, MD, DRChoksey FinServ, say that in the automobile sector, companies offering comprehensive engineering and R&D services to OEMs are poised to play a major role in the evolving landscape. This transformation has already begun and is expected to accelerate through the rest of the decade. Such firms — including those in the EV and mobility ecosystem — could deliver strong returns. Similarly, we are highly optimistic about the long-term outlook for housing.
Deven Choksey: Well, the market is already getting the leadership from some of the very strong companies like Reliance at this point in time, and one can well argue for some amount of unlocking of valuation happening in this particular company, that is where the market is possibly remaining completely resilient and supporting us. Apart from that, the banking stocks are showing reasonably good signs of giving further support to the market and would not be surprised if they end up giving between 15% to 20% appreciation even from current levels in the course of around 12 to 15 months. So, some of the leaderships are already established in the market. The dark horse in this entire situation could be, at some point in time, the commodities. If they start participating, probably they may run faster compared to many other sectors, which are already quoting at a reasonable valuation at this point of time, and that could be a contra call as well, largely because of the fact that the demand for commodities expected to surge in the following period here after.
Deven Choksey: Yes, a good point and this is something which we keep on debating every single day. In fact, there is a formula going on in the organisation that every single year you should produce one company which becomes 10 to 15 times in the next 10 years and that much patience you should have. So, that is what we have been doing up till now, with the grace of God. Well, currently the situation looks quite conducive to me for those companies which are typically a large degraded player for some of the larger OEMs. For example, in the automobile sector, since I mentioned OEM in the automobile sector, the companies that provide complete engineering and R&D services to this sector are the ones who are going to be participating big time in this changing environment, which we are going to be experiencing. Already, we have started experiencing the beginning of this decade, and it is going to further accelerate as we progress towards the close of this decade. So, the companies which are in the engineering, R&D space, who are basically helping the OEMs, they could be the ones who could possibly give a significantly large amount of return that could include the driving space as one part, but other parts are also there in this particular space. Similarly, we remain distinctly bullish about the prospects of housing going forward in the next 25 years. In fact, the city of Mumbai alone is talking about 30,000 redevelopments taking place in a span of around 10 to 12 years, 15 years. So, if that kind of a development which is happening in city like Mumbai and for that matter any other place in the country, we remain distinctly bullish about the housing as a space and within that we cannot forget the housing finance business because 85% to 90% of the housing is purchased based on the finance and that is where we see the continuous growth of 20-25% happening into the housing finance business. So yes, I do not know whether they will give what kind of percentage return over a period of time, but going by the size that they are likely to create, it would not be wrong to generate 10 times from the current price in some of the cases.


Deven Choksey: In fact, in each of these names which you mentioned, their position has happened largely because how they executed their business and that is very-very important going forward as well because if yesterday was competitive, today and tomorrow are going to be extraordinarily more competitive because of the surge of technology along with. So in my viewpoint the companies which could possibly execute well are the ones which would be the winners of tomorrow and some of the names I do not mind sharing with a complete disclosure though that the companies like Tata Technology, companies like Bajaj Housing Finance, they are typically executing it a very differently and we like that proposition. The way in which these companies are executing their business, we find that they are creating a separate kind of presence in the industry for themselves and at the same time trying to show a relatively different path to the competition. Should they end up taking up the larger piefor example if Tata Technology kind of company out of the emerging addressable market of around $135 million in next three to five years, even if they end up taking 1-1.5% of that market, probably they would be generating significant large amount of return. And the same situation could happen with a Bajaj Housing Finance kind of company. If they have demonstrated 30% cagr growth in the AUM in Bajaj Finance, in Bajaj Housing Finance too they are moving with the same kind of a growth rate with a high margin business from other three apart from the housing finance so that is where I believe that their execution skills are completely different, maybe very much promising and we find a more happening in this area of activity from these kind of companies.


Deven Choksey: See, the uncertainties, the competitions, disruptions, they are all going to happen. I am not saying they will not happen. Our eyes are typically in the area of renewables in particular, and within renewables, how the companies are going to be addressing the large problem of green hydrogen is something which we would like to be very keenly watching out for. As of now, there is nothing on the horizon that one can separately identify, but as we keep on looking around, there will be a few opportunities as we see they emerging over time, that is one area which we like. Second thing which we definitely like out here is a complete logistic management activity in the country with the rail, road, airport and seaport completely coming under one-fold with which is speeding up so fast on the highways, I believe that this is one space which could possibly be a good space for many of the large scale annuity based investors like insurance companies, provident fund companies which is emerging very-very strong with the high cash flow positions. And last but not least, power and power utilities. We believe that some of the companies are executing their programmes very well in power, power utilities and could potentially continue to run at a rate of around 20% CAGR over the next 5 to 10 years. So, yes, there are opportunities in those companies, we are completely with the names and the valuation at this stage. Maybe it is a subjective question for a while for us.
Deven Choksey: It is a very interesting question. We keep on looking into the corporate balance sheet as to how they deploy their money. When we see that the balance sheets do not have enough amount of avenues to deploy money, that is the first signal that we get, wherein we probably stay away from those companies. It would not be proper in my viewpoint at this point in time to name them on the screen, but frankly, the allocation policy of the company would possibly create either performance or underperformance. In my viewpoint, I think most corporate managements do not want to remain accountable to the allocation policy, and that is where one is a little about their continued performance, even though in past they have performed handsomely, so that is an area where we are a little bit more concerned about. We keep our eyes open, and certainly those companies do not mean good to us from the return point of view, so we have to take a gradual exit also from those companies without keeping much of the past in the back.
Deven Choksey: Consumption could be the one theme which probably will have to be looked at very seriously because the way in which individuals are left with income in their hand, the way in which corporates are generating higher amount of profit in their books, I believe that both B2B side of the consumption and B2C side of the consumption game could possibly be the big time disruptor. From my viewpoint, the companies which are utilising the ONDC platform, companies which are working with CBDCs, companies which are working with AI, IoTs are the ones who could possibly be a differentiator in this space. Now, whether they would produce the same magnitude of return which some of these companies have produced in the last 15-16 years, it is a matter of time that we analyse that part of it, because on an ongoing basis, we have to review this part. But we remain distinctly positive about the characteristics under which these companies will be producing returns, and that is where our focus is from a selection point of view of the stock in the portfolio.