Raunak Onkar, Co-Fund Manager (Equity) & Head Research at PPFAS Mutual Fund in an interview with CNBC-TV18 shared the rationale for holding certain stocks and sectors in their funds.
Sharing the rationale for selling their holdings in Maharashtra Scooters, he said, “We have been shifting some of our holdings in Maharashtra Scooters to Bajaj Holdings, the other holding company of the Bajaj Group. The reason is that Maharashtra Scooters dominates the underlying in Bajaj Finance, whereas we get an exposure to the insurance segment of Bajaj Finserv and Bajaj Auto by buying Bajaj Holding. Being the larger and more liquid stock, it is also easy to purchase that and stay liquid in the portfolio as well.”
With regards to the outlook autos, he said since we bought more of Bajaj Holding, we have added more to the auto sector holding as the underlying is Bajaj Auto. However, if you look at Suzuki, Hero, even Bajaj Auto or any other two wheeler company in India, for a long time we had a longer period of growth which made people forget that this can also be a cyclical industry. So, if you are entering a cyclical industry you need to accept that there will be some time during the holding period that the industry volumes and profitability will not be at peak and we have to live with that."
"The point is do you want to enter when there is a waiting list for the cars to purchase or do you want to enter when nobody wants to buy and so the stock is cheaper. We choose to wait and we are building a position in Hero Motocorp, Bajaj, and Maruti Suzuki at slow and steady pace.”
When asked about Mahindra Holidays, he said, “The business model is a little different from a regular hotel company where they have to use their balance sheet to build the hotel. Here, the members essentially pay for the properties that they keep building and if you look at the number of rooms that they have and you value them separately as compared to any hotel business, you can get the valuations of how that business should be running as the occupancy is always higher than the regular hotel businesses."
"It is a different way of looking at consumption where you get to lock-in some customers for a long period of time and they end up paying for your capex unlike hotel companies.”