Not into specific trends; like consumption, auto: Varanium

Speaking to CNBC-TV18 TS Anantakrishnan of Varanium Capital Advisors, said he takes a stock-specific approach. Each of the IPOs in healthcare like Narayana Hrudayalaya and Dr Lal PathLabs were unique, he said, adding that there is no specific trend one can identify. There is more participation in the consumption story. “Every wants to be a part of it.”

He is not betting on specific trends. He is more into the relative value game. Consumption, auto or auto ancillary or the retail-oriented banks are sectors that appeals to him. “We have started to nibble at the building materials, in cement.

Speaking about pharma, he said that a lot depends on the company you are looking at. He is avoiding public sector banks. There is more write-offs and issues, he said.Below is the verbatim transcript of TS Anantakrishnan's interview on Prashant Nair and Ekta Batra on CNBC-TV18.Prashant: What is your view on the ICICI Prudential IPO?A: I think the franchise is extremely good. If you have a medium-term to long-term view, I think this is a company that you would want to own. It is a company which is showing return on equity greater than 30 percent, solvency ratios which are around 320 percent more than the prescribed 150 percent, you have profitability of Rs 1,650 crore odd from last year and this last quarter was about Rs 400 crore odd. So, from a franchise perspective, I think it is a great company to hold.I would tend to agree that from a valuation standpoint, it is at the top end of the range. If you look at the HDFC and the Max Life embedded merger, that was around Rs 65,000 crore odd and if you take out the embedded value of each one of these, they would be coming around 3.5 times and now it is trading at 4.6 percent. So, if you compare this relative to what HDFC and Max Life then possibly it is not too expensive at the price that it is coming.However, as your previous anchor reporter had mentioned in terms of margins, there is a difference in the margins of HDFC and Max enjoy vis-à-vis what ICICI Prudential so there would be a slight discount. So, if you compare that it is fully valued at the price that it is coming at Rs 334 but as a franchise I think it is a franchise that if we have three to five years of view, if people are coming in just for the listing in, I would think possibly disappointment but it is a long-term play and it is fully valued at 3.5 times though HDFC Max in our view from an embedded perspective is trading at 4.5 times.So, there is a call that one could take not perhaps from a one year perspective but perhaps from a three to five year perspective, then that is something which you should look at.Ekta: Talking about healthcare companies, what I was noticing is that most of the IPOs that have seen a lot of interest are these niches stories and a lot of them have been healthcare companies, Dr Lal’s of the worlds, the Thyrocare’s of the world, the Advanced Enzymes, what is your sense in terms of whether that is where the opportunity lies now and are you looking at specific niche stories?A: We take a stock specific approach, we don’t really look at a specific trend or a sector that we need to look at. It just so happens that if you look at the healthcare, some of the IPOs that you mentioned, Narayana Hrudayalaya or you talked about the others, those were unique in that, like Dr Lal was the first diagnostic kind of IPO which was coming in. People want to have, there is no way you can participate other than through the listed vehicle and people looked at taking those.However, there is no specific trend that you could identify and as far as the overall market is concerned, there are only very few places that you can actually look at because pretty much if you look at the valuation side of the picture you would see that people are typically in the consumption story, everybody is there and it is a crowded trade and so anything which is different and doesn’t seem too expensive or at an average, everyone wants to go take part in it. Prashant: Let us discuss your big ideas, big overweights across the market.A: There is no specific trend that we are observing, we are playing more relative value game because if you look at the more overcrowded sectors, whether it be the consumption oriented, the auto, auto ancillary sectors or the retail oriented banks kind of sector, pretty much everybody is positioned out there and the valuations have gone much above their averages. So, it is more a relative value game that you end up playing because of the visibility of the earnings in that space. You start nibble at some of the building materials and in that space we are looking at cement, we are seeing some early signs in terms of movements out there. Power, especially in the transmission space, we are looking at some of the names out there.And other than that, if you look at the metals space, the raw materials space, we are not seeing much to go by oil refining, the marketing margins, that story is played out. So, pharmaceuticals, it depends on the type of company that you are actually looking at and there we are quite bullish still in several names. Media, we think there are some interesting plays in there. So, rather than a specific sector, what I know we are avoiding at this stage is public sector banks. We think there is still more write offs and issues that need to come out. The asset quality review (AQR) was just the start of the identification of the issues and if you look at the earnings that just went by, there is not that much of growth that was seen. Nifty grew by 3 percent last quarter and the issue really is if analyst really have pegged it at 10-15 percent, where is the rest of the earnings going to come and we are not seeing that on the ground. Yes, there are green shoots, not to say that we are bearish. There are some green shoots out there, but you have to take a stock specific call.