Investing FAQs with Parimal Ade (Investing Satsang- 14)

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Here are some questions asked by the viewers in the Investment Satsang dated 23rd July 2021. These questions can provide you insights on some grounds. Please read these questions for knowledge purposes only and make any investment decisions only based on your research or the advice of your financial advisor.

Q Will the price of Zomato sustain at the current price?
Parimal Ade:

• The article by Mr. Ashwat Damodaran has valuated the stock for the next 10 years is around Rs. 40 to Rs. 41 per share.
• The analysis was for the Indian food business.
• As per the current valuation of Mr. Damodaran, the price has come up 4 times against the estimated valuation.
• Zomato is currently in the food delivery business. Now the question is will Zomato also be into other delivery services.
• Already Zomato market capitalization has touched the mark of Rs. 1 lakh Cr.

Q View on IDFC first bank?
Parimal Ade:

• The IDFC Ltd promotors of IDFC First Bank are ready to exit from the bank.
• The RBI has allowed the promoters to exit. The 5 years are considered since the time the license has been issued to IDFC Limited in the year 2015-16.
• IDFC Financial Holdings holds a 36.6% stake in IDFC First Bank. Now they are going to exit this stake.
• IDFC First Bank is all about Mr. V Vaidyanathan and not about IDFC Ltd.
• Even though IDFC Financial Holding is a promoter of the business, but it seems that it is not having the say in the day-to-day business.
• It is all about Mr. Vaidynathan going to drive this bank. Hence it will not impact from the strategy point of view.

Q View on IDFC Ltd?
Parimal Ade:

• IDFC Financial Holding Limited is the holding company of IDFC Ltd.
• IDFC Financial Holding limited is holding 100% of IDFC’s Asset Management Company.
• IDFC Limited is holding IDFC’s First Bank holding is around Rs 11,551 Cr. And, IDFC AMC’s stake worth is around Rs 1.26 lakh Cr.

Q If the subsidiary gets listed, is it sure the parent firm will be re-rated, or will it suffer like holding companies?
Parimal Ade:

• For instance, HDFC Limited subsidiary is HDFC Bank and if HDFC Bank gets listed then it is estimated in the way that value unlock has happened for HDFC Limited. So based on the evaluation it will impact the valuation of HDFC Limited.
• We should see to it that the company is not going to become a pure holding company. We need to see the company which is having its own business. eg HDFC Ltd which is having an HDFC Housing Finance Business. Plus they are having subsidiaries also.
• In the above case, the discounting will not be more. If there is a pure holding company then there could be a good amount of discount.
• Normally the market expects 20% discounting but some companies are giving 40%,50%, and 60% discount.
• It is suggested that you need to invest in main companies. Ultimately that is going to evaluate the company.

Q View on India Bulls Real Estate?
Parimal Ade:

• Need to avoid these counters.
• Between the years 2005 to the year 2015, the reality sector grew by 35% to 40% across India.
• The economy with inflation that has a growth rate has happened to 12% to 15%.
• Hence, This decade is a pause decade, especially for this sector.
• So there are 2 types of correction- price correction and time correction.
• Price correction means prices come down and time correction means the same price will be there for a long period.
• In the last year, we have seen lower single-digit returns.
• This scenario can continue till the year 2024-25.
• Affordability is a real concern in the reality sector.
• Time correction will be there for around 3-4 years.

Q Which retail stock is better to participate in Reliance Retail whose IPO is coming soon or Dmart?
Parimal Ade:

• This is the sector that is having organic growth.
• There could be shifting of Unorganised sector to the organized sector so there could be a benefit for these 2 companies.
• As there is an upcoming listing there could be a rational valuation in Dmart for more time.
• We need to see when reliance retail is going to be listed.

Q Future of HDFC AMC?
Parimal Ade:

• Earning visibility is good because of the AUM growth and pressure on expense ratios.
• Growth is going to be a concern though the under penetration is very high.
AMC Business is going to have a good penetration business. But there is a concern about the growth in the margins.
• The margins can come down due to ETF business.

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