An analysis of shareholding patterns in next-gen firms like Zomato, One97 Communications (Paytm), Delhivery, FSN E-Commerce Ventures (Nykaa) and PB Fintech (Policybazaar) reveals that mutual funds have steadily increased their holdings in these companies over the last four quarters. However, the country's second-largest asset management company, ICICI Prudential, maintains a cautious stance on such firms.
In an exclusive conversation with Moneycontrol, Nimesh Shah, CEO and managing director of ICICI Prudential AMC, discussed the potential of new-age companies like Paytm, Nykaa, and Honasa Consumer (Mamaearth). He emphasised the need for a cautious approach when managing public funds, stating, "We handle the finances of ordinary people, retirees, even schoolteachers in small Indian towns. It's crucial to be prudent in our investments."
Shah stressed the necessity of these companies having a clear and executable plan to generate profits within the next three years. He stressed understanding the 'how' and 'how much' in their strategies, steering away from macro-based investment calls lacking a tangible roadmap. While these companies might not immediately meet his investment criteria, Shah highlighted the importance of profitability over top-line growth, a prerequisite for consideration in his portfolio.
On preferred themes:
Shah underlined three prominent themes unfolding in India: banking, manufacturing, and power.
He pointed to the robustness of the banking system, and well-aligned macroeconomic factors like inflation, fiscal deficit, and current deficit. With banks having largely resolved their non-performing asset (NPA) issues and maintaining strong balance sheets, coupled with corporates operating at historically low borrowing levels and efficiently utilising capital, he foresees substantial growth potential in the banking sector. Shah opined that banks with a strong grasp on credit risk management and careful business conduct are poised for success.
He also expressed optimism in Indian manufacturing and infrastructure. Despite enduring intense competition from China over the past two decades, companies that survived and thrived through this rivalry are now witnessing an upsurge in global inquiries. Shah highlighted the emergence of the "China plus one" strategy, envisioning companies expanding their capacities, which, in due course, would reflect positively on earnings.
His third specific theme, apart from the banking industry and diverse sectors within manufacturing, is the power/utility sector, citing the increasing demand for electricity and the need to augment capacities swiftly to avert a potential power deficit. Shah underlined that these sectors, including capital goods industries, hold significant potential for investment.
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