We are transforming our productivity, our global reach and our speed to aid growth in API business. We are also on a digital transformation and modernizing supply chain network. This will make the business stronger and I can foresee double-digit growth going forward.
Globally, people want to diversify their supply chains and are looking at alternate sources. This is an opportunity for all of us in India to go back to the old days where we were fully vertically integrated and that will certainly add margins to the business.
As you talk to more companies on the conference call, they are saying that demand is significantly coming back from rural India, tier-III, tier-IV is reaching its way back to metros. Unfortunately unlike China or the US we have got very few listed plays in India as of now. Maybe over the next three-five years we will see another 100 companies IPO in India. There is a very limited choice. That is also to some extent driving up the valuations of the existing listed plays because there is a very few pool of stocks to choose from.
In February, the total corporate stress in the banking system was 3.8 percent of the total loans. Post pandemic, about 5.8 percent of total banking credit to the corporates were the borrowers who were stressed and found it difficult to service their loans. This was the bottom of the exercise looking at about 500 top corporate.
The moratorium as of end of July was 40 percent. As the collection efficiency improves in the month of August, I think we will have much lesser people in the moratorium. Our cost of funds has been coming down sequentially for the last few quarters. In the last quarter, we were able to reduce by 20 basis points to 7.6 percent.
The demand for cement until July was much better than expected by the industry. Coming August, I think a little bit of depression because of extensive monsoon. In another coming 10-15 days the demand should be back into shape. There is labour shortage and some sand shortage that will be overcome once the monsoon subsides and labour should come back post-Diwali. In the very near future, I think the demand should be back.
The international demand for steel has picked up. Entire South-East Asian countries and European countries are buying steel as consumption increased post-COVID after the construction activity restarted. Indian economy is coming back on wheels. So, I think from here till March 2021, things should be better.
VR Sharma, MD, JSPL
I maintain my view that while in the short term, especially in large-cap, it looks like a lot of stocks and sectors look fully valued, there are still some pockets of reasonable or undervaluation as well. This is because the averages always hide more than they reveal. From that perspective, I maintain my view that we can invest about 50 percent of fresh flows at the current level and the rest should be staggered over the next 3-6 months.
Sandeep J Shah, Managing Partner, Motilal Oswal Pvt Wealth Mgmt