Let us first start talking about ITC, lot of talking points actually. But first your word on and whether the conviction stands on ITC?
Yes, ITC has been doing well since the new CEO took over and with the rejigging strategy towards profitability what we have seen is that on their FMCG business, ex-off cigarettes profitability has been improving. Cigarettes obviously did very well. And all of us knew that hotels and paper business will do well so performance was good. They also paid out strong dividend and valuations even after that the run ups are still reasonable. So my guess is that in this uncertain environment, ITC should continue to do well.
Paytm has been one stock that you have been consistently avoiding and recommending to avoid but given the fact that there is a definite improvement in earnings, they have been ahead of the guidance as well. And a lot of brokerages are talking positively about it. Have you changed your stance at all?
It is tough to change the stance because reporting operating earnings of 20-30 crores but broadly being still in loss, it does not create huge value. So, they have been growing their loan book so much so aggressively and we do not really know what is happening out there. That could actually become a risk where they are getting the profit from not their old core businesses. So I think let us see whether there will be some excitement after the management commentary but I am not buying this stock.
What has been your assessment and takeaway after I think it has been quarter after quarter that Divi’s has disappointed and the Street has reacted so vociferously against the counter?
Yes, results have been very-very poor and in fact, they have been deteriorating. The expectations this quarter were very low but still they managed to perform below that so there are no near term triggers. On the reduced earnings, the valuation still looks expensive. So I think there was a base of earnings that base of earning itself has come down so much that even after the severe fall the stock looks expensive. So I think it will be best to avoid it at this stage.
What do you make of this entire Vodafone issue, I mean the government is now going to be converting the AGR dues into equity. They have been directed to issue about 16.13 million equity shares, face value of Rs 10 do you see value in Vodafone and how the government is coming to the rescue?
From an equity shareholder’s point of view it is a very tough stock to invest into. So it is a bailout. In bailouts, normally equity value might not be created although the company might survive. So I think there will be some excitement. But my advice to all the retail investors who think that it is cheap at Rs 7 it is best not to invest into it because still the debt remains too high. They are losing customers. They are reporting huge losses quarter on quarter so this could ensure survivability which is good for the existing customers and could convince some customers not to shift. But from a shareholder perspective, it is very tough to see the company making returns.
I do not recall what your opinion is on an but clearly what is playing out for hotels is also playing out for aviation companies right and it is in that sense as the listed monopoly, so would you bet on the name?
The company continues to do well. Results were above expectations, their guidance for fourth quarter which is traditionally a weak quarter because holiday and business travel falls a bit in this quarter also continues to be strong and on top of that we have actually seen crude oil prices correct more and move more nearer to 52-week lows after a run up over the last few weeks. So I think things are going well for them, yields are good and flights like hotel rooms also continued to be pretty reasonably priced. So I think it is in a sweet spot and should do well.
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