Whether we call it vote on account or whether we may call it the last budget of the current government before the next election cycle, the backdrop is easy to understand. Local economy is super strong. Global economy is highly uncertain. It is an amazing backdrop. Normally you would say global uncertainty, risk of Covid, issues in terms of debt but this time the demarcation is very clear.
Porinju Veliyath: Yes, that mix of our own reforms and policies with what is happening globally. It is the one thing which is making India look very strong in the global arena. And I think that is very much evident that geopolitical formations going on and India is going to be very strong. And this is something, which really works for our Amrit Kal vision that you have been talking about. I feel today everyone is ignoring the budget. I think, of course, it is a celebration and people have even started ignoring the upcoming union elections. You know, it is something not once in a century, it is once in 1000 years kind of a thing we are talking about; a civilisational rise of the next 25 years of India.

You talked about the continuity of the current government. Is the market already pricing in that, especially given last weekend’s developments with Nitesh Kumar? Does it seem obvious that it is going to be a very fragmented opposition and this government will be back in power? Is the market already pricing that in?
Porinju Veliyath: That could be the reason people are ignoring it. It is already there. Everyone is confident. And I think that is already a done deal. But most importantly, we have got strong roots for this Amrit Kal vision. It is not just based on the excitement of people or that the government is creating some fancy or some excitement. It is very different. This time, it is really something massive happening. A massive scale up of the economy and markets.

So investors have all the reason to rejoice and to be optimistic. That optimism is reflecting now. There is an excitement that’s reflecting in the high valuation of what we all are worried about, again and again. And after the worries, you see the market is strong again and they forget the worries. But ultimately, one should be cautious also. Unless you have got a very long term, the so-called, Amrit Kaal vision, everyone ultimately is going to get into that vision, which is going to drive the economy faster and faster.

Now we have seen our market capitalization passing 4 trillion. We are the fourth globally. Now we see these things are happening very fast. From here, we are talking about doubling the economy in six, seven years, five, six years to $7 trillion. And the Amrit Kaal vision of a $30 trillion economy by 2047. The most important point for equity investors or the investing community of every Indian, is of course, every trillion will be added to the GDP and to the market capitalization faster and faster. So that momentum of wealth creation is going to be there in the coming years.

You said that there are pockets of valuation exuberance, there are pockets of overvaluation, which we always talk about and get a little scared looking at the screen. Where is it that you are maintaining caution? And where do you think in the market, there is currently undervaluation and opportunity?
Porinju Veliyath: It is a very interesting question and everybody has these things in mind. Most people are really, you know, especially the experienced all timers in the market, they all are very cautious, looking at the running up of valuations. Just take example of PSU companies. I remember two or three years back, they had been moving up. It is something amazing. It is like people could not believe it and still, they are staying strong. There is no sharp correction. But at 30, 40, 50 PEs, some of those already runup companies are not going to lose money. But there can be a very long time-wise correction, maybe two, three years or four years, the stocks may not move. There can be 20, 30, 40% corrections for some reason here in the market. So those kinds of cyclicality investors should be ready for. But with an Amrit Kaal vision, the way India is moving, with the massive scale up of operations, a massive build up of, building up of infrastructure, this is like never before, historic, historic rate and scale of development. So we cannot compare this with any period of time.Considering PSU is such a large umbrella, where will these four, five years of correction or consolidation is going to come in?
Porinju Veliyath: This correction, consolidation will be all across. But on one side, there will be 30, 40 PEs, fancied stocks in PSUs. And on the other side, I am seeing some companies.

So railways, defence and power?
Porinju Veliyath: They have very high PEs and have already gone two, three, five times and some of them 10 times in a short period of two, three years. On the other hand, one segment is still to catch the fancy of the investing community – the oil and gas sector. Oil and gas PSUs, starting with ONGC and then HPCL, BPCL and many companies in that sector. Some of them are at single digit PEs, and with a very high dividend yield. So these companies are not going to close down. They are very relevant, they have huge cash flow and companies like ONGC there is a possibility that their earnings are going to grow faster than the past.

I feel investors should have a look at that. We have recently bought some holdings in ONGC but these are very large companies and it is not going to make any difference. I like ONGC and those other oil and gas sector stocks in PSUs. At this price, I would not be surprised to see 8 or 10% dividend yield on ONGC in the coming one, two years.

ONGC is a PSU stock. They are in the business of exploring crude and gas. The world is moving away from oil and gas into new energy businesses. Do you think it makes sense to buy ONGC?
Porinju Veliyath: Oh, yes. This has been one reason this stock has been underperforming for last several years even after having such dividend yield and cash flows. But the business is going to stay after five years, ten years and twenty years and the demand is going to be there in spite of all those alternative fuels. ONGC was in a declining trend in the last 15 years in terms of production. Now, many things are happening. The production is going to stop declining and start moving up.

At what price did you buy it?
Porinju Veliyath: I think the current price only. I just bought it recently.

Are you happy to own it for the next five years?
Porinju Veliyath: I am an old man, so it depends. I think this is a stock to at least hold for the next one-two years and sentiment can be improving in that segment itself.

One to two years is long term in today’s terminology.
Porinju Veliyath: Yes.

Old man, I do not see any evidence of that.
It is great that we have the Amrit Kaal vision of 25 years, but the lifespan of humans are very small. We sometimes do things without waiting.

This is a big one and this is a new name and that is Piramal Pharma. It is just one of those companies where a lot has been talked about, a lot has been discussed. When the demerger happened, it was not off to a great start. But the last two quarter numbers have been solid. What is the unique aspect of Piramal Pharma which excites you?
Porinju Veliyath: It is a very large pharma company, well diversified within pharma and many OTC items and number one brands in many segments, small segments. And I was surprised once it was demerged. It went down to some, below 100, went down to Rs 70-60 …

It was 62… yes 52….
Porinju Veliyath: So, it is more than double now. But it is still below Rs 20,000 crore kind of valuation. This can be a good compounder for the next five years.

At what price did you buy? You bought at 60 or you bought at 120.
Porinju Veliyath: We have been buying in PMS where we started buying at two-digit price, below 100.

And you have again at least a clear time frame here?
Porinju Veliyath: This is a stock to hold for the next two-three years minimum .

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