What about sectors like IT, FMCG, industrials? Have your views on these sectors changed?
Well, with the IT sector I have a nuanced view. It’s been a long-time favourite of bulls on Dalal Street. We have all cut our teeth with companies like Infosys, Wipro, TCS, that have gone up 50 times, 100 times and have made us a lot of money. So we are all very enthralled by those companies and they continue to do well. But those companies pioneered a service-led, business-oriented model in India, which essentially means you export services to the west, bill in rupees, collect in dollars and you make a margin. And because the rupee depreciated and volumes were growing you kept doing well. That model maybe under threat due to automation, competition and just due to the fact that there is a slowdown in global IT spends.
But increasingly I find, as an analyst, there are a lot of opportunities in what I call product-oriented companies on Dalal Street. There are a lot of companies catering to vertical markets, building products in knowledge, database, antivirus. They offer some very attractive opportunities to investors, they are available at fairly cheap valuations. So rather than look at the old services-led model, which of course I have in my portfolio, I would also be looking at the product-oriented companies. And there are maybe half a dozen on Dalal Street now that have exciting balance sheets, exciting prospects, and probably deserve a lot of investor attention. So that is my short take on technology.
That’s been your position in the recent past as well. And if our research is correct, you’d invested in companies such as Polaris, Geometric, Sonata. Are you still adding to such investments?
There have been a plethora of offerings in the recent past. Polaris spun off a nice looking product company which I own. There are a lot of others, few companies have come out with an IPO recently. So it requires little bit of digging. The road to riches is never easy. There is risk in these stocks because they are unproven business models yet. We don’t know if India can legally sell, in the domestic market, a lot of licenses or are they all going to be pirated software. So time will tell. But I am fairly excited about these companies because they address very good opportunities. For example, the Aadhaar database was built by an Indian company and that’s a huge technological achievement. They have 100 crore people on the database. Antivirus software companies are showing up in India. So that makes me excited as a technology investor.