How is it that you are reading into the market construct? We were just a whisker away from 25K and then petered down from there. The good thing is, of course, crude has seen a bit of a softening. Do you think that will keep at least sentiment intact for us?
Deven Choksey: Well, on one side the crude and commodities, the metal commodities in particular, they are likely to remain soft going forward. And given the situation that in the global market, there are going to be positive developments it looks like on the war front.
So, to a greater extent, the crude as a territory and metal, they are likely to remain softer going forward as well.
And given that kind of a situation that we are talking about, maybe many of the companies which are basically using the derivatives of the crude oil, they are going to be the beneficiary and particularly those are the ones which are likely to be in the chemical and speciality chemical segments in particular.
So, this is a good sign, definitely for sure, positivity that could be seen in the users of chemicals, speciality chemicals particularly because their cost of production will come down. So, eventually the industries including paints, including among other speciality chemicals, they will have relatively better times going forward as I understand.
Overall fabric of the market, nothing much has changed. I believe that it is giving a significantly good amount of opportunity for some of the banking stocks who have corrected, though yesterday some of them have recovered too, but I believe that in this correction the banking stocks and some of the large NBFC companies would be the prime choice that one could possibly go for adding into the portfolio.
Let us also understand how you are reading into the analyst meet for DMart. What is it that you would actually want to get clarity on?
Deven Choksey: Well, I believe that the company is going on the right track. New stores are being opened, existing stores they have got higher amount of footfalls. Year after year, the increase in the revenue is also happening from existing stores.
So, all of these I guess are going in the right manner as I see and their discount model is so far so good, working well. Maybe one would like to see how exactly the company is going to adapt to the digital way of working.
I am sure at the back end, they have adapted but at the B2C level, whether it is going to be a reality is something what one would like to see. Though they have got a completely hybrid model in place at this point of time and that is what probably they are trying to utilise maximum.
But whether the direct B2C play would make some difference, one needs to see that, because the competing models which are basically now operating in the marketplace, they are basically quick commerce in particular which I am talking about, they are particularly taking a good amount of business share out of some of the existing players, so that is to be seen whether it shifts the bulk one as well, so that is what one would like to look at it.
But otherwise, the business looks pretty solid from the point of view of growth going forward as well.
Wanted your thoughts here. I mean, we all know the two-wheeler space has done very well, some very aggressive launches, now a new CNG bike from the Bajaj Auto stable, but now a pure play, electric play IPO-ing. What would it do to the two-wheeler market construct?
Deven Choksey: In one simple line it will probably increase the value of some existing two-wheeler companies. And the points are very simple. You take Bajaj or you take TVS, both these companies have balance sheet size. Look at what Ola is today.
On a five lakh vehicle sale, they are incurring a loss of about 1200 crores, which means they are talking about losing somewhere around INR 34,000 per vehicle at this point of time.
Now, if they have to come out of this particular loss making proposition, certainly either the price has to increase which is the most distinct possibility or the cost will have to significantly go down, which is a slightly lesser possibility.
In my viewpoint, should the price increase, then the stronger balance sheets like Bajaj would probably have a meaningful amount of growth going forward because though they are also equally losing on the electric two wheelers, but at the same time if the price increases in the marketplace, they will be the first one to get the benefit out of it because of the strength of the balance sheet and because of the cost of production that they are enjoying.
So, in my viewpoint, other things being equal, be it the technology part, be it the product part, and be the market opportunity, if they be equal, then in such situation the companies with the stronger balance sheet could have relatively more opportunity going forward. Ola is probably trying to create the balance sheet at this point of time, so they should be giving a good tough competition to the existing players, no doubt about it.
But as you asked the question, the benefit would go to the existing players valuation probably I think would increase from current level and probably come in parity with what Ola is priced today at this point of time in its IPO.
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