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What to sell and what to add to your portfolio in Samvat 2078?


I am not throwing out too much, but in terms of incremental allocation, there have been very good corrections in some of the API CRAM names like and and Hero in auto sector and a platform name like , says Gurmeet Chadha, Co-founder, Complete Circle Consultants.

What’s next for SBI?
SBI came out with I think perfect results pre-Diwali. What impressed me most is the NII growth. It is almost Rs 31,000 crore plus and that is almost like an 11% growth. The NIMs are expanding. On the asset quality front, the bank continues to make good progress. In the last three years, they have reduced their gross NPAs by more than 45%.

I was looking at the SMA 1, SMA 2 book which we call the watch list and that has come down to almost Rs 6,500-6,600 crore. The watch list now is like 0.26%. The credit cost should reduce going forward. They are more than adequately provisioned. All the subsidiaries continue to do well — life insurance, general insurance and asset management. I see a lot of value in these subsidiaries.



After some time, we can look at some fireworks in terms of loan growth. Their home loan book is Rs 5 lakh crore. They add almost 1,000 customers every day and they have a clear plan of doubling this in the next four to five years. So interesting times ahead as far as SBI is concerned.

What are you throwing out and what are you adding in your portfolio for the year ahead?
I am not throwing out too much to be honest. But in terms of incremental allocation, there have been very good corrections in some of the API CRAM names. Look at something like Laurus that is down almost 30% from the peak.

In the case of the auto sector, a lot of the problems right now are in terms of RM inflation, semiconductor shortage, etc, That will start getting addressed. I am extremely positive on the commercial vehicle space. Ashok Leyland has almost 30% market share in trucks. They are shaping up the LCV with the Bada Dost. They also have this EV subsidiary through which they want to make India the export hub. It is available at reasonable valuations. Even something like

is available at 16-17 times earnings. It sells about 55-60 lakhs bikes a year. So one has to buy some good businesses which are going through temporary bad phases and are available at reasonable valuations and that is what makes long term investment worthy.

Also some of the platform names like IEX, etc, are interesting names which can be accumulated in a staggered way.

Is the worst behind us for the banking pack? ICICI Bank, IndusInd have done well. Bandhan Bank after declaring Rs 3,000 crore quarterly loss has also indicated the worst is behind it. What would be the pecking order?
I will be in that camp which believes that incrementally financials will look better. I think markets are indicating that. In terms of pecking order, I would go with ICICI, Axis, HDFC in that order and SBI within the PSU pack. The big will continue to become bigger.

The banks have the muscle to keep the yields under check, keep the NIMs better despite the pressure on the bond yields. Something like ICICI Bank shows excellent improvement in credit quality metrics. They grew advances by 19%. The industry growth is 6.7%. It continues to gain market share. The NIMs at 4% which is at all-time high. CASA is 44-45%, great liability franchise as well. So ICICI Bank, Axis Bank at 1.7, 1.8 book value forward are attractive.

We are seeing a bit of transformation happening under Amitabh’s leadership and HDFC Bank has been a relative underperformer with leadership issues, RBI issues, credit card restrictions and app problems behind it. It looks set for growth. I will go with the big becoming bigger and stick to the top names in the banking space.

You often tweet a lot of memes about it and you said you are not really throwing out anything. Does that mean you did not own IRCTC?
I owned it and that is where the memes and tweets come from but the market was probably trying to evaluate IRCTC as a platform play. Mind you, 20 lakh tickets are booked everyday on IRCTC. They are web based and are comparable to the Amazon and the Flipkarts of the world. As far as the Indian business goes, the market is betting on this platform getting the advertisement revenue up.

Today IRCTC does Rs 400 crore quarterly revenue, the advertisement revenue for the biggies is in thousands of crores and so the market probably thinks that this can evolve into a bigger platform play attracting many eyeballs. It is the highest transacted site in Asia Pacific. If that plays out, one cannot evaluate these businesses with a traditional lens and that is why I say create a basket of such platforms. A few of them will not do well, a few of them will really do well and make up for it. One has to play it like what VCs do in the space.

What are your top picks in the real estate pack?
One has to be region specific. One cannot take a homogeneous call on realty. I like DLF. They did a presales of almost Rs 1,500 crore, much above the Rs 1,000 crore they guided for. They have a launch pipeline of almost eight million square feet, doing even well in their high end spaces in Gurgaon which is Camellias.

I like some of the Mumbai names including Macrotech Developers and Oberoi Realty. Sobha from Bangalore has more than 75% of the presales coming in terms of the launch pipeline. We are also seeing net debt reduction. In the DLF case, their net debt is now just about Rs 4,500 crore, DCCDL which is the retail arm, is seeing stable occupancy levels right now.

I am also bullish on some of the building material names for the long term like the cable and wires of the world, the PolyCabs, the tile makers, the sanitary makers. That to me is a bigger trend to capture



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