Mr. Nilesh Shah, MD & CEO, Envision Capital spoke with us on a host of issues surrounding the current market levels, specific sectors – IT, Pharma, cement, platform, and tech.
Mr. Shah does not view the market moves as a terrible up-move since, he opines that earnings are strong though he is cautious. He continues to project strong earnings at 20-25% CAGR over the next year or two and differentiates the 20-21 market up-move to the move in 2017 where the market moved up without underlying earnings growth. He also elaborates that the market has run up on the rush of liquidity as well as domestic retail investors investing in the momentum of the markets.
On the IT space, Mr. Nilesh believes that while valuations of certain large caps have run up significantly, some of the mid/small-cap names are pivoting business models especially in the SAAS and digital model, and are in a good space in terms of relative valuations. He continues to view the pharma space favourably, believing that it is the best opportunity for growth in the short, medium, and long term.
Consumer companies, especially the top rung of companies, are overvalued, he believes. Mr. Shah believes the auto OEM space may have a challenging few quarters due to chip shortages, but sees attractive opportunities in the auto ancillaries space from a medium-term perspective.
On the cement sector, he predicts the short term to be very interesting with elevated capacities and expansion possibilities including M&A, but cautions that the key is to understand the regional/local view of each specific company. The one sector he envisions to do very well going forward is the construction and infrastructure space, where he believes there is a significant catch-up possibility with markets currently in denial mode. He further views the good opportunity for the ancillaries’ space – wires, cables, fittings.
Lastly, on Zomato, the blockbuster IPO this week, Mr. Shah calls the business model “differentiated” given the thrust of D2C and digital-first agenda of the company. Like other platform companies, he feels that there is immense possibility over the next 3 to 10 years with the potential of a very expanded business model and range of offerings. Mr. Shah terms this as infinite scalability, but as regards valuations terming it as more of an art than a science.
