's just that the regulatory requirements for banks are much stricter.
Yes, there are a lot of things they can't do. There's less regulatory arbitrage. In NBFCs, things can be monoline, high-yield, so the regulatory reserve requirements are low. So the margins can be higher , they can grow faster. Some of that could change as well, right? Because we saw what happened to the big NBFCs when the RBI issued a consultation paper on revolving credit facilities.
I mean, their latest paper talks about limiting revolving facilities, particularly for NBFCs involved in retail finance, right? We've seen Bajaj Finance cool down a bit. So is that a concern for you in terms of adoption? I don't know, I haven't studied the document, so I can't comment, but you're positive about both the banks.
Yeah, look, as long as there's business, there's margin, credit costs are low. Yeah, defaults are low. Less stress from customers. Of course, there 's always a cycle even in consumption and so on. Of course, the capital expenditure boom hasn't happened yet. We haven't seen a significant capital expenditure boom in India since 2008.
How long can you continue to sit on the same, you know, marginal costs and so on? So I think we're in a situation where we're going to have a consumption boom followed by a capital spending boom. So, led by defense, infrastructure, all that stuff, look, the government is getting money. They're not going to spend money on little things, they're going to buy infrastructure: whether it's defense, whether it's roads, ports—everything in a row.
As you have seen, the collection of the Goods and Services Tax has increased by 15%. You increase tax collection by 15% this year, and then next. Yes. You see what is happening with government spending . So, from an investor's perspective, you've raised an excellent point: both engines are likely to work—both consumer and capital investment .
From an investor's perspective, where do you see the best opportunities for profit or investment? It all depends on how early you notice the company. And from what you understand and where you are comfortable working. Yes. You know, defense is great, but personally, I'm scared of having only one buyer.
It scares me, especially if I buy cheap. Yes. Look, there are three factors to consider when investing. An investor can be anyone, but they must consider three things: business, management, and valuation. Of course. I want the business to be great. Of course. I want first-class management and a very reasonable price.
Very acceptable. So, defense...it's like a utopia —getting everything at once . Indirectly. And you have to look for everything one by one, step by step. Mm. So you need to look for positive factors in all three segments. You will usually find a great business, of course, but either with no growth , or with low growth, or with a very high valuation.
That's right. Outstanding business. Aha. Outstanding management. Yes. But the price is incredibly high. Yes, it doesn't work again. So you need all three indicators to be in the “green zone” . So give us a hint, maybe not all three, but at least two of the three—where do you see such "green" zones? You have to look at specific stocks.
Good. Which I have no right to speak about. I see some of them. But it's better to ask what sectors these are in the capital market or in the defense sector. It could be production. This could be a service industry. This could be export- oriented technologies. It comes from everywhere. I see them all.
They come and talk to me. Some of them are public, some are not. There are very interesting opportunities among private companies as well . So, there are clear opportunities for researchers, and now, with the use of AI and screeners, even individual investors have gained enormous power. And thanks to CNBC, they get interviews straight from the boardrooms .
Information is becoming more accessible. The information is available, everyone's interviews are on YouTube, so you don't have to worry, uh, true, true, so regarding sectors, one more question I wanted to clarify: this topic and the narrative about the energy transition , data providers and, you know, energy equipment.
I've heard a lot about this the last 6 months, especially this year here, uh, you know, what would your advice be, if valuations are not reaching cautious levels, let's look very methodically at all three, okay is this a good enough business, is it very cyclical energy, like is this early stage growth?
Of course, let the situation change. Of course. But is this an early stage of growth? Here is the cement. Cement is a cold industry. She didn't get up. Yes. So, you will get the opportunity. But nobody likes cement. True. It's not popular right now . Truth. So you have to figure out if it's a good enough business, or if there's a compromise in management.
This must be outstanding management. If management is not strong and outstanding, you will not succeed, you see, strong companies are built by strong management. True, true, true. Okay. And if you have a strong business and strong management, you can actually afford to pay a little more. M, okay. ee IPO on the unlisted market .
uh what do you think about such companies and now there are many new listings, even in a sluggish market it is so, so Midcap, large companies, we had SBI fund listing. What is your opinion on that list? That's good, okay . Mutual funds rate it well and it is a very healthy environment. You see, the capital market is designed to raise money and provide liquidity to the secondary market; it goes both ways, both for me as an investor and for corporations to raise capital.
Truth. So if corporations are raising capital, that's great, that's a very, very positive side. So what businesses that are currently in the queue for listing, uh, are you excited about right now ? Which ones are you considering? As for companies, I mean many companies that, well, like LIC, were very interesting, very interesting, very difficult to understand, but very interesting.
You have to figure out where the value, the deep value, is, and you also have to be patient. There is so much information now, so you have to be very careful. So yes. Okay. Okay. Strong business, strong management, lots of growth, reasonable price. Okay. Rightly. What do you say, Mr. Rami? What are the risks?
We need to talk about them. There are many opportunities in the market, which we have already talked about. What are the remaining “ red flags” that we should be wary of in these circumstances? Is this war? War between the US and Iran? Why is 20% this small? This is true. I just hope it's not near me, be it somewhere in North or South America, I mean it won't have a direct impact on us.
But there is no war now , but it still hurts us. So, there are risks that will become much more visible, but they may not affect you. And there are risks that will directly affect you. So let's not talk about risks we don't know about. OK. Okay, the ones that are already staring us in the eye, for example, inflationary pressure if inflation increases.
The government has no choice but to restrict the flow of credit. And once they limit that flow, it's like the lights went out on the show. Good. So then earnings growth slows down, and then I feel so inflation could certainly be one of the factors, and this global interest rate scenario—how it will evolve.
The USA is another factor. Yes . But these are things that are already in sight. Completely out of line No, we did very well in July, but someone is saying they revised the deficit up a little bit higher than they had previously projected. So if August and September are extremely dry, and uneven, and all that, then food prices and all that—that's more of an inflationary effect.
But I'm talking about profits, credit growth. Credit growth. Credit growth, because India is a very poor country. The purchasing power of the masses depends on consumer-level lending. I know this is a question about a bit of a distant future, but soon we will be talking about the elections in Uttar Pradesh, it is a big state, does this matter for the market?
No. I don't see any "red flags" at the moment. OK. Of course. I mean, someone has to show up who poses a threat. Good. So, now I mean the internal situation. OK. Rightly. So let's get back to what you love to do: analyze, study companies, look for themes , explore long-term investment ideas. So what excites you right now ?
What are you reading? What companies are you meeting with? What has inspired Ramo Ji at conferences or otherwise over the past few months? You see, I'm always excited about growth. Growth is part of my, uh, investment structure of 2G LP. So G is a very important part of it. So if growth is happening, then of course the growth is noticeable, the quarter itself is uh, the second is how long it can last.
So where are these niches? I say, let's throw everything else away. Let's set aside valuation, company management, etc., because this is the level of individual stocks. Purely from a growth perspective, what are two or three niches where you think growth might not translate into a stock recommendation, but from a growth perspective, those niches are really going to grow rapidly.
It seems to me that the consumer sector, look, first of all, it's cars, clearly cars, and therefore real estate. Real estate, those who, like Loa and BLF and all these guys, they run branded, you know, player and aspirational brands, because a home is a once-in-a- lifetime situation, that's true. So people would definitely want to buy branded stuff, and a lot more people can afford it.
So, uh, my feeling is that they're going to feel really good for the next 10 years. Uh, and, uh, I mean, now they need to manage their finances well. Of course. You know how they manage. Yes. I'm talking about demand. I do n't know about how good the balances are and all these issues. Uh, but then I think I see a very strong demand for , you know, nice homes, branded homes.
Everyone wants branded homes now. Nobody wants to go to unknown developers. You know, because RERA came along, so there was some certainty and uncertainty for smaller companies, so that's one thing. Uh, so cars, real estate . The car is clearly there, the real estate is there. Then what else? I mean, we talked about finances, creditors, etc.
Yes. I don't see, you see, because capital is being raised, all the capital goods companies are going to make… capital goods companies, there's going to be a very well- distributed earnings momentum there. Uh, let's say all the jewelry companies, they were very...Titan did so well. So I just follow the uh, you know, what you call quarterly results because I don't invest directly that much.
So for me, stocks are not as important as earnings, they tell me the story of what's happening in the economy as a whole. Truth. So how well distributed, I mean, everyone made mistakes this quarter. We, uh, I think our earnings estimates were four to five percent lower. Aha. So that's a 5% first quarter increase in earnings, I even forgot the word " increase." A.
Usually, once you start one quarter, four quarters are already determined, and then we'll see. So my last question for you is the perspective of new investors who have come into this market after seeing a great V- shaped recovery. Back then, everyone thought you could just trade in the market and make money.
Yes, but the cost of trade has increased significantly, has n't it? Your probability of success and the degree of success and economics of trading have changed dramatically. This is what my professional trading friends tell me. I've never traded so I don't know, but I think they said their revenue was down 90%.
Those real traders, they just left the market. Okay, fair enough. So, what would your investing advice be for the new wave of investors who have come and gone through this painful two-year sideways market? They had never seen a sideways market before. Now that the good news is starting to come in, what should they keep in mind to have a good experience in the market?
Yes, look, there are two types: those who are doctors, professionals, and they don't have time to pick stocks, for them and for most of those who have money, yes, and they are young, they have to be professionals. Okay, so they don't have time to study, and it's become very competitive, so you need to be even more picky if you want to do stock picking.
So I would advise them not to choose stocks on their own, but to go and buy mutual funds. Okay, start investing through SIP so that the market risk is minimal, it will smooth out. The simplest, the easiest, but if by chance there is a consultant like you, you can tell me which scheme to invest in. There are enough people who will tell you which scheme to choose.
Of course. Invest in this scheme and keep investing for a certain period of time, you will feel great, much better than anyone, I tell you, much better, okay. 99% of people do not get index returns. So this is advice for 99% of people. Imagine, imagine. Only 1% smart guys like Rakesh and others and like Ram Ji.
I'm addicted, in fact I'm a mutual fund investor myself , the biggest investor. OK. Perfectly. I think this is great advice for any newcomer to the market who doesn't have the time or patience to sit and study companies, because it's exhausting and painstaking work. But it's also a great time to read about companies.
Those who have the time, those who are qualified, and they say then start reading, friends. Now all the classics are on the Internet . All the questions you can, now you don't have to ask "fruits" like us; you can go and ask the AI. He will tell you everything. Therefore, I believe this is a great time to learn and develop intelligence in individual stock investing.
Will AI be—of course, it will become a support tool, but for brokerage business , wealth management and advisory services, how disruptive will it be, because we'll see, we'll see, that's all the question. People who turn to him can get advice. But he won't give empathy, he won't build a relationship with you .
Yes. You know, it's about building trust; At the moment you suffer losses, what will you do with AI? You will come to me and ask, "Ram, what should I do?" and I will say, "Hold on." AI won't do that, so I think... We'll see how the technology develops. The computer appeared, it changed the world, everyone has a desktop, and yet little has changed.
We have become more efficient, smarter, and much faster. I think something similar will happen here, I believe that AI is intelligence, it analyzes big data and instead of a few people having the source of intelligence, now it is available to everyone. Truth. So everyone will become much smarter , much more intense, much more precise.
Yes. You know, the stock market is the best place to use AI. Certainly. And despite all the technological changes, we have been hosting the Motilal Oswal conference in person for 22 years. Yes. So I am sure that there are many, many more years ahead. In the 80s, to get a balance, you had to buy one or two shares and register.
I still have hundreds of shares of companies registered in my name, just to get balance sheets and reports. Yes. Today. Pressing a button. One click. Fantastic sir. Thank you very much for taking the time to join, it's always a pleasure to talk to you, and I wish you a wonderful rest of the conference.
Yes, everything is going very well. Thank you. Thank you. Thank you very much. We hope you found this conversation fascinating, interesting, and informative. I definitely was. Keep sending us your feedback, comments and we will be back soon with new content from the Motilal conference.
Comments 0