MINUTES OF MEETING
|Venue||Board room, Chandigarh office||Date||November 18, 2014|
|Subject||Market Outlook 2014-15,L&T India Prudence Fund||Time||1600 Hrs|
|Details||Discussion with Mr. S N Lahiri (Chief Investment Officer, L&T Mutual Fund)||Duration||45 mins|
|Internal||Iqbal Singh, Pankaj Sharma, Akaljot Singh, Jagjit Singh, Vishwapreet Singh, Jagdeep Singh|
|External||Mr. S N Lahiri, Vikas Ahluwalia, Rajiv Sharma|
1. Earnings: which we expect them to be good/ improving
2. Flows: Domestic and Foreign. We expect these also to be ok. Good thing is that Domestic flows are also increasing.
1. Global growth outlook outside of US is quite challenged.
2. Govt.’s disinvestment plan which will start in Mid Dec 2014 means a lot of issues coming in. This would pull liquidity out of the market.
1. Private Banks – best leveraged play on the economy
3. Equipment suppliers
4. 2 Wheelers
3. Oil & Gas
4. 4 Wheelers – selected
1. Commodities – The Commodities Super Cycle looks over for now for some time
Question and Answers session:
Q1 Mr. Iqbal Singh: Sir, we’re holding your fund as 5% of our portfolio and would like to continue at 5% if your AUM can grow.
A Mr. Lahiri: Yes, Thank you. Definitely, we expect our approach to pay off.
Q2 Mr. Iqbal Singh: Sir, you have major exposure after Pvt. Banks in Cement. Could you elaborate ?
A Mr. Lahiri: As the economic recovery sets in, Cement will be a beneficiary. If we see historically, cement players have added capacity without leveraging themselves. Present capacity utilization is about 60-70%. As the demand picks up , the major players are beneficiary of operating & financial leveraging.
Cement growth rate is about 1.5 times GDP growth rate.
Cement is used in Rural Housing, Urban Housing and Infrastructure.
So clearly it should do well in the times to come.
Q3 Mr. Iqbal Singh: Sir, you have talked of EBITA beneficiaries and bottom line. Which other sectors would be the beneficiaries?
A Mr. Lahiri: First is the Auto sector. India can become a hub for cars export, so clearly there is a tremendous traction in outsourcing demand.
Second is the Agricultural part. Improving yields would help:
1. Crop protection companies
2. New implements companies
Q4 Mr. Iqbal Singh Logistics companies ? Because of E-Commerce boom, valuations of many logistics companies have gone very high. What is the ground reality ?
A Mr. Lahiri Wrt valuations, the cart has gone ahead of the horse. They’re too high. Wrt Business, L&T also owns Blue Dart, and as a business they’re growing 35% Q-on-Q. We expect them to continue to grow.
Further, Logistics is a very capital intensive business, so its not so easy also. However, it remains a huge opportunity in India.
Snowman Logistics is the leader in cold chain logistics in India. Yet for a country of India’s size its revenues are only Rs150 crores. Which are peanuts for India.
As a country we waste 40% of our produce while the final produce reaches at mandi. So there is great opportunity in logistic management.
Q5 Mr. Iqbal Singh Could you share your view on the fixed income side ? 25% of your portfolio is in Fixed Income. What is your call on the Interest rate cycle ?
A Mr. Lahiri: Interest rates have peaked, Yes, but in my opinion, if we’re keeping expectations of a rate cut soon, then we’re likely to be disappointed. Possibly, we’ll see a cut of 0.5% in June 2015, not before that. This is my personal opinion , I may be wrong in my assessment.
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