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You have been a big votary of urban consumption and you bought into stocks like Landmark. You bought into stocks like Varun Beverages. You bought into stocks like Sapphire Foods. Where are some of these urban consumption stocks headed because A) it is a niche pocket. B) there is a base effect which would kick in.
Yes, I agree. But if you look at, let us say, Sapphire Foods or even Landmark for that matter and both in some sense are similar because both have branch expansions taking place whether it is adding more restaurants for Sapphire, Kentucky Fried Chicken, or Pizza Hut, or for Landmark geographically moving to other parts of India because they are focussed on the west. They have Delhi. They have Punjab and then they have an agency of Mercedes in Kolkata and Madhya Pradesh. So, I think while you may not see necessarily a big SSG growth for both of these businesses, you will see revenue top line and progressively EBITDA growth because the absolute number of branches will keep expanding.
Where are you investing right now, apart from buying car companies, watch companies, pizza companies, I think Eureka Forbes has made it up there. So, now you are playing the full chain, right? First, build better water, clean water, that is what all of us need.
I will tell you, your point on Eureka is interesting but why we bought it in the first place because our ethos of of buying companies is that we try and see if the company has a trigger that is embedded in and that has not played out as yet and will play out over the next three to four years.
So, specific to Eureka Forbes I think which is a classic example, a company that was not doing too well under the previous management, taken over by Advent which has a history of turning around companies, Crompton Greaves Electricals being a case in point and basically they brought in one of the best CEOs in the country, Pratik Pota, who did wonders with Jubilant FoodWorks so that I think is a great turnaround story which will play out over the next two to three years.
I am not saying a quick fix to Eureka Forbes in six to eight months you will see that happening. So that is the reason we bought Eureka Forbes.
But to answer your question, I think the other businesses that one needs to focus on and again these are newer businesses that have got listed in the past about 12 to 24 months, wind, you are seeing more activity now in solar and wind is really taking off. If you see the kind of tenders that are coming out and the government’s own target of 10 gigawatts of annual tenders for the next several years. EMS companies and if you look at the non-Amber and the non-Dixon, you are seeing a significant growth in those companies.
They have, obviously, higher EBITDA margins and very different and specialised products. I think smart meters, that is going to be a big business as well and we have one listed drone company, I am sure more will follow.
But I also wanted to get in a sense from you as to any sector or space you believe that is very overvalued in a market like this?
Good question because the whole market is overvalued in some sense. But I think, well, we have erred in investing in IT a little too early, probably now might be a good time to actually start building up smaller positions in IT. But I do not know, I am struggling to answer that question because I mean a lot of stuff is out there is good but expensive and I think it is going to remain unfortunately expensive for a while, so do not really have a better answer than that.
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