There have been extreme swings in the market over the past few days. A lot of noise has shrouded the markets and everyone from journalists to politicians have jumped onto the bandwagon trying to score a lot of brownie points based on their alignments, be it ideological or political. Well I’m not a politician and this is not a journalist’s blog so let’s keep the news aside and discern what is important for us.
First, we have to make a distinction between the Adani stocks and the Adani group’s viability. I’ve two bits to add here:
The group’s viability depends on its ability to service its debt. As far as this is concerned, we now all know that the group has some bonds which are due for maturity over the next couple of years amounting to some 2 odd Billion dollars. Based on public information, there is not much doubt that this will be serviced. The late rally in bond prices also signals on similar lines. Even the worst rumours going on agree that the group has real assets which are functioning like ports and airports and cement companies and in the worst case, selling part of it to retire some debt won’t be an issue.
Second, there are some groups, the so-called gold standard banks which have reduced LTV values of some Adani bonds and that created some news worthy points for an eager media. Well, the two groups are Citibank and Credit Suisse. First let’s talk about Citibank. Even the current CEO won’t be sure about the number of times this group has either gone bankrupt or sold at distress prices. Credit Suisse has only been left with a fancy name and it wasn’t too long ago when its share prices hit lifetime low levels. In the past five years, CS shares have gone down by over 80%. So we must also know who is presiding over the case in what capacity.
Third, we Indians must refuse to be told about our interests by some gora sitting somewhere whose own pants are on fire. I am in complete agreement with Harish Salve that this assault on a group is being used to negate, deflate and nullify the India story and this is my biggest point. That India is a beacon of growth and prosperity in a world ridden with high inflation and macro economic instability is hidden to none. And there are enough vested interests who would like to hinder our progress. And of course there are pliable insiders who are all too happy to take orders from their masters in a wishful hope of being anointed as regents in a day when the current dispensation is laid to rest.
I refuse to buy this bullshit that share swings, however wilds are not going to deter the onward push of this giant who now has risen from its deep slumber after decades. India is truly rising and no force is going to stop it, from within or without.
Now, let’s come back to the share prices of the Adani group which in effect is the hot topic of the day. A lot of my friends are suddenly tempted to buy their shares which appear to be down significantly from their highs and offer deep value. Well, as I have written last week, no bull market leader ever comes back to its previous highs within at least ten odd years of its peak. Now will this group turn out to be a dud like Unitech or DLF which hasn’t ever crossed its peak or will it be an Infosys will only be known in hindsight. The only thing you should do is to get out of the way of this train which might cause a lot of damage before coming to a halt.
So here is my conclusion – never bet against India. This is our decade and we’re going to make a lot of progress. Bet big and be a part of this growth story.
And here’s my favourite part of the week- ITC released its numbers for the Q3 on Friday and what bumper set it was. On an already high base, the profits grew by over 20% and the stock is at lifetime highs . This in my opinion is only a start. Let me give you a small number to play with- ITC trades at just around 25 times trailing earnings while Nestle and HUL are at over 65-85 times. If there’s just a PE expansion and ITC begins to trade at around 50 times, in a couple of years, the stock will well be trading at over 1000 rupees a share and still won’t be as expensive as some of the FMCG giants are currently.
And in the end- Mercellus guy has now sold Relaxo claiming it’s no longer a monopoly stock and other related bullshit. This man is the biggest scam in the fund management business where all her did was to buy momentum stock and intellectualise the process to appear smart. His fund has consistently underperformed the benchmark over the past three years and I’m certain with most of his holdings now entering a degrowth era- Berger and Asian paints and HDFC life being hit by the budget bullet, in no time will he quietly fade away like other fries in the pan.
Life is all about Compounding! 