Mixed use hotel development reaches smaller places

http://www.business-standard.com/article/economy-policy/mixed-use-hotel-development-reaches-smaller-places-116063000756_1.html

Escalating land costs make this inevitable, to lessen risk and get financing

Ajay Modi  |  New Delhi 

June 30, 2016 Last Updated at 17:56 IST

The trend of hotel developers opting for mixed use of property to cushion high land cost is reaching smaller cities and is not limited to luxury projects.

Under a mixed use, the hotel is constructed with a retail commercial complex such as a mall or a residential wing having apartments.

Lemon Tree Hotels, setting up a hotel in Purulia, West Bengal, has opted for this. Along with the hotel, a commercial complex will come up. The hotel is being set up with partner Carnation Hotels.

"It is a practice in developed markets. It is a financially sound proposition, due to the exorbitant cost of land and finance, and therefore balances the return better," says Rattan Keswani, deputy managing director at Lemon Tree. Two hotels they manage, at Jaipur and Dehradun, have such a commercial wing. Keswani said this model was more suitable for mid-market and upscale hotels, not the luxury ones.

Sayaji Hotels, which runs six mid-scale hotels in non-metro cities, opened one last year in Maharashtra's Kolhapur. The hotel has come with the city's largest mall, DYP City.

Some new luxury projects are also coming up under a mixed use model. MBD Group, which owns two Radisson Blu hotels, is setting up a 184-room luxury hotel in Bengaluru. The property, expected to be operational by 2019, will also have 118 service apartments priced at Rs 2 crore onwards.

Sonica Malhotra, joint managing director at MBD Group, said hotels where the land owner acquired the lot years before could survive with a hotel-only project. "But, for new land bought at a high price, mixed use makes sense. Such a model helps to bring down the payback period," she said.

According to estimates, land accounts for 40-50% of the hotel development cost. For budget and mid-scale projects, the share of land in overall cost is much higher. Mixed use ensures the sale proceeds from the commercial or residential segment can be used to fund the hotel's construction.

Bringing a mixed use project means the developer can get upfront cash by selling the commercial space or the residences. This helps in risk mitigation. More, any new hotel takes time to stabilise and occupancy levels increase at a gradual pace. In the absence of mixed use, the owner is forced to look for more revenue generating space within the hotel, such as more banquet halls or restaurants, said a sector executive.

Rapid growth of MFIs’ gross loan portfolio sets alarm bells ringing

http://www.livemint.com/Industry/MiPf3aFSQgmpuJzOeMMWHN/Rapid-growth-of-MFIs-gross-loan-portfolio-sets-alarm-bells.html

Last Modified: Mon, Jun 27 2016. 10 55 AM IST

Microfinance companies extended heavier loans to their customers in the last financial year, data showed, raising concerns the sector that emerged from a crisis not far ago may be growing too fast yet again for its own good.

The loan portfolio of microfinance institutions (MFIs) stood at  Rs 53,233 crore as of 31 March 2016, up from Rs 28,940 crore a year ago, according to data from the Microfinance Institutions Network (MFIN), a self-regulatory organization for the industry. However, this 84% jump in loans comes against a much more modest 44% increase in the number of clients, suggesting the average loan per customer is on the rise.

The number of branches and employees too have grown much slower during the year, at 22% and 36% respectively.

Ratna Vishwanathan, chief executive officer of MFIN, linked the loan growth to the increase in client base and income levels. “Client base has increased by 44%, which is balancing out the increase in loan book. Also, general income levels have increased which led to such a high growth pattern,” said Vishwanathan.

Alok Prasad, a former chief executive officer at MFIN, did not agree. “Even if income levels are up, the jump is not enough to explain an 84% growth in the gross loan portfolio,” he said, adding the growth rates may be “something to worry about”.

Prasad said the MFI sector, which shrank after the Andhra Pradesh microfinance crisis of 2010, regained momentum only after new rules from the Reserve Bank of India (RBI).

In October 2010, following allegations that aggressive loan recovery tactics of MFIs in Andhra Pradesh had driven many borrowers to suicide, the state government promulgated an ordinance to curb MFI activities, sending ripples across the country. Bad loans piled up as borrowers refused to pay back and banks declined to give loans to MFIs. In December 2011, RBI announced new regulations for the industry.

“Growth is a function of individual institutions and good leadership. But such high levels of growth is absolutely worrisome. Compared to the client base growth, the loan book growth is much higher, indicating more money is given to the same client, which is a risky situation,” said Prasad.

The institutions that have seen the sharpest increase in their gross loan books are among the largest in the sector. Some are in the process of converting to small finance banks after receiving RBI’s in-principle approval last year.

Janalakshmi Financial Services saw its client base nearly double, but its gross loan portfolio grew at a pace that was nearly double the growth in its client base.

Bharat Financial Inclusion Ltd (formerly known as SKS Microfinance) reported an 84% growth in the gross loan portfolio on a 27% growth in its client base. Grameen Kota Financial Services Pvt. Ltd and Equitas Holdings saw their portfolios grow by 75% and 53% respectively. Among the larger firms, Ujjivan Financial Services saw the most conservative growth at just under 25%.

Emails sent to Ujjivan, Janalakshmi, SKS and Grameen Kota on Thursday went unanswered. P. N. Vasudevan, managing director of Equitas, said the increase in loan portfolio was because of an increase in the ticket size of loans.

One possible reason for the increase in ticket size of loans is a change in lending rules.

In April 2015, RBI eased rules for MFIs, raising total indebtedness limit of a borrower to Rs 1 lakh, double the previous limit of Rs 50,000. This allows lenders to give out more loans to the same customers. The new rules state that MFIs can disburse loans to a borrower with a rural household annual income of Rs 100,000 as compared with the earlier limit of Rs 60,000. In case of customers in the urban or semi-urban regions, the annual income limit has been raised to Rs 160,000 from Rs 120,000 earlier. In the first disbursement cycle of the loan, MFIs can give up to Rs 60,000 out of the total loan amount. This limit was fixed at Rs 35,000 earlier. In subsequent cycles, the companies can now disburse up to Rs 100,000 as compared with Rs 50,000 earlier.

Low levels of penetration have aided rapid growth, said a bank official familiar with the microfinance segment.

“Market penetration is low which gives huge potential to grow. Current growth is aggressive; however, if we compare the pre-crisis days and today’s situation, there are positive developments such as more responsible lending and a wider geographical spread,” said this official requesting anonymity, as he is not allowed to speak to the media.

The official, however, cautioned that MFIs still serve the most vulnerable sections of society, meaning the underlying risk remains high.

P. Satish, executive director of Sa-Dhan, the second self regulatory body for the microfinance sector along with MFIN, pointed to some other likely factors.

“A large part of the growth is accounted for by bigger MFIs who are on their way to becoming small finance banks, though growth shouldn’t come at the cost of neglecting loan procedures. Also, since banks have to fulfil priority sector lending norms, they give loans to big MFIs which are further given to small borrowers, thus helping banks meet their regulatory requirements,” said Satish.

To be sure, credit quality of the MFI loan portfolio remains steady, and has shown no significant uptick in delinquencies.

The percentage of the portfolio overdue for 30-180 days is at 0.25% for rural areas and at 0.33% for urban areas, according to Kalpana Pandey, managing director and chief executive officer of Crif High Mark Credit Information Services, a credit bureau.

Pandey said that however, “more borrowers serviced two or more loans during the year”—one of the reasons for growth in the loan portfolio. MFIN data show that 64% of loans were given for non-agriculture activities. In terms of the regional distribution of the loan portfolio, the south accounts for 35%, east 15%, north 25% and west 25%.

TA Associates in talks to buy stake in owner of fashion brand ‘W’

http://www.livemint.com/Home-Page/OxIDxRtZzGUD9MVIEbZ1IK/TA-Associates-in-talks-to-buy-stake-in-owner-of-fashion-bran.html

Last Modified: Fri, Jun 24 2016. 02 41 AM IST

TA plans to acquire a stake of about 30-35% in W, with existing investor Matrix Partners India selling its nearly 20% stake and promoters selling another 10-15%

Private equity investor TA Associates Management Lp is in talks to acquire a minority stake in TCNS Clothing Co. Pvt. Ltd, which owns the ‘W’ brand of clothing for women, according to two people close to the development.

TA plans to acquire a stake of about 30-35% in W, with existing investor Matrix Partners India selling its almost 20% stake and promoters 10-15% to raise fresh capital for funding expansion, said one of the two persons.

Besides TA Associates, four-five other private equity investors are in the running to purchase the stake, said the second person. Both spoke on condition of anonymity.

According to the second person, TCNS is seeking a valuation of `3,000 crore.

Several large investors, including Singapore’s state-run Temasek Holdings Pte. Ltd and US-based Blackstone Group Lp, held discussions with the company, but backed out on grounds that the valuation was too high, said the second person.

Investment bank Avendus Capital has been appointed to scout for potential investors. Matrix has invested about `100 crore in TCNS since 2011.

TCNS Clothing is in talks to raise around $100 million to fund its growth plans and provide an exit to Matrix, Mint reported in February.

Besides W, sold by around 200 exclusive brand outlets, TCNS Clothing sells other brands such as Aurelia, through 90 stores, and Wishful, across the country. W contributes about 70% of the company’s revenue while ethnic brand Aurelia and premium brand Wishful contribute the rest. W competes with brands such as Chemistry and Biba.

The proceeds of the proposed stake sale will be used to expand into new markets and increase the number of outlets in India, said the first person.

Anant Daga, chief executive officer at TCNS, and a spokesperson at Temasek declined to comment. Mails sent to Dhiraj Poddar, co-head, India, and director, TA Associates Advisory Pvt. Ltd, and a spokesperson at Avendus Capital on Tuesday did not elicit any responses.

“We don’t comment on fund raising and your information is speculative,” said Rishi Navani, former managing director at Matrix Partners India, who is also a board member of TCNS.

Founded in 1968, TA Associates has invested about $17 billion in 460 companies across the globe.

In India, it has invested in payment platform BillDesk, diagnostic chain Dr Lal PathLabs Ltd, mobile handset-maker Micromax Informatics Ltd and RateGain IT Solutions Pvt. Ltd, a price recommendation engine for hotels.

TCNS Clothing is promoted by Onkar Singh Pasricha and Arvinder Singh Pasricha, who have been in the textiles and clothing business since 1972.

TCNS Clothing posted revenue of Rs 358.7 crore and profit of Rs 27.2 crore in 2014-15, according to Registrar of Companies data. The firm aims to increase its sales to Rs 1,000 crore by fiscal year 2017 on the back of new stores, innovative product offerings and increase in online sales, Press Trust of India reported in October 2015, citing CEO Daga.

According to consulting firm Technopak Advisors, the size of the Indian apparel market stood at $41 billion in 2014 and is expected to grow at an annual rate of 9% over the coming decade. Womenswear is a $15.5 billion category and accounts for 38% of the overall apparel and textile market in India, it said in a report.

“The womenswear market is a huge opportunity, given the rising incomes, aspirations and an increasing tendency in the growing urban middle class to dress more smartly,” said Dhanraj Bhagat, partner at Grant Thornton India Llp.

However, while the market opportunity is big, it is also highly competitive, especially for companies wanting to create a national presence, he said.

“Growing nationally is a big challenge. A lot of investment is needed in building the brand, for promotion and advertising etc. Building the physical store infrastructure, distribution supply chain for serving a national market is also costly,” said Bhagat.

The womenswear market has invited the interest of several private equity investors in the last couple of years.

Aditya Birla Private Equity backed Creative Lifestyle Pvt. Ltd, owner of women’s apparel brands 109F, Fusion Beats and O2xygen, last September. Everstone Capital had picked up a minority stake by investing `100 crore in fashion label Ritu Kumar in 2014.

General Atlantic bought a minority stake in AND Designs India Ltd, a designer and manufacturer of women’s apparel, for about `150 crore. Private equity firms Warburg Pincus and Faering Capital also invested about `300 crore in Biba Apparels Pvt. Ltd, a firm that makes women’s ethnic wear, in 2013.

Apparel brand US Polo tops Rs 1,000 crore India sales in FY16

http://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/apparel-brand-us-polo-tops-rs-1000-crore-india-sales-in-fy16/articleshow/52859717.cms

By Sagar Malviya & Richa Maheshwari, ET Bureau | 22 Jun, 2016, 02.27AM ISTPost a Comment

MUMBAI | BENGALURU: Apparel brand US Polo crossed the Rs 1,000-crore sales mark in India in the fiscal ending March 31, less than five years after it entered the country, according to a top 

executive of the company. US Polo's fastpaced sales puts it in the same league as Zara, which became the biggest apparel brand in India within four years of setting up shop. 

Zara now clocks over Rs 1,000 crore in retail sales here. In comparison, brands such as Louis Phillipe, Van Heusen and Benetton had taken nearly a decade to reach this mark. 

"We caught the consumer trend with a fashionable but highly affordable brand," said J Suresh, managing director of Arvind Retail, which holds licence to sell the brand. "The iconic logo with two polo players on horses helped too. India is possibly fastest growing market by sales and stores addition." 

Arvind Retail opened the first US Polo store in India in 2011 and has since added nearly 230 more. The 750-sq ft store at Select City Walk in Delhi on average rakes in Rs 225 per sq ft a day. Zara, on the other hand, makes on average Rs 150 per sq ft each day from the same mall, although from a bigger store. 

According to Suresh, the company plans to open one US Polo store every week over the next few years as part of Arvind's broader push to grow its retail business. "Two factors have worked: they are more casual driven and less about fashion and second, they are a value international brand and well positioned on price, which appeals to wider audience," said Devangshu Dutta, CEO at Third Eyesight.

'If you want to make outsized returns, buy during uncertainty' - Madhu Kela of Reliance Capit

http://www.moneycontrol.com/news/market-outlook/if-you-want-to-make-outsized-returns-buy-during-uncertainty-madhu-kela_6882401.html

If you want to make outsized returns, buy during uncertainty'

Global equity markets are likely to remain volatile in the near term in the wake of concerns over events such as Brexit, says Madhu Kela, Chief Investment Strategist at Reliance Capital.

But the former star fund manager believes that Indian stocks will give plenty of returns to the patient, discerning investor.

Speaking to CNBC-TV18 in an exclusive interview, Kela said the Indian economy was growing at 7.5 percent in a world mired in deflation. Over the long term, this would lead to tremendous creation of new businesses and wealth.

Kela -- who called the bottom of the market around its 6,800 lows in February--  added that near-term returns, especially in stocks that have bounced sharply since (such as public sector banks), may be subdued.

"If you want to make great returns, you have to buy during uncertainty," he said.

The quintessential bottom-up stock picker, Kela said investors can find opportunities in any sector -- even real estate -- but he said one overarching theme could reward investors: consumption.

Below is the transcript of Madhu Kela’s interview with Anuj Singhal on CNBC-TV18.

Anuj: What's your outlook on the markets?

A: It is going to be a little volatile, because you are going to have so many global events, sometime it is going to be Brexit, sometime it is going to be Fed rate hike, there will be a lot of noises and we must not forget that we have had 40 percent global market deflation which is going on. There is USD 11 trillion of money which is earning absolute negative interest rate even in a country like Germany. Against all that, if the country is growing 7-8 percent and we are making 15 percent return, it has to be looked at in that context, so whenever there is a panic, you have to have the longer direction clear. So, whenever there is a panic, that is a real opportunity because there is nothing else which you can discover. So, India is not an undiscovered story anymore. So, it is all discovered. So only when there is a panic and you have a differentiated view, that is when you can make.

Q: So, that panic was there at 7,000 and you gave a call that go out and buy regardless of all the – you said everything is now priced in, that panic is no longer there and the market has rallied 12 percent or thereabouts.

A: If you now come now, you will make that much less return.

Q: But you will still make return.

A: Yes, you will still make return.

Q: You think what, 30,000-40,000 Nifty in some years?

A: I would say that there is a lot of wealth which is to get created. I do not know where the index is going to be. To me it stopped mattering where the index is. But a lot of new businesses will come up, a lot of wealth will get created. When you go from USD 2 trillion to USD 6 trillion, USD 8 trillion gross domestic product (GDP), over the next 10-12 years and you have so many dynamic business changes, disruption which is happening, so as long as you are agile, there is a lot of money to be made.

Q: But purely because of this Brexit and all, what is the downside? Do you think, we have actually put a bottom in place. We are not going there.

A: Of that I am very confident that because the earnings have improved quite a lot in the last quarter and I believe this year earnings will improve, we are looking at a good monsoon. So, I do not think those levels should get revisited.

Q: Stocks or sectors to buy right now? Non-banking finance companies (NBFC) have done well. Industrials have done well. Commodities have done remarkably well. What do you think is going to do well from here?

A: I would say again, rather than focusing on real sectors, I am saying anything which is really referring to consumption, because you see Seventh Pay Commission. That is one theme which is very intact in India. In one way, all these housing finance companies, all NBFCs are representing that theme because you lend money to companies which are in a way consuming. So anything which is linked to urban consumption even within that is most preferred. Then you will have a plethora of smaller themes or smaller companies like pharmaceuticals. It is getting slowly out of fashion and we spoke about pharma, but it is not a business which is going to die down. At some point of time, because your underperformance is so severe, you will have some companies which will become very attractive in the pharma side.

We spoke about public sector banks and you are seeing all of it actually playing out. When you bought, when things were really darkest, that is when you made money.

Q: I remember you saying that it was a good time to buy PSU banks, but is still a good time to buy PSU banks, SBI has rallied a lot.

A: If you have a three year perspective, I would say yes.

Q: You will not go wrong with PSU banks?

A: I do not think you will go wrong, because so much is being discounted. Even my driver knows what is wrong, how much NPLs are there, what can happen. But I am not saying random. It is not a sector call. You cannot go an buy any public sector banks which has listed. But the ones we have been more prudent have provided a lot are being more proactive and are really active on recovery. There is a lot of value which is there.

Q: So that is some pharma stocks we discussed, some banks and all, some consumption, some NBFCs. What else excites you in this market right now?

A: Bottom up. I am a bottom up idea man. I am saying in every industry, you will find a real winner.

Q: Any couple of themes that you tell us.

A: I do not want to talk about stock specific. I wish I could talk about stock specific names, trust me.

Q: Our viewers are intelligent, they will understand. So, if you could just give a couple of themes.

A: Talk about real estate. It is absolutely in doldrums. There is no one who believes that this sector is going to get revived. The companies are actually trading at 0.2 or 0.3 of the real book value. I am saying that because of whatever has to happen over the next 5-10 years, if you are an investor who has faith, and again, I am not talking about real estate sector, you do your homework properly, you see where the debt of the company is coming down, you see where the ROE is improving, you see where the promoter is extremely focused. You will eventually end up making money. My philosophy has always been, you cannot whatever is very fashionable, you can make standard 10-15 percent return but I will get excited when I see that I can make 3-5 times return. Now, when you want to make that kind of return, you will always have to buy it at uncertainty. And sometimes, 70-80 percent of the time, logically, the future must unfold as you are thinking. But 10-20 percent of the time, it will go wrong. So be it.

Q: So that of course is a couple of real estate stocks and your theme is bottom up investing and that is going to continue. Any other sub-theme that you identified off late?

A: No, frankly not. We are looking at a couple of ideas but have I reached to any conclusion, the answer is no. Like defence, it is going to be a big business. Again, it is going to be a big business, Pandora ’s Box has opened, the domestic companies in the defence sector have been given preference over the overseas companies. You remember how Maruti came up? 10-20 years back there were no auto ancillary companies. And now there are a plethora of them. So, when the defence industry is full blown over the next 10-20 years, there will be a lot of companies which will emerge suppliers.

Q: What is the key risk to this market from here on?

A: Key risk remains actually global to be honest. If something really unprecedented happens globally and this deflation which we are talking about, actually accelerates and we cannot rule out in that place’s market, you see the debt burden has gone up 2.5 times. And the interest cost globally is still down 11 percent versus 2.5 percent of the global GDP. So that must speak on a 2.5 times higher debt, you are paying less interest as a percentage of GDP. So, money is very cheap. Anytime that reverses, it will end up disrupting a lot of things.

Bull markets will climb the wall of worry: Ramesh Damani

Source : http://www.moneycontrol.com/news/market-outlook/bull-markets-will-climbwallworry-ramesh-damani_6809041.html

Jun 04, 2016, 03.20 PM | 

Ramesh Damani, Member of NSE, was talking about how markets will find a way to get back on their feet if the US Fed raises rates. He is most interested in product-oriented companies like the ones which are into anti-virus or banking.

Below is the verbatim transcript of Ramesh Damani's interview with Anuj Singhal and Sonia Shenoy on CNBC-TV18.

Anuj: What a conference we had today and a lot of good positive vibes from here?

A: As they say there is nothing more tragic than when a young life is lost whether it is in war or to cancer, so the Ira Sohn conference is a great way to try and raise money to help fight paediatric cancer and I think they did a great job today. This was the inaugural conference and we have an outstanding line of speakers and all of them presented some very sharp ideas, so it was a very positive vibes and I came back as a listener today but very happy.

Sonia: The market has been in a phase where 9 out of 10 people are bullish. Do you see any risk to this bullishness?

A: If you go back to Jan-Feb and play your tapes and everyone was bearish so these things go on in a pretty much yo-yo, but the broad thing that we are maintaining is that the underlying bull market is continuing and I think January-February was an aberration, the kind that shakes out the weak bulls in the market, which is what happened really. There is nothing to have become too bearish in Jan-Feb or too bullish right now. The undertone remains good and we will close the year positive, very hopeful about that. Market has shown some leadership, a lot of high quality stocks are making new highs including in banking, cements, entertainment. The midcap have not done as well in this round as they did in the previous round, but sometime it is a merry go round, it catches up in the next few quarters.

Anuj: Two or three themes clearly stand out consumption have done well and non-bank financial companies (NBFCs). I want to start with NBFCs is it now getting overheated, almost everyone I am hearing is buying NBFCs and we have seen such a big rally normally when such things happen (a) it may be a bit of peaking out indicator. Do you think NBFCs are running the risk?

A: Maybe in the near term I am not necessary sure the loss of segments to the NBFCs; home finance will probably do well, the micro financing part I am not that hot upon because it has some assumptions which I am not sure are well founded, but we will see of that. Plenty of values available in the market the oil marketing companies to give you an example. India oriented product companies to give you another example. There is lots of value out there for investors who want to go and find bargains in a manner speaking.

Sonia: But I heard that you didn’t speak at this conference today but there were plenty of influential speakers Rakesh, Akash, Shankar what was your key takeaway from any of the speeches that you heard?

A: It always nice to hear your peer groups speak and look at the ideas. I think with Raamdeo I found they came full circle with airlines. He is used to really not like airlines and now he made a presentation on airline, so that you see a reflection of his change in thinking also. Rakesh you always pay very close attention to because he is an originator of so many ideas and I think DLF as a lead indicator for the real estate recovery. It’s pretty strong because I myself have been fairly bullish on the real estate sector. I think it’s out of favour, it’s bogged down, it’s contrarian and if we expect a prosperous India in the next few years people will want houses, so it will do well. There are a lot of good ideas out there in fact, all of they gave me pause to think.

Sonia: In fact, Rakesh also spoke about Tata Motors, that’s a stock that has been hitting new highs over the last week or so, that is Tata Motors DVR and Tata Motors. Do you think we are at the threshold of a big revival in the earnings and in the stock?

A: I think the earnings have already revived staying in a fairly single digit PE and you don’t argue with the king and if he says buy, you buy it. I don’t want to put a contrarian opinion on Tata Motors right now.

Anuj: Let’s talk about the stock that has made you a lot of money in the past United Spirits. It’s corrected quite heavily now. Lot of headwinds, do you think it’s corrected enough, is there temptation to buy again and sit back?

A: Some time I find this a bit funny because when I was buying the liquor stocks but in modest out here, the stocks were trading at penny stock level. You have Rs 200 crore market cap this kind of the years. It is at Rs 20,000-50,000 crore market cap I just don’t see that much excitement in my eyes to buy. These are good stable businesses and they will do well, generate huge amount of cash flows, but I think for the next year or two they are still going to struggle to get the operating house in order, so I am not sure it’s a bargain at this point, but over long run this industry does well and Sunil who presented on the clip two videos to say how alcohol consumption in India has progressed from the rich drinking it to regular people drinking it, but the fact of the matter is you saw in the film, Deewaar when Parveen Babi and Amitabh Bachchan are in a bar where he say that, “look everyone is drinking, he is drinking because he is happy, he is drinking because he is sad, he is drinking because he is celebrating”, so alcohol is a universal lubricant.

Sonia: That’s set the mood for our Friday night for sure?

A: Happy hour coming up.

Sonia: You didn’t speak at the conference, but if you were to speak what was that one theme that you will talk about which could be the next winner?

A: I love to talk stocks. It is not that I am embarrassed to talk about stocks these days, but there are Securities and Exchange Board of India (SEBI) rules that prohibit us from doing that giving respect to that, a thing that fascinates me is when we were young analyst in 90s we got our treat under the great Indian tech companies who were in the service oriented model Infosys, Wipro, TCS these are all the companies that are multibaggers for us and made us a lot of money, but almost since that time analyst of my kin and we are looking for product oriented companies in India, people who sell packet software by name to domestic market or globally like Intuit say in America or Tencent in China.

Finally I am finding after 20 years of looking there may be 3 or 4 companies that are selling product oriented work and decent revenues, 20 percent profit after tax (PAT) margins and addressing a different market, identification, benefits transfer, antivirus, banking, so I am excited by that area because they are still unrecognised values for the market, they have fairly cheap market cap. I think one or two of them will become very, very promising as the years go by.

Anuj: I tell you something there are not too many listed stocks in the space, so if some of our smart investors are watching they will probably zero down the stocks, but one more space where you got in early was the logistics and if I am right you got fair bit of money out of that as well. There is fresh talk of goods & services tax (GST) being passed again and all. Do you think that could again be another story because it’s corrected quite a bit from the high?

A: The problem with value investors is you like to find thing so free no, no at bargain. These stocks are now well discovered by the markets, so I don’t necessarily find them at throwaway valuation. They will do well. The fact that as Mary Meeker reports in an internet trend study of 2016, that India is going to become the second largest internet user crossing America, so China and then India and we know that once people have smart phone and have internet they do shopping on that, so it is going to create huge demand for logistics, media, packaging and the like, so these are now well discovered themes also in the market.

Anuj: This market has seen a lot of domestic flows in fact, the reason this market has not corrected as much may be as it could have given the global headwind was because the domestic institutional investors (DII) flows remain intact and the domestic investor remain intact. Do you see that as a big change compare to the last bull market do you see a lot of domestic investors now in a position to really make a lot of money out of the next bull market?

A: I hope they do because it seems bit strange to me that foreigners are more bullish on India than Indian domestic investors are, but I think it’s changing. Once they realised that you are not making money in real estate, barely making money in gold, will move to equities as their asset class and Anuj is never tired of saying it is the only thing that gives you long term capital gain tax free. It’s a great advantage to be in equity, you get a handsome yield, you get great businesses and things you can hold it for period of time. So you are right that domestic retail investors will come back and fuel the next few years of this market.

Sonia: One more theme that everyone very excited now is the rural-agriculture theme with the onset of the monsoon, so whether it is your tractor maker, your Fast-moving consumer goods (FMCG) companies. Are you interested in those pockets?

A: I tend to avoid these. We don’t try to pay these bumps for three months. I am looking at businesses over the next 2, 3, 5 years and I hope that there will be plentiful good monsoon during that time. I particularly don’t happen to play those themes, so I don’t look for those bumps in three months because of a good monsoon.

Sonia: Nagnath was just with us 5 minutes ago and he said that there could be a big global correction underway over the next three months because of perhaps variety of issues whether it is Brexit or the Fed. Would you concur with that view and if that comes about then should investors jump in?

A: For the last five years you have lots of reason to exit the market, but there is one reason to stay because market gives you positive return compounded over long periods of time, so yes it could happen. I think if the Fed raises rates for example, I expect that may happen in July. It would be fairly earth shattering event for the market, but we have seen interest rates hike before, great businesses conquer that, bull markets conquered the wall of worry if you will. While it will rattle the market, I think we are in for the long haul and we want to keep great businesses alive irrespective of the Brexit happen, irrespective of the quarter point rise of Fed happen.

I just feel that the last 30 years of investing had taught me that, “Just as Rome wasn’t build in a day, great businesses aren’t build in a quarter or a year”, you have to own that piece of the business for a period of time and then they give you that 20-25 percent compounded return which is a holy grail in a business, so I am pretty optimistic sitting from where we are today that despite Fed rate, despite Brexit, despite US elections coming up. The markets will figure it out.