It has been five days since the budget came out and since then markets have been in good stead. In fact, it was a very consumption-led budget, especially the tax exemption for people with income of Rs 12 lakh per annum. With that, how do you see the consumption boost coming in? And as I can see in your holdings, I do not see any major consumption, FMCG name in your holdings. Time for a portfolio rejig perhaps, I mean given the valuation comfort as well?
Sachin Shah: So, firstly on the budget, so, I personally feel that this taxation slab that has been changed, it is a very transformational thing. It is structurally extremely positive because if you think about it today an annual income of up to Rs 20 to Rs 25 lakh annually will have an effective tax rate of just about 10% to 12.5%. And to my mind, it is very-very palatable with most of the people. So, they will actually start disclosing full income. Today, there are less than probably four crore people who are paying taxes. This number can actually multiply and probably become 10 crore plus people in a very short time of maybe just about five to seven years.
So, structurally, this is very positive. And to add to this, if you think about it, there are double incomes in a household. So, at an annual income of almost 40 to 50 lakhs you will just have effective tax rate of anywhere between 10% to 12.5%, so that will have a tremendous amount of positive effect, so that is one. Second, in terms of the consumption, to your point, to our mind this actually will actually lead to a lot of discretionary spending.
And from that perspective, autos as a space we believe will gain one of the most thanks to this budget and thanks to the tax savings that the individual investors or they will have. So, we have a very decent allocation to auto and we believe that should be one of the big beneficiaries.You say autos are going to be a big beneficiary, but give us a lowdown, give us your sense on other sectors as well because you had the likes of capex related stocks, you had defence, infra, you had railways that were in focus in the budget, some good, some bad takeaways for all of these sectors. What are you making of these sectors and how are you positioned when it comes to all of these sectors?
Sachin Shah: Well, actually, at least in our flagship PMS and the AIF strategy capital builder, we do not have too much of exposure to most of these sectors. We are largely focused on the private sector banking and we clearly believe some of the leaders will do much better as we go ahead. I mean, the results were very good for some of these large leaders as far as the private sector banking is concerned.
Autos, I already mentioned, they should do quite well. Even IT stocks, we believe should do much better. We will also have some benefit of the currency and US economy bouncing back very strongly, that is the expectation because of the confidence that the US Inc corporate leaders have at this point in time.
And, of course, pharma, we believe that in terms of the pharma, we have very decent allocation to the CDMO, cramS space and we believe that business should also do quite well. So, these are three or four secular sectors where we have very decent exposure and we feel we are in a good position at this point in time to deliver decent returns.
I can see that Zomato is one of your top holdings. I mean, what do you make of this space because this is one space that is absolutely hot and perhaps also very-very competitive because we saw the results coming out for Zomato and clearly there was a miss as far as the profitability was concerned on the back of the competitive intensity and now should Zepto also list on the stock exchanges. It is already eating into Zomato and Swiggy‘s market share. What do you make of this space as of now? How bullish are you on Zomato going forward?
Sachin Shah: So, we have been owners of Zomato for now more than two years and we still believe that it has long legs. Two things is that one is of course the entire food delivery space and also the quick delivery space which is what the Blinkit is part of Zomato.
I think both these businesses are in a very-very strong position. I am not sure if they are losing market share as you mentioned. My sense is both of them are either gaining or holding on to the market share and Blinkit is at a very-very high distance from the next competitor as far as the market share is concerned.
Also, in terms of the miss of the profitability as far as Blinkit is concerned in this current quarter, from whatever we could read the results, it is more to do with the very accelerated expansion of new stores.
So, what they were planning to do in the entire calendar year 26, I think they would do it in calendar year 25 itself and that is that acceleration which sometimes brings uploaded or upfront cost which is probably the reason why there has been some miss in terms of the profitability but if you look at the growth of the business, if you look at some of the gross margins or those kind of things, they are actually on a very-very strong footing.
Most important thing is that this entire sector has a tremendous amount of tailwind because the consumers have completely embraced this sector, if I can use that word. They have gone beyond acceptance. They are actually completely embraced.
We generally tend to see that businesses grow very fast and market leaders like Zomato and Blinkit tend to have a disproportionate share as far as the profit pool is concerned and that is something what we believe should play out over the next probably 12 to 24 months.
Article by:Source:
