Nishit Portfolio

Q&A: Questions & Answers Portfolio Q&A
1

Hello

Below is my portfolio starting July 2020. I have provided the weightage and 1 liner on the rationale behind purchasing the company.
I welcome feedback and discussion on my choices.

STOCK NAME % Rationale
ITC 20.0% High Dividend, Low Possibility of Cap Erosion
COALINDIA 6.8% High Dividend, Low Possibility of Cap Erosion
INFY 5.3% High Dividend, Growth Stock
HDFCBANK 3.7% Consistent Compounder, Stable Stock
LT 3.0% Bet on Infra Spend, Good Track Record
AIRTEL 2.5% Bet on Increase in ARPU
VEDL 2.5% Small Bet on another higher offer for delist
AARTI DRUGS 2.5% Growth Stock. Bet on Pharma API
KOTAKBANK 2.2% Consistent Compounder, Stable Stock
POWRGRID 2.0% RoE is a part of agreement, utility stock, high dividend
SWSOLAR 2.0% Bet on growing need for solar projects. Also, stock would grow once SP Group overhang of ICD goes away
SUNPHARMA 1.5% Defensive stable stock
HAL 1.5% Bet on Aatmanirbhar Bharat and local defence manufacturing
IDFCFB 4.0% Growth Stock. Bet to be next big thing in Banking sector
SONATA SOFTWARE 5.5% High Dividend, Defensive Stock, Can also become a growth stock with the IT boom
GOLD 4.0% Hedge
SHRIRAM NCD EFFECTIVE YIELD 12.4% 31.0% Company has no likelihood of going bankrupt. Great yield. Matures in Sep 2021
2

Have not been very positive on airtel and recent results regarding customer base migration from VI to other providers were heavily inclined towards Reliance. Even the broadband market is being chased by reliance. Are you banking on airtel’s premium customer base to remain loyal ?

3
  1. Airtel has the financial and operational strength to take on Jio. They are matching Jio step by step on Broadband as well as Mobile.
  2. Airtel customers vouch for Airtel’s reliability. I have Jio broadband which keeps failing once in a while.
  3. More the customers move to Jio, more will be congestion on the limited spectrum that Jio has. Infact, I strongly believe that after a point, Jio will want to disincentivize new customers and would prefer to squeeze more revenue from current users while maintaining a decent customer experience.
  4. And lastly, something that is good for the entire industry is the imminent tariff hike. I want to bet on that and Airtel seems to be the only viable pure play bet for that.
4

Can you pls elaborate what you mean by ROE is part of agreement? Agreement with State electricity boards? Can it be trusted will always be followed under all circumstances?

Also regarding ITC - no chance of capital erosion may not be an accurate estimate. There is always a chance of capital erosion for prolonged period of time in many businesses. I would agree on a statement which says - no chance of complete capital erosion. Thanks

5

For Powergrid, they are guaranteed to get 15.5% RoE. Quoting from the AR

Under the Tariff Regulations applicable for Tariff Block 2019-24, your Company has been permitted to charge its customers, the
transmission charges for recovery of annual fixed cost (“AFC”) consisting of various tariff components such as Return on Equity,
Interest on Outstanding Debt, Depreciation, Operation & Maintenance expenditure and Interest on Working Capital.
The Return on Equity (ROE) is computed on pre-tax basis by grossing up the base rate of return on equity of 15.5% at the
effective tax rate of the respective financial year. ROE shall be reduced by 1% for such period as may be decided by CERC,
if any transmission system is declared under commercial operation without commissioning of data telemetry, communication
system up to load dispatch centre or protection system. An additional ROE of 0.5% that was allowed in previous tariff block for
project(s) completed within the timelines specified under the CERC Tariff Regulations has been dispensed with in the current Tariff
Regulations, 2019.

Regarding ITC, I said low possibility, not no chance. Will never say no chance on anything :stuck_out_tongue:

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