Sridhar Sivaram, Investment Director at Enam Holdings, saw that the valuation gap had significantly widened in October-November.
“We saw that the process for privatisation was moving at a reasonable pace despite COVID-19. So, the feel that we were getting is that the government is pushed to the wall and they have no other choice. We were sure that just this whole process of divestment the way they were doing which is through an ETF is not going to help,” he said.
"The risk reward was too much in your favour," he added.
According to him, Bharat Petroleum Corporation Ltd (BPCL) would be like the testimony. “If the government is able to successfully complete the BPCL privatisation, our view is that the entire PSU basket gets rerated,” Sivaram mentioned.
“In our view, BPCL and Container Corporation of India (CONCOR) are possibly the best two companies currently that are being offered,” he stated.
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"Stay away from PSUs has been my view for 20 years. They just erode well and that has been the case for 20 years. It is just that I personally have changed my view from being a staunch growth to a slight tilt towards value that too because there is a trigger. When you talk about power PSUs, yes, they have eroded well, we know it is very well documented on the issues of the power sector. Some of them have got resolved, some haven’t but if you see the large power sector plays from a price to book multiple or from a dividend yield standpoint, they look quite attractive,” he pointed out.
“There are companies where the earnings visibility is much stronger, there are companies where earnings visibility is lesser but our view is that if one-two privatisation happens, the entire basket does get rerated,” he added.
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