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Multipie Weekly: June 27, 2021

Hey there!
Good morning from Team Multipie!

As we start a new week, we share our weekly digest – Multipie Weekly, with handpicked recommendations to watch, read and summarize the week gone by.

Grab a cup of tea or coffee and let’s get started!


The Week (and month) Gone by…🗓

Recovering from the minor correction last week, Indian markets were in the green indicating continued bullishness. IT led the gainers along with Industrials and Financials this week. Energy/ Oil & Gas saw weakness and corrected ~4% lead by Reliance.


Microcaps again led the markets joined by Mid and Small caps. Select Large caps are also showing traction, indicating broad based optimism. 

Performance across industries for the last week and month
Performance across market cap buckets for the last week and month

What did the Top Bosses of India Inc say at the QEF?

Qatar hosted its first Qatar Economic Forum in collaboration with Bloomberg last week, and India’s top industrialists shared some fascinating insights.

We highlight inputs by Sunil Mittal on 5G and Space technologies and N Chandrasekaran‘s plan forward for WFH!

N Chandrasekaran – Outlook for office culture in the post-pandemic world:

The pandemic and WFH will allow a robust integration of women into the corporate workforce, and we must not miss the opportunity as it is morally and economically, “the right thing to do.”

  • Offices will remain relevant as it’s the only place where collaboration and social engagement can take place
  • A three pillared hybrid model will be the future:
    • The Office: Employees and teams to come to the office periodically
    • The Home: WFH is here to stay and a substantial workforce will continue to work remotely
    • Satellite Office: A middle ground will need to be created, which will reduce commute time but still provide a productive work environment 
  • Diversity: WFH will improve women participation in the corporates, and we must not miss the opportunity

Sunil Mittal – Bridging the digital divide:

A duopoly in the Indian telecom sector will be “tragic”, and 3 private players are essential for healthy growth of the sector – Sunil Mittal

  • Bharti Airtel has raised $12 Bn in the last 24 months
  • The role of 5G will be limited for industrial applications, such as autonomous cars, streaming, robotic surgeries and drone management, etc
  • While 5G will not play such a big role in boosting digital penetration in rural India, Satellite communication will have many use cases

    One Web: 
  • Bharti has partnered with the British government, Softbank and Eutelsat to create a network of 648 satellites which will be able to cover the Earth’s circumference in an hour and ninety minutes
  • These will enable Bharti to provide high speed and low latency data to the remotest of regions across the world, be it “Deserts or the Ocean or the Himalayas”

PS: We suggest you to read the annual report of Nelco, a Tata group company (Airtel and Tata group have partnered for 5G) to understand the opportunities in Satellite Communication.

Market Outlook With Kenneth Andrade

In an interview with BloombergQuint last week, Kenneth Andrade of Old Bridge shared his candid views on markets and sectors. Key takeaways from the discussion:

  • Market valuations are not disproportionately expensive; they are fair
  • One must build portfolios irrespective of where the market cycle is
  • Find a company which makes money when its peers don’t

Metals

  • Steel and Aluminium industries will see stronger balance sheets even if metal prices do not rise further
  • Bearish on end user industries that have metals as core raw materials. They might need to absorb much of the price damage caused by rise in metal prices and general inflationary pressures.

Oil & Gas

  • General consensus that Oil will be in a temporary bull market from here
  • Investing in companies which have a higher proportion of their income in USD might be a good hedge for effects of high oil prices on the economy
  • Benefits of high prices will mostly evade oil marketing PSUs as they are representative of the government’s B/S which will be severely hit by the macroeconomic downturn

Financial Services

  • Retail banking needs to be relooked as it gradually gets fragmented in light of continuing disruption by fintech players, and credit costs remain high
  • Platform companies are valued for the future. They will follow the process of natural selection so it is important to find the market leader and stay invested in that company alone.

Real Estate

  • The sector has remained stagnant since 2008. High degree of consolidation and record low home loan rates make the industry an attractive bet from current levels.
  • Urbanization will be the next big structural shift and many more cities will start coming up as India’s GDP per capita grows. This will be an inflection point for the sector.

Opportunities

  • Companies that have incurred a significant capex to outperform along with digital companies

Bonus: Portfolio of Old Bridge Capital based on public information

Reliance Goes Green in its 44th AGM..

Reliance Industries conducted its 44th AGM and announced significant changes towards a greener future

RIL held its 44th AGM on Thursday, and Mukesh Ambani had some significant announcements for the conglomerate’s future. Here is summary of the interesting aspects with our thoughts:

Sustainability: RIL aims to achieve net zero carbon emissions by 2035

Gigafactories: RIL plans to invest a total of ₹ 75,000 Crores over a period of 3 years to set up four “gigafactories”. These factories will be equipped to produce:

  • Green Hydrogen
  • Solar Photovoltaic Cells
  • Batteries
  • Fuel Cells

Our Thoughts: 
India has a high import dependency in all the four technologies, particularly in energy storage, electrolyzers and fuel cells. RIL is attempting to capture most of the value internally but analysts believe it will have to rely on global OEM’s for certain technologies.

Jio Phone: Can RIL be second time lucky?

  • RIL partnered with Google to launch JioPhone Next at an aggressive pricing of  4000/-  which will be optimized with a lite version of Android OS, instead of the inferior KaiOS which was there in the earlier Jio Phones.
  • This will be the most affordable entry level smartphone for current 2G users in India to upgrade to 4G, in a bid to increase their subscriber base.

Note: In a report by ET, it was pointed out that Jio might need to extend subsidies upto ₹15,000 cr (₹2000/ piece) to consumers if it were to achieve its target of selling 75 mn units in the next 2-3 years.

Aramco

  • Saudi Aramco’s Chairman Yasir Al-Rumayyan joined the RIL Board as an independent director, cementing the relationship between the two energy behemoths.

Retail

  • RIL expects it’s retail vertical to grow at least 3x in the next 5 years
  • Reliance Retail sold 4.5 cr units of electronics last year which translates to 1.2 lakhs units/day
  • It aims to create 10 lakh jobs in addition to the current workforce of 2 lakhs over the next 3 years

5G network

  • RIL believes it is well positioned to be the first to launch a full fledged 5G service across India
  • Jio has partnered with Google Cloud and will use their technology to offer 5G in India

Chart of the week

Performance of Global markets over the last 10 years:

  • India ranks 16th in the global list with a 5 year CAGR of 13.63%
  • While this indicates the power of compounding over a period of time, it also shows the merits of diversification as some markets have yielded negative returns as well

In Other News

  • The SBI-led consortium of lenders exposed to Vijay Mallya’s default recovered ₹5800 cr through a 15% stake sale of of United Breweries to Heineken

That’s all for this week. Please share with your peers if you found this helpful and subscribe at multipie.co to start receiving these as a weekly digest every Sunday!

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