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ACC | Ambuja Cement: From a minority investor standpoint, Ambuja, ACC do not offer much value now: Sandip Sabharwal

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“One has to look at the market valuation since the Indian market is up so much this year vis-a-vis other markets. As equity investors, we need to evaluate how much of the growth is already in the price and how much will come through,” says Sandip Sabharwal, asksandipsabharwal.com

What do you make of this so-called festive shopping? Across consumer goods including consumer staples, where do you see the commentary being changed?
The consumer companies always talk bullish. So, we ourselves need to evaluate what is realistically going to happen. We need to take it with a pinch of salt.

If things are going to be good, one has to look at the market valuation also since the Indian market is up so much this year vis-a-vis other markets. As equity investors, we need to evaluate how much of the growth is already in the price and how much will come through.

Smart Talk



That is the important thing and to that extent, wherever there is excessive run up, it is already in the price.


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We have been speaking about the cement space at great length, but the stocks over the last couple of weeks have moved higher by between 15% and 25%. If somebody has missed out that rally, does it still make sense to buy into these counters or do you think this has just been pegged on account of the M&A and consolidation buzz and it might not play out for the entire sector?
I will agree with the second comment because these stocks have gone up too much. If you see the results these companies delivered in the previous few quarters as well as the overall capacity accretion and earnings growth, the outlook is not so great. Most of the stocks have gone up 30% odd, Ambuja, are trading at very random valuations. So from a minority investor standpoint, they do not offer much value at this stage.
I think people should be careful because longer term, over three to five years, they might still perform but in the near term, the capacity addition outlook as well as pricing outlook do not seem very attractive for most of these companies.

Do you look at a lot of other midcap banks and NBFCs? Can that space or MFI as a space start to do well now?
In a rising interest rate scenario, NBFCs, MFIs etc are at a disadvantage to large size banks. So although just due to the differential in valuations, we might see some up move as the larger banks have moved up so much, but directionally longer term there is no big story.

Among NBFCs, we own M&M Financial because it is a good rural play and it benefits from M&M doing well. The cost of funding is relatively benign and they have got a very high capital adequacy ratio but besides that nothing much.

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