What is your take on the so-called class of 21 or the new age tech companies that we keep talking about, which were listed in 2021? We have seen very divergent situation. PB Fintech and Zomato have gone one way. Delhivery is also inching up. But we have the likes of Nykaa and now, of course, the Paytm debacle. It is getting very, very diabolical. What should investors do at this point of time with these stocks?
Ajay Srivastava: I love the term diabolical. That is one name I could not give to them. I think again back to the same point. We have a lot of investments in these companies, to be honest and one cannot live without them. The key test is that these are monopolies which are emerging in the system or at least duopolies. A disclosure, we have invested. But it is not a recommendation. You spoke about PB Fintech. Now, in insurance retailing and financial retailing, they are the sole company in the country. There is nobody else competing with them.

It is the same as the food delivery service which has pivoted itself to an amazing concept called delivery of product. And they can directly now compete with Amazons of the world without the backup of all the Rs 7,000 crore of losses. You have to embrace them. You have to invest. When you buy a product today, all of us instinctively go to either Swiggy or Zomato because Zomato is listed. You can buy the share or you can get a Paytm.

Paytm is a sad story because I think the central bank could have removed the CEO when they found that he was not listening to the advice. Instead of penalising the CEO and the share and the principal share promoter of the company, they penalised people in the market. I think that was a sad story because the CEO should have been sacked by the RBI. They have the powers to remove a CEO of the bank instantly and override the board of directors and secure the interest of millions of people who use Paytm Bank or the ordinary shareholders. They chose not to.

And guess what the guy does? He resigns from the bank, moves to Paytm, which is okay at this point of time. So an iconic institution, unique absolutely in terms of market spread. Nowhere in the world you have a comparable payment system as what Paytm has done. But it is a very sad governance story because the central banker could have protected the company and removed the CEO and the board members who were delinquent in their job. They did exactly the opposite.

But do not take that as an example. I think this business has a lot more to go. All the new age companies have really long runways to cover. Yes, some will do better, some will do worse. Some may have pessimism. Zomato was pessimistically priced at Rs 80 not long back. Of course, it picked it up after Blinkit became such a success. I think you have to embrace it, buy it, make it a larger and larger part of your portfolio. That is where your life is. You do not live your life away from Microsoft. You do not live a life away from Zomato or go online buying, etc. Why would you leave a portfolio out of it? This is the future of your portfolio. So our recommendation to all our people is keep buying, keep investing. Yes, you will face setbacks like Paytm but that has nothing to do with your model of investing. That is to do with the regulatory model of buy, hold, keep. It is a decade, two decade story which will turn out to be a magical story, I can tell you this much.What is your thought on the hotel stocks? We have seen a run-up there again. Obviously, a lot of factors play out for these stocks in terms of travel, domestic play and in terms of religious tourism that we are talking about. Are you still quite bullish on the hotel stocks?
Ajay Srivastava: BUY. That is a three letter answer. I keep saying go back to where the Indian economic story is running. It is a clear K-shaped country at this point of time. The people may not like it. Some people may say it is not correct for the country or the poor. But the fact is, when I sit here and decide my investment, I look at where what is happening. India’s rich are getting richer and they are spending their money on experiences. It is back to the beginning. It’s the same issue with NBFCs. Hotels are consolidating. Smaller hotels are giving up to the larger hotel chain. The larger hotel chains are able to extract absolutely ridiculous prices. We have not seen this kind of pricing even last year.

So I think hotels by and large are on an expansion spree, consolidation spree and they price their product quite attractively at this point of time. The economy, the mid share, the superior, whatever you want to say. And best part, competition. There are not many hotel chains coming up in the country. The standard ones are getting bigger and bigger market share. And they are not sticking to the hotel room. Look at Ama Trails, I would say for the next five years, it is a golden era for the hotels because consolidation will give them enormous power.

There is a huge lack of competition. And there is a long delay in putting a hotel up, it takes five years. So in terms of all the dynamics and if the new government wins and this policy continues, the K-shaped consumption pattern is only going to accelerate. So nothing to tell us right now, this is not the time to check out of the hotel. If you are there, stay put. If you are not there, get in, at least book for a couple of days and see how it goes.

Will the next generation reforms that the market is trying to figure out come from the government. Yesterday, we got a glimpse of that in the commentary from the Finance Minister. So much work is happening. Will it be more of the same or could there be some surprise which the Street could be watching out for going forward in the new term of Mr. Modi?
Ajay Srivastava: I do not think there will be surprises because I think one thing the government very clearly has learned that whatever they have done, one can argue some are good, some are bad, has resulted in a very strong equity environment in the country. And that is a domestic good environment, which has meant what? Which has meant that hundreds of companies which are struggling to raise capital were living on debt, are now able to pay off their debts and go on the equity spree. And I think that the greatest success story of 2023 is that hundreds of marginal companies who could never aspire to raise equity are raising hundreds of crores of equity. Now, what happens when you raise this equity? Your debt goes down, risk goes down in the system, your ability to build the market share goes up, and therefore you can compete in the market.

So I do not think the government policy will change at all because whatever they have done so far has worked well for most of the people. They are richer, they are feeling better, their consumption is better at this point of time and the equity culture is booming at this point of time. There is no need to change it because what they have taken the reliance of companies away from debt instruments and banks and moved it to equity. It is not zero cost, but it is certainly zero risk money that companies have. So fundamentally for the equity market, the focus will remain.

That is why we said that the themes which relate to equity markets will continue to bounce, whether you are talking of AMCs, whether you are talking of depositories, they are going to have a much bigger run in the next five years.

If the government supports more of the equity culture and they have done it already by saying that unlisted companies also have shared the depository. For example, that is one of the things that they have introduced legislation for. That is a precursor to opening up the market, much more to private trade etc. and the fractional sharing of real estate. So fundamentally, the policy will be the same.

And what is important for us to understand is that debt returns this year could become as good as index returns. Because this government, if it comes in, is not going to borrow excessively, they do not need to buy out voters at this point of time, which means that if the fiscal deficit goes down, there are greater chances of interest falling, assuming that the US interest rates also come in line. If you ask me personally, in 2024, gilt returns may even exceed the index returns on equity given that we expect in the second half, interest rates should start to come down quite substantially.