Whether it is Tata Group, Birla Group, Indiabulls, or , all have done a lot of deleveraging during the Covid period. They got plenty of cost savings, and that led to debt improvement. Do you think those are some companies, sectors, groups that you would look at?
What the smarter companies do when interest rates are low, there is so much liquidity, is that they would do more issues of paper and reduce the leverage on their books. Reliance has done that. I was reading about their treasury operations, where they have picked up money at very, very good rates at this time.
I am not worried about what happens to the balance sheets of some of these larger companies. Instead, financial services-particularly large banks is the sector I am worried about.
For the last two years, since there has been a lockdown, nobody has compelled or at least I have not read anything about the amount of loan restructured, how many people took advantage of the moratorium and did not pay interest. Everything keeps getting delayed.
Auditors are being pushed to increase the time to six months, eight months and give us more time to make provisions or declare NPAs. If interest rates were to go up even by 25-50 bps and the cost of capital becomes expensive, you will see a lot of pain in financial services.
It may not be hard to believe right now because everything is hunky-dory. There is so much liquidity around, but this cannot go on forever. There must be some pain somewhere for people not working, not getting salaries and businesses shut. How could that all disappear? So I am more worried about how they will perform over the next four-five quarters.
Have you been a buyer in the recent decline that we have seen from the October highs?
No, not at all. The only thing I have done for a few of my client portfolios is that we have not sold off a lot of equity positions, but we purchased put options for the month ending January. That is to disclose about 1% of the total portfolio size. For example, if somebody has a portfolio of Rs.20 lakhs, then 1% would be something like Rs. 20,000 and so on. So three lots of Nifty for every Rs.20 lakhs, so that is the only thing we have done for clients where portfolios are in equity, and we have not sold off anything, but other than that, we sold off stocks and are holding cash.