“Aurobindo, I think they have got into some issues with one of their major plants now. I was just listening to them saying that it will be resolved in two-three months,” says Sandip Sabharwal, asksandipsabharwal.com.

Let us begin by talking some of these pharma names itself. If you track Aurobindo Pharma or Divi’s Lab closely, either of them?
Divi’s Lab has been, in general, underperforming expectations and delivery has been somewhat not as great and I think that is the difference which we are seeing between branded formulation companies and pure API, like API-based companies which have been underperforming because API still see pricing pressure. But on the other hand, the formulation companies are benefitting because of lower input prices and reporting higher profitability.

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So, Aurobindo, I think they have got into some issues with one of their major plants now. I was just listening to them saying that it will be resolved in two-three months.

Historically, FDA issues never get resolved in two-three months. They take a prolonged period, almost a year or so. But depending on how that goes, I think that will determine the performance.

What has been your portfolio positioning since the start of the month up until now, barely a week or so, but anywhere you have added positions or booked profits?
Not booked profits, but we are sitting on around 15-20% cash because I have been expecting some correction. So, correction happens fleetingly, but they do not sustain and the market bounces back. So, till we see some more reasonable levels in the market, it is tough to buy. Like, there have been specific instances or specific stocks of the portfolio doing well, so that is something which we are watching out for. But in general, a wait and watch phase right now.

I also wanted your take regarding Hero MotoCorp, if you got a chance to look at their numbers and the overall two-wheeler space because the commentary for rural India seems to be improving. We heard from a lot of managements at the Global Business Summit as well, but what is your take on rural India and Hero MotoCorp?
See, depending on which industry you are, the commentary of companies on rural India have been very different. Like, for example, for most of the durable companies, ex-off two-wheelers, the commentary still has been a bit soft, but two-wheeler rural sales are doing very well, whereas the consumer, FMCG sales in rural India are still subdued. So, I think it is not a straight yes on the rural markets right now. But I think the trends are positive and as such I think what we are seeing in the two-wheeler markets could get repeated in the rest of the durable and non-durable space going forward as we go into this year, so that could be the opportunities in those spaces. Hero MotoCorp has had a very strong run-up and I think at these valuations, it more or less factors in all the near-term positives. So, I think if growth like this sustains continuously for a long period of time, then we could see more upsides. But I would think that it is fairly valued at this point of time.

Real estate and hotels or hospitality, do you think these are two spaces that one should start trimming positions and booking profits into?
I think in hotels specifically we are holding Lemon Tree Hotels and Indian Hotels and I am not selling both of them because I do believe that next two-three years still will be very good for them. Especially Indian Hotels has a very strong strategy under the current CEO, and I believe they are doing many things which will help shareholders, which includes getting profit out of ancillary businesses, expanding to areas which are underpenetrated and also moving globally and I think that could help them.

Lemon Tree recent results were subdued, but I think directionally it still seems okay. On the other hand, I think real estate in my view is entering into some sort of a bubble at this stage given the way the frenzies build up, the kind of advertisements we see of new real estate projects and the price movement which has been there in the real estate segment, so I think we should be careful at this point of time because this kind of price hikes and volumes are very tough to sustain and the stocks have run up substantially also. So, I think this is one segment where we should be a bit careful at these prices.

Although the rebound in SpiceJet as well has begun, but would you stick by with the market leader that is InterGlobe?
I would. So, we hold InterGlobe in view of our portfolios. So, I am positively inclined. I think their competitive positioning is very-very strong and the kind of cash flows they are generating, I think not only in India, but globally also we have rarely seen any company do so well. So, they have a good strategy of keeping costs under control and they operate on that model and they are doing very well.

The only risk for InterGlobe, as all of us know, at periodic intervals is that the ex-promoters come to sell a part of their stake periodically every few months and that creates a depression in the stock.

SpiceJet, again the news flow is decent because they are getting a significant fund infusion which will obviously not only help them survive, but also sustain. So, I think it could be interesting how they play this out. So, we will have to watch for some time and then take a call on SpiceJet I would say.

Wanted to get in your thoughts on Honasa Consumer. Just wondering if you have had a look at the kind of jump they have delivered in their profits, what the outlook is on the business as a whole or whether or not you like anything within the new-age tech space?
In the new-age tech space, I think the only company which is doing very well is Zomato obviously. Now, Zomato is again a question of at what price you buy because like I could never buy it as it just shot up, so I think then it is a matter of timing and you want to time, but I think incrementally their trends and the way the profitability is coming could hold that company in good stead.

Honasa, although on the face of it, profitability improvement looks good, but I think the growth was a bit lower than expectations and you need to watch their profitability trend because a lot of their growth is advertisement and publicity push promoted and how that plays out and there were also news flows on high inventory into the system which is showing good results at the company level but there is a lot of inventory which is there with at the retail level or with the distributors, etc, the model whatever they operate, so I think that is something which we have to watch out for.

I wanted your take on the electronic manufacturing theme, because this quarter numbers from either an Amber or a Dixon or Syrma SGS of the world were not impressive at all and these stocks are trading at very high valuations. What should one do if you are holding on to these stocks? Is it the time to book profits or just hold on?
I believe valuations are very high given the fact that these are low end businesses which are largely surviving on very thin margins and PLI support from the government. So, I think directionally given the growth they will show because they get the PLI benefits could help the stock prices sustain without too much of correction, but for new buying I do not think these prices make sense because these kind of businesses should not get 70, 80 or 100 PE.

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