HDFC Bank is firing on all cylinders. Is ICICI Bank going to follow the same path?
ICICI is more of a corporate dominated bank and HDFC is more of a retail dominated bank. The transition is happening but we have to see whether ICICI also is able to get the growth or not. HDFC Bank has got a 15% plus kind of a growth on AUM because they have been very careful on the corporate side. On the other parameters, they are more or less on par with HDFC Bank and the likes. Obviously as far as valuation is concerned, it is much cheaper than HDFC Bank.
Overall we need to wait for the December quarter and see once the moratorium is over how much of these problems crop up into the balance sheet whether they are well capitalised or not. So let us just wait for the December quarter before increasing our exposure in the banking sector.
What is your view on HUL in particular?
Lever sets the tone for not only the FMCG sector but also the consumer sector, especially the rural demand. Definitely the numbers will be keenly looked at. We are also optimistic that Lever will deliver a good set of numbers again. Most of the FMCG companies are improving their margins and so will Lever.
Having said that, I do not think it is going to create much action on the stock market because everybody seems to be overweight on consumer goods and I do not think people are changing in hurry because the other big weight on the Nifty is banks and people still do not have much clarity whether to be equivalent weight or overweight on that sector. So I do not see much changes happening as far as the stock prices are concerned. But the results would be good for Lever.
What’s your take on Bajaj Auto?
The segment which they cater to are quite different but Hero’s 40% sales come from the rural market. In the case of Bajaj, 50% of the sales come from exports. They are catering to two different markets. For both of them, urban sales seem to be a bit slow. Rural for Hero has done well whereas for Bajaj, exports are going well. So that way it is balancing out the two but Hero seems to be in a better spot at the moment because I think the rural has done…, really picked up very well for Hero. So our preference is Hero, Bajaj and Eicher in that order.
Would you chance your arm in auto ancillaries?
Definitely. There are several companies we like out there though we do not have it under coverage. But with my earlier knowledge about them and experience, Motherson Sumi is at the top end, then there are several companies like Varroc Engineering which is largely catering to the two wheeler and Bajaj per se. Then there are Minda Industries, Minda Corp. There are several of them who basically look to be in a good spot at the moment because the demand is back and exports are also doing pretty well for the guys who are doing it.
I would be a bit wary as far as auto ancillaries which are dominated by the CVs market. Commercial vehicles could still take off in a big way and even go back to pre-Covid levels. CVs will take a bit of time, maybe a couple of quarters more.
What is your view on the home improvement segment?
We cover a few of them, basically the tiles and the sanitaryware and we have been surprised with the demand in the last quarter. There have been instances where some of these categories ran out of stock. Tiles and sanitaryware seems to be doing pretty well. We were also surprised that though the real estate is not doing well, these categories suddenly came back with a surge in demand.
My thought remains in those first four or five months when we saw almost 70-80% fall in demand. It is picking up now. We are seeing a V-shaped recovery across sectors. It is happening in these sectors also we do not cover but plywood at the moment. But it will not be very different from the tiles and the sanitaryware sector.