Samir Arora, Founder, Helios Capital, says “broadly, we are okay. Our valuation, if you take out the consumer sector, is broadly okay. In the last two years, NSE 500, is cumulatively up some 28-27%. So, 28% in two years is not something which could have raised our valuation suddenly from what they were two years ago. It is in a few pockets. So, reduce shorts and play for the bigger themes and bet on India that is it.”

Do you think there is a bit of a FOMO or missed out feeling on pharma?
Samir Arora: Little bit could be, but fortunately we have two pharma stocks, but yes, we could have had more of those. Actually our pharma analyst does say buy more, but we always feel that oh! my God what do we sell to buy and therefore we miss some of these things because at the end of the day if you have $100 in my hedge fund I can buy a little bit more than 100 also by going beyond 100%, but in most of our products you have to sell something to buy and that makes it a little bit more complicated, but yes, even we feel a little bit more we could have had.

What is it that you do not find exciting in the consumer space? Which part are you avoiding? And what is it that you would maybe consider looking at on the consumption side?
Samir Arora: Many people talk about India being expensive as a market. I do not think India is expensive as a market but the Indian consumer sector is expensive as a sector. If you see the financials, they have not really done much for two years. If you see the IT, which we do not own, but they have not done much for two years. What has done well is these consumer guys, these newer sectors as well as sectors like defence.

But if you look at the big three themes, the consumer sector all our life used to grow at maybe 15-20% with valuations in maybe late 20s, mid 30s. Then, came this era of the last five years where people were brainwashed into saying that valuations do not matter, that these are 100-year stories. Now, you see most of these companies growing at 10-12% or lower and their valuations are in the 50s and that we do not accept. We are willing to buy at 40-50 PE if you are growing 25-30% per annum for the next few years at least. That is the only thing we will buy in consumer even if the valuations otherwise are looking high. That is why we have Zomato and Varun Beverages and all.

In Varun Beverages, in my offshore fund, I have made 10 times already, but it grows more than 20-25%, that is what I need for having high valuations. So, I do not like 50 PE for 10-12% growth which is most of the “old” regular consumer companies that are considered as high quality and great outperformers in the past but obviously have not done well for three years and most probably will not do well for the next few years till they either start growing at higher rates or their valuations decline.

What is the next big risk then? Is that largely going to emanate from the global markets versus any risks back home?
Samir Arora: Nobody knows, that is the whole story of this risk business that nobody knows. Who would have thought, one day before the Ukraine war if you had asked me will Russia attack Ukraine, I would have said no. By the way, I was reading a book. The US warned Ukraine that Russia was about to attack thm and they said no. So, the point is, do not get into that. Nobody knows. All you have to know is being able to react to it well.

So, beyond a point we cannot pre-empt these things, but we will react fast if needed whether right or wrong. So, after the Ukraine war, we raised cash by about 15-20%. It did not help because the market did not fall. But the point is, that is a better way of doing it than to worry about a risk that suppose we worry about a risk that China is being very aggressive against Taiwan, if it was. These days, it is not let us, but generally what to do today?

So, the point is, let us not go there. Broadly, we are okay. Our valuation, if you take out the consumer sector, is broadly okay. In the last two years, NSE 500, is cumulatively up some 28-27%. So, 28% in two years is not something which could have raised our valuation suddenly from what they were two years ago. It is in a few pockets. So, reduce shorts and play for the bigger themes and bet on India that is it.What is your view on metals as a space? I know it is not an easily investable area because of the moving parts that is there, but any bet that you would want to take there?
Samir Arora: We do not do it. Basically, in 28 years, I have never invested and once in a while we invest if it is doing really well and we feel paranoid, we might buy one stock and buy 2% and that normally is enough to stop that rally which is one reason I buy it. I say let me stop it since I have never been able to make money and broadly very few have been able to make money in that. But we do not like it generally and we do not like it now.

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