Porinju Veliyath Recommends Stock At “Inflection Point” With Potential To Become “Billion Dollar Co”

Dhamakedaar Budget

“Maine bola tah na ke Piyushbhai solid Budget dega,” Madan Kaka declared with a big smile on his face.

There was much jubilation in Dalal Street as Piyush Goyal unravelled benefits after benefits for the Indian economy.

In keeping with the festive mood, Shyambhai and Mandakini were offering free Adrak Chai to all punters.

The farm sector received a massive relief package of Rs. 75000 crore which will cause farm income to double by 2022.

total farm package of 75000cr announced https://t.co/yY9csq7yNw

— Sonia Shenoy (@_soniashenoy) February 1, 2019

There were also generous concessions awarded to the realty sector which will benefit HFC and realty stocks.

Budget boosts housing finance, realty stocks https://t.co/R0evMPSsX9 pic.twitter.com/6rYlg1F8ss

— Times of India (@timesofindia) February 2, 2019

Income-tax benefits were also showered upon the middle class.

ITS A #PERSONALFINANCE BUDGET FOLKS!!!
No income tax for income up to Rs 5 lakh
Standard deduction hiked from Rs 40,000 to Rs 50,000!!!#Budget2019 #ElectionBudget #wealth #incometax

— Surabhi Upadhyay (@SurabhiUpadhyay) February 1, 2019

Billionaire Mark Mobius gave the Budget a clean chit. He described it as “excellent” and “positive for consumption“. He opined that it can boost the GDP by 50 Bps.

CONSUMPTION, CONSUMPTION, CONSUMPTION!
– No Tax upto 5 Lk For Middle Class
– Farm Package for Farmers with Land <2 Acres

Mark Mobius Says
– Excellent Budget
– Positive for Consumption
– Can Boost GDP by 50 Bps #Budget2019 #ELECTIONBUDGET#FMCGIsLife @MarkMobiusReal https://t.co/PUBXUyuA5e

— Mangalam Maloo (@blitzkreigm) February 1, 2019

Sonia Shenoy rightly described the Budget as a “Masterstroke“.

Masterstroke ! #Budget2019

— Sonia Shenoy (@_soniashenoy) February 1, 2019

Naturally, the Bulls ran amok and sent the Sensex surging like a rocket.

Bulls run amok on Dalal Street after US Federal Reserve signals a pause in rate hikes at least in the short-term. Sensex rallies over 600 points, Nifty soars past 10,800 #MarketSnapshot pic.twitter.com/i9lwvWrlqX

— CNBC-TV18 News (@CNBCTV18News) January 31, 2019

Dalal Street smiles, sensex gains 213 points https://t.co/7KG6tZZKR5

— TOI Business (@TOIBusiness) February 2, 2019

(Jubilation in Dalal Street)

Porinju hauls up novices for displaying attitude of ‘hopelessness’

It is no secret that the novices of Dalal Street are in a highly despondent mood nowadays.

They have suffered such colossal losses owing to the ongoing Bear market that they are in no mood to buy stocks.

Even multibagger stock recommendations are met with hostility.

This sorry state of affairs has not escaped Porinju’s attention.

“I have never seen hopelessness like this in my time of two, three decades. Even as Nifty and Sensex are near their highs and reasonably outperforming global markets this last one year, the average investor in India has shown some kind of hopelessness, which is very bad,” he exclaimed, his eyes flashing in anger.

“I feel even without waiting for the bigger event, the general elections, investors are going to come back to the market. Something will be definitely coming up to stop that hopelessness or extreme fear in the market. People have just got so much averse to equities. I think this not sustainable,” he added.

Porinju counselled novices to see the “Big Picture” and not be obsessed about their petty losses in the market.

“We are at $2,000 per capita income at this point against $1,200-1,300 a few years ago. This is a trigger point. If you compare, China is now $10,000 and once we go to some $2,500 or near $3,000 per capita, that is going to make a huge positive impact on the consumption story, especially discretionary consumption,” he said in a soothing tone.

It is not a time to get depressed or feel the pain. This is the time to look at the positives, he added.

“The India growth story is intact. Our organic growth, whatever happens on the political side, is going to continue. And this is very important. I think the per capita income and the roadmap for the next, two, three, four years’ will give you a lot of energy to pick stocks in the market,” he said in a conciliatory tone.

Even Dhirubhai Ambani was managing governments, bribing, but Reliance is still multibagger

Porinju explained that his hypothesis with regard to alleged “chor” managements turning a new leaf is still valid.

“The corporate governance issue is a major thing affecting or impacting the market of late and most of the corporate governance issues are because of the reason reforms in the economy, in the nation because those reforms are bringing out the existing problems especially with regard to the corporate governance,” he pointed out.

“People are getting caught. Those who have been very unethically managing, those who have been cheating minority shareholders, who have been siphoning out money now they are getting exposed and there is more pain/ That is where I went wrong,” he added.

Porinju cited recent examples of stocks like ZEE, Vedanta, Sun Pharma, Sterlite Technologies etc which have got butchered on the Bourses owing to alleged corporate governance lapses.

“The next one, two, three years a theme will be where there is very clear evidence or symptoms of improving corporate governance,” he pointed out.

He also explained that alleged lapses in corporate governances have been happening since time immemorial but this has not stopped the stocks from delivering multibagger gains.

“Everybody has a past in our market history. There are very few there who have been ethical and professional by attitude from the beginning. Even Dhirubhai Ambani was managing governments, bribing. All these things have been happening in this country,” he said.

“If the companies are not affected operationally because of this promoter level problems, I feel it is an excellent opportunity to buy into some of the C group companies because provided the operations of the company do not get affected,” he advised.

“They all have fallen to a very attractive valuations going by the operations and the fundamentals of company,” it was stated.

Legal system in India allows promoters to siphon-out money, cheat minority shareholders and defraud banks – all within the framework, just need to choose the right loopholes!

— Porinju Veliyath (@porinju) January 30, 2019

Nobody is looking at Kaya despite great promoter and quality business model

Porinju cited Kaya as an example of how investors are blind to multibagger opportunities and are ignoring the stock despite it ticking all the boxes in terms of promoter quality, management ability and robust business model.

“Like Kaya is consumption story which I was talking about one of our largest holdings but nobody wants to look at that kind of small companies, irrespective of the quality of the company or the greatness of the promoter or the management or the business model,” he lamented.

He emphasized that consumption stocks like Kaya will be big beneficiaries of the increase in per capita income and will see “huge explosive growth“.

“India is getting into a point of per capita income $3000 maybe in the next three to four years’ time. So $3000 per capita income is going to make huge explosive growth in the so called discretionary spending,” he explained.

With particular reference to Kaya, Porinju opined that it is at “inflection point” and can blossom into a magnificent “billion dollar co“.

#PorinjuTopPick | Pick 1: Kaya is our largest holding in the portfolio; at an inflection point. Kaya can become a billion dollar co over 5-6 years. @porinju #Budget2019 #BudgetSession pic.twitter.com/tGuv8K5HDA

— ET NOW (@ETNOWlive) February 1, 2019

#PorinjuTopPick | The smallcap czar @porinju shares one of his TOP MID-CAP PICKS#Budget2019 #Budget @AyeshaFaridi1 @nikunjdalmia #BudgetSession pic.twitter.com/qiK1wQN7hp

— ET NOW (@ETNOWlive) February 1, 2019

Porinju’s Equity Intelligence PMS Fund is the single largest shareholder of Kaya.

Equity Intelligence holding in Kaya has now crossed the 15% mark. @porinju now holds almost a staggering 2 million shares. Bet big, bet hard on high conviction stocks. pic.twitter.com/QkciGQ2V50

— Kush Katakia (@kushkatakia) June 8, 2018

EQ's @porinju now owns a staggering 1751617 shares of Kaya Ltd. This works out to a massive 35% of the free float. This is what I would call "Putting money where your mouth is". https://t.co/EHarFRHfoJ

— Kush Katakia (@kushkatakia) April 18, 2018

Unfortunately, the stock is presently in the doldrums. It has lost 28% on a YoY basis and 12% over 24 months.

([*C] Consolidated     [*S] Standalone)

(Source: Business Standard)

Conclusion

Prima facie, it does appear that Piyush Goyal’s budget will be a game changer which will send the stock markets surging back to their past days of glory. There is now no justification for our continuing to cower in fear and hide in the bunkers. We should start tucking into high quality consumption stocks ASAP as advised by Porinju!