Knowledge FAQs with Gaurav Jain (Knowledge Yagya- Episode 2)

4 min read

Here are some questions asked by the viewers in the Yagya dated 13th 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 If the goals are not identified and with the normal process I start investing. Can the goals be achieved then without identifying them?
Gaurav Jain:

• Yes, the goals can be achieved and can be overachieved.
• Because the process is very much important and should be followed consistently in a disciplined way.
• The asset allocation that has been identified that needs to be assigned consistently.
• Regular investing in stocks, Mutual funds even in fixed deposits which suit your risk profile should stay invested consistently.
• There should be a thought process of “SIP first and then the expenditure ”

Q If I hold shares of the parent company and if its subsidiary gets listed then will I get shares of the subsidiary or should I need to apply for the IPO separately?
Gaurav Jain:

• No, separate allocation will not be given. The investor continues to own shares in the holding company.
• For Eg If the investor is having shares of Reliance Ltd. (Holding Company) and if it’s one of the subsidiaries (Reliance Jio). Here Reliance Ltd will sell some portion of the stake, but not all. Hence the investor will continue to have a stake in the holding company i.e. Reliance.
• By this, there will be value unlocking. There will be a proper understanding of the valuation of the company. So this will benefit the holding company as well.
• Hence if the holding company is listing its subsidiary business, then there will be no extra share allocation to the investor, and one needs to invest in IPO separately.

Q How to identify companies’ growth and earning visibility?
Gaurav Jain:

• It is subjective and not quantitative.
• Need to look for the company and the industry and expectations around regulations and what the government is doing and various other things.
• Also need to check with order books to understand the cash flows.
• Checking Earning visibility based on quant-based factors is very difficult. Need to understand the company and the industry as well.

Q Why are people making investing complex and scary?
Gaurav Jain:

• It is complex and scary because we are influenced by the news.
• The investment should be simple which can be reviewed very easily.
• There should be discipline in investing as well.
• Wealth Creation is the game of accumulation.
• So need to try to maximize this game of accumulation. Every increase in investment will give a great picture in the future.

Q Next generation of Automobile is Electric Vehicle then what is your thoughts about battery industry?
Gaurav Jain:

• The battery company will have a role in electric vehicles.
• Currently, they are having earning visibility.
• It is expected that by 2030, India will have 35%-40% of Electric Vehicles. And the rest 60% will be petrol vehicles.
• The vehicles running on petrol are going to have the normal battery.
• The new trend seen in electric vehicles is the battery cost is high. So most vehicle manufactures are developing their batteries. Maruti Suzuki, Tata Motors and Mahindra and Mahindra have already in the process of developing their battery system.
• The Battery industry Exide and Amara Raja’s role will be limited to electric vehicles.
• It is also in the news that the batteries will be removable especially in 2 wheelers in that case Exide and Amar Raja can Play a role.
• Their role is extended in renewable resources and solar energy as well.
• Growth is expected but growth from electric vehicles is not seen currently.

Q How to analyze the pharma sector?
Gaurav Jain:

• Currently, the Indian pharma industry is mostly an export-oriented sector.
• When the drug patient got expired, we made the generic version, took the approval, and then it is sold off. This is what the Indian pharma company had done in the last 15-20 years and did it very well.
• We were always dependent on the US, UK, and other markets. India’s Pharma Sector is quite small as compared with the developed nations with a lot of competition.
• The impact of the growth is always at risk due to the regulation of the other countries.
• The Pharma Sector of India faces two major risks: International Growth Risk and Regulatory Risk.
• Also as of now, there is hardly any R & D in India.

Q Looking at the articles/financial statements in 2016-2017, Yes bank appeared good. In hindsight, how could we have avoided yes Bank?
Gaurav Jain:

Yes Bank was a great company that was very fast growing.
• There were no major issues associated with it.
• The only way for the selection should be to go for the best of stocks.
• Even though the regulations are improving there could be a chance that the same story could be there with other banks just like Yes Bank although there are fewer chances.
• If the investment has already been done and if there is any governance risk anytime, it is a good time to exit.

Q View on LTI and LTTS- best growth-oriented stock?
Gaurav Jain:

• LTTS has a better growth chance.
• LTI is a more generic company.
• LTTS which is more focused on the Engineering Research & Development (ER&D) sector. Which is doing well in the last 2-3 years and may grow very well.

Q Difference between premium valuation and overvaluation?
Gaurav Jain:

• Overvaluation means it is not a good time to buy the stock at a particular point in time.
• Premium valuation means it is highly-priced and can be a good pick but no need to invest in a lump sum.
• Some stocks always trade on premium valuation like Hindustan Unilever, Nestle, Asian Paints, etc.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.