Saurabh Mukherjea, founder of Marcellus Investment Managers, on Tuesday, said that GMM Pfaudler is on its way to becoming a multi-billion dollar franchise.
“Three years ago, when we first started buying GMM Pfaudler, it was a smallcap and now it's on its way to becoming a multi-billion dollar franchise. Similarly, franchises like Galaxy, Fine Organics Industries, Alkyl Amines Chemicals - we put a heavy premium on companies that are constantly innovating, spending on research and development (R&D), spending on growing their businesses and helping our clients get rich,” Mukherjea said.
On two-wheeler space, he said, “The demand pickup for auto at this juncture, the cycle is pretty decent, and I am sure two-wheeler manufacturers will participate in auto recovery over the next couple of quarters. So I don't have that much concern about the sector struggle from a cyclical perspective, but the structural story on internal combustion engine versus electric vehicle (ICE versus EV), I don't think we have got a clear view on it in Marcellus.”
According to Mukherjea, recovery coming through in the financial space is evident in Q2. “We will choose to stay with companies that have shown they can hold their nerve over the last 10 years and stick to high-quality lending as economic recovery kicks in, which is in the next couple of years really,” he said.
Talking about his recent report released in November, Mukherjea said, “As raw material price pressures kick in, the companies that don't have pricing power, the companies that have second rung players, don't have the greatest brands, the strongest distribution system, that is where the margin pressures will be most acute. So whether I take a Titan, Pidilite, Asian Paints, GMM Pfaudler in our smallcap portfolio, a recent addition in our midcap portfolios is Grindwell Norton - these companies have shown over the last 5-10-15 years that they can pass on input cost increases to their clients and that’s what we want from consistent compounders, the ability to not just grow topline in an economic recovery but also to protect operating margins.”
Therefore, said Mukherjea, the firm continues to remain positive on market leaders like Asian Paints and is keenly watching the progress made by Bajaj Finance and HDFC Bank in the payments space.
For the entire interview, watch the video