Wanted to start off by getting your take first up on Reliance Industries, all eyes on the AGM that takes place later this afternoon. While, of course, we will watching out for some of the key aspects in terms of retail, the telecom IPO, what happens with the consumer brands business. Is there anything else in specific that you think the street will closely be eyeing?
Amnish Aggarwal: Two things here. First being that as far as your Jio or retail business is concerned, expectations are already built in that over a period of time these companies will be separated and their IPOs will come. Now, I think what markets will be keenly watching out for in this year’s AGM is more on the announcements regarding their green energy initiatives and new energy. Because these are some of the initiatives where they have been talking about, you can say, spending a lot of money, a lot of big corporates are going into it and whether it is solar, whether it is green hydrogen and all I think these are some of the key things people will be watching out for in this year’s AGM.
The other thing, of course, is the market has been anticipating and now sort of given up hopes as well on whether or not there is going to be value unlocking of the subsidiaries. Retail is the one which has been talked about after Jio Financial’s listing, that are they looking to hive off that business and list it separately or not? Do you think there could be any such announcement coming in?
Amnish Aggarwal: It is very difficult to say, but in my view, in addition to retail, one business which is actually very ripe now for listing seems to be your telecom business. Because we have seen the tariff hikes first of all in prepaid and recently in your postpaid plans and this is one business where if you look at across vertical, whether it is Airtel, whether it is Vodafone.
Retail is something I would say it is a work in progress. They are growing, but still highly competitive business. Lot of, I think, things to do by Reliance in that particular business. So, I would not be surprised if your telecom business, which is your Jio platform, comes first and retail later.
What is the outlook when it comes to some of those power financiers? The likes of PFC or an REC, they have been in the spotlight of late. There is recent reports as well that have come out. How are you looking at the kind of movement that we have witnessed here?
Amnish Aggarwal: All these power financers, they have been in limelight because of two reasons. First of all, their NPA have always been very low. But now with the move which is happening towards renewables, that is giving them, I would say, a fresh order book, which is clean. Their overall disbursements, as well as your allocations, are also rising and that is why we have seen over the last one, one-and-a half-years, all the power financers, PFC, REC, and last entrant IREDA, all of them have done very well.
But having said that, now they are not trading at a significant discount to price to book where they were trading a year, year-and-a-half back because all of them were a sub-0.4, 0.5 time price to book, but that does not seem to be the case now.
Now, I think it will be a slow and steady climb from here and seems more like you can say returns at least in the near term they are over. Now, it will be very-very measured returns, which will come only over a period of time.
What your outlook is on stocks that are fairly closely linked with crude oil prices, given the fact that it has been the second straight day of losses, we have seen it below that $75 per barrel mark, what would be your outlook on some of the paint companies, the OMCs, etc, that are closely linked to crude?
Amnish Aggarwal: If we look at crude in the past few months, it has been pretty range bound and there is no big spike which is visible and expected in the crude prices. So, if you look at, say, in particular paint companies, paint companies last quarter reported the pressure on their gross margin because it is not only the function of crudes, but there are a lot of other additives and raw material which go into it and they were actually facing you can say inflationary pressure for which from 1st of July they also undertook some price increase.
Now, I think as far as paint companies are concerned, the crude softening or the raw material softening is positive for them, but at the same time, the bigger concern in the industry has been more on the competitive side where I think the entire story will play out in the coming few months, particularly in the festival season.
So, while on the raw material front, if the pressure eases out, I think it will start getting reflected more in the numbers beyond 2Q.
So, as of now, we do not have any great view on paints, we are more like a cautious view on all the paint stocks given the spike in the competitive intensity which is yet to play out fully. Now, as far as you can see, other segments are concerned, I think they will be positively impacted because of the benign crude prices. But definitely crude I think if we look at the medium term, it has been range bound. If it goes down, say to 70 or below 70, then it would be a game changer.
The range bound crude is positive, but it is not going to have any meaningful impact on numbers, at least in the near to medium term and so that is why there will not be any significant change in the long-term view on these stocks. But due to these variations, there could be, you can say, some uptake, some trading bets which can come in the various sectors.
