Samir Arora, founder & fund manager, Helios Capital, is of the view that the Evergrande issue is unlikely to spiral into something very big at this stage. But one should not look at every big event as nothing, as it had its impact for a day or two and it slowed down China a little bit as well.
In an interview with CNBC-TV18, Arora said, “However, China itself, if you look at all the sectors they have attacked, and some now which they are not attacking directly but it has happened because of control on real estate prices. But before that, education, then technology, casinos, even social media, and in real estate not letting people discount their property prices, it is building up there and it affects them a little bit. It looks like a self-contained thing and it is not in any way a Lehman-type event, which was much more integrated with markets and more global. Here, it is there and good for them.”
About the Zee-Sony deal, he said, “I owe a lot to Zee in my career because it was my first 100 bagger but I don't own it now and don’t plan to own it. It is very good if this deal happens. But I don't think it is a big stock move opportunity because they are saying that Sony is paying some $1.5 billion to increase the stake in the combined entity by around 14 percent. Therefore, they will own 53 percent of the company, which means that the other side, which is the Zee side is being paid $700 million effectively, to increase the stake by 14 percent of the combined company. That means the combined company is being valued at something like $5 billion or $6 billion and in that case, it is lower than or equal to current Zee price.”
“However, there will be obviously synergy and other things, and the management will continue. But otherwise, I don't think it is anything more significant. If one were to look at global media stock prices broadly they have all underperformed the market one year, year-to-date, five years. So, it is an event for today, and it may be worth another 10 percent but after that, this sector is being disrupted and you can try and do new things but it is not a straightforward sector. Moreover, at least today, the premium is not very significant,” he further mentioned.
On financials, he said, “Kotak, we used to own 5 percent of the bank in 2001, HDFC Bank since IPO, in IndusInd Bank we were there for eight, nine years, and then we sold and we have bought it in one of our funds. Basically, we like the idea of private sector banks and the good guys have taken their hits. The main thing is that they have not been rerated unlike some other parts of the market and according to us, valuations matter.”
On ITC, he said, “We don't have it and I don’t plan to have it but it all depends on what the market is expecting. If you read what people are saying, it makes no sense or will they spin off the consumer business and therefore have higher value and unlocking, that cannot be done simply because the whole idea is to drown out the tobacco revenues in a combined company. That is the whole purpose of doing these other things so that over time one part is not seen as purely a tobacco company and that is why you go into hotels and you do other things to make the overall business not look like a tobacco business.”
Arora further mentioned, “According to me, it cannot and should not be separated because otherwise, that part of it would really lose because many people are against so many companies because of what they do and not because they are good or bad or they are compliant on saving water or something, but just because of harmful products which is in black or white. Maybe ITC could have been bought for a value trade but they are growth guys and so don’t look at these things.”
Arora earlier was of the view that Vodafone Idea would not be allowed to fail, so when asked about his view on that and the entire telecom pack after the announcement of the relief package, he said, “I would think that it will not be allowed to fail, Vodafone is not putting even $1 in that, because there is actually no benefit given to them, all you have said is that you can survive. They have been given no benefits simply because the bank may not have been willing to finance, so the government is saying, we are giving you this loan, you pay us 8- 9 percent interest, which in theory, if they had been able to get loan would have been plus-minus 1- 2 percent here or there. I think Bharti Airtel has done a good job by saying that we will also not pay even though they have the ability to pay, because they might be thinking that one day, four years later, what if some AGR dues are waived by the government, then, if you've already paid your dues, you will not get anything back.”
For the full interview, watch the accompanying video