The wheel has come a full circle for the blue-chip tech behemoth companies like Infosys, TCS, HCL Tech etc. From being the darlings of the market who could be trusted to deliver block-buster returns year after year, they have now been relegated to back-bencher status and are no longer being considered as investment opportunities by fund managers.
Ramesh Damani fired the first salvo when he hinted with his usual diplomatic stance that the traditional info-tech stocks are past their prime. It is time to start scouting for “product technology” companies like anti-virus makers, etc Damani opined.
Basant Maheshwari is not known to be diplomatic. He says things like they are, with no holds barred.
In his latest interview, Basant has trashed the information technology sector. “These stocks have had their run. They were young about 15 years back, now they are probably into retirement mode” he said.
“You want a pension income, they are the pensioners for us” he added. “They will grow at 12-15 per cent. You make that kind of money and you can keep switching between TCS and Infosys and HCL Tech and Infosys and this but overall there is no magic to be made in the big companies.”
Basant is equally contemptuous about the smaller infotech companies. “Trying to push them into running an 100 meters in 10 seconds is not going to happen because they have had their time before” he said.
NBFC Sector will do dramatically well if they continue to grow at 30-35 CAGR:
Basant explained that all NBFC stocks are enjoying a sectoral tailwind at present. He pointed out that the NBFC sector is only 13 per cent of the total credit in India as compared to about 26-30 per cent in developing countries. This implies that the NBFC sector can only go up and also comfortably double in size. He also emphasized that the government’s initiatives of Jan Dhan Yojana, Aadhaar, direct transfer of subsidies into bank accounts etc mean that the sector will continue to prosper in the foreseeable future.
“Too much of a good thing is wonderful” Basant said with a chuckle, borrowing the immortal lines of Mae West.
No need to sell MFI stocks because a lot of upside is left:
Basant is still gung ho about stocks in the micro-finance sector. He also rubbished fears that the stocks are overvalued. He pointed out that MFIs are presently enjoying the sectoral tailwind and the growth in the rural economy. He also emphasized that the market cap of the small finance banks/the microfinance is not even Rs 20,000 crore, which is petty in the context of the Indian economy.
“So the growth continues and its valuation, even at 3x PBV, is not too expensive at all” Basant said with his customary confidence.
Basant also soothed the nerves of investors in micro-finance stocks who are getting jittery at the steep surge in stock prices and wondering whether to book profits.
“There is no need to sell because it has gone up a bit. We have seen this before. Stocks can go into over valuation territory and remain there,” Basant said. He added that the question which has to be asked is whether the surge in price is backed by a surge in earnings. “For the moment the earnings are coming in thick and fast. So no problem there,” he added with a big smile.
Is Basant throwing caution to the winds?
It is notable that Basant’s optimism about the micro-finance sector is in sharp contrast with the views expressed by other leading experts like Ramesh Damani and Shyam Sekhar. While Ramesh Damani expressed doubts as to the viability of the business model of MFIs, Shyam Sekhar warned that they are in danger of being collared by the Government for indulging in “organized usury” and having their business operations shut down. “I would not give a PE multiple to usury” Sekhar has opined.
Whether these cautions prompt Basant to tone down his optimism and pare his holdings in MFI stocks require to be seen.