India is not just changing, it is transforming at a mind blowing pace, says Vinay Khattar of Edelweiss Financial Services . In an interview with ET Now , Khattar said that were the housing theme to pick up, the entire building material space including cement, tile and plywood, among others, will gain. Edited excerpts:
ET Now: What is the basic positioning of the Emerging Ideas Conference 2017?Vinay Khattar: We do this conference every year. This year, more than 70 plus companies will be presented at the conference. We would have a conference of ‘thought leaders’ across the board, who will be coming and speaking.
You have political leadership with two cabinet ministers being addressing the conference plus we have a panel discussion on stressed assets. We have various segmental leaders within the the stressed asset space, who will be coming and discussing various facets of how things are panning out within the stressed asset space. We will get one of the global voices on the digital space from Sweden, who will talking about how the digital landscape in India is changing with what Modi government is doing.
Now this kind of confluence of ideas and exchange is going to be listened to by a wide variety of audience. The two broad categories of audience — professional investor community or fund managers and ultra-high net worth individuals — would be presented. Between them, there is likely to be $12-13 billion worth of net worth and assets under management (AUM) sitting in the conference. That is what it is: A place where you exchange ideas and you have confluence of both investors as well as thought leaders under the same roof.
ET Now: Housing is seen as one of the most important themes as part of this conference. Is that the focus area because there must be a lot of interest in investment-led themes such as infrastructure, construction, engineering, cement and other infrastructure affiliated-businesses. Those are the places where everyone is expecting the next leg of growth to come by. So why only housing?
Vinay Khattar: The theme is building India and companies that will be present in the conference would be from various sectors.
India is not just changing, it is transforming at a pace which is completely mind blowing.
Aadhaar has used lesser time than Facebook’s in adding one billion users. India added almost 270 million bank accounts in less a year. This is close to the population of United States!
We are talking about electrification of all rail routes in the next five years, which is more than what we did in last 70 years.
So, across the board, the transformation in India is happening.
Let us look at a country which just did this in last 20-30 years, which is China. I do not know many of your viewers are actually aware of the fact that the cement Chinese consumed over 2011 to 2014 was much more than what United States did over preceding 100 years.
So when a nation like India with a similar demographic profile like China and a land mass as big as or as diversified is going to be spending on infrastructure, it will be transformation.
The opportunities that you will get are large and wide.
The government is talking about adding 50 million houses in the next five years. It would be interesting to know that during the UPA-I the thrust on housing and construction on the civil construction side — both in housing and infra — was one of the key reasons why unemployment fell so dramatically.
There was a massive shift from agricultural unemployed towards construction employment and that was one reason why UPA-1 came back so strongly.
If the housing theme picks up for the Modi government, you could have the entire building material players from cement, tile or plywood sectors, among others, seeing significant uptick in their numbers. That can provide tremendous investment opportunities.
Banking recapitalisation is taking place because the credit was not picking up and you have entire set of NBFCs, who have come into this space.
Housing space could attract serious competition from both banking as well as non-banking players on the funding side.
So, you have a wide variety of investment opportunities that could emerge out of this whole space coming in. That is what we are providing our investors a platform to see.
ET Now: What is the whole thought process with addressing what investors may ask about PSU banks?
Vinay Khattar: In terms of the PSU banking space, there has been a bank recapitalisation. The government has pulled out all the liquidity out of the bank and re-infused it as an equity capital, which is the government share.
Now we know that the credit cycle on the banking side had not been taking off because of lack of equity. This is even if the liquidity was very high. Our sense is that that it should begin to improve going forward. The credit cycle picking up is a bigger factor of the demand, consumption and the private sector capex picking up. That is what is going to cause a lot of NPAs to come down automatically. It will then give a leg-up to the cycle. On the housing finance side, public sector banks have generally been missing and a lot of market has got captured by NBFCs and private sector banks. Our sense is that some of those banks are going to come and some of their subsidiary companies are going to come and play an active role.
So PNB Housing Finance could be one of the interesting bets on the public sector side, which may participate in this upswing. One may stay with the market leaders SBI and Bank of Baroda till the time more clarity emerges in terms of what is the kind of write off the tier II leaders on the public sector side are going to happen going forward.
ET Now: What is the opinion about as far as India’s growth numbers goes?
Vinay Khattar: So our sense is that Q2 numbers are definitely going to be better than Q1. We have kind hit the bottom with 5.7 per cent growth in Q1. Our sense is that you are looking at 6.3-6.per cent growth coming in for September quarter. There is going to be a positive trajectory from this point onwards.
In fact, Q3 numbers which would happen maybe two-three months down the line would be even better because you will have a base effect happening of DeMo last year.
So as far as the GDP numbers are concerned, our sense is the bottom is already in place and the trajectory should be positive and improve going forward.