RBI has to come out with guidelines for banks’ moratorium books: Hemang Jani

The way each company is showing this moratorium book and the numbers -- right from NBFCs to the banks -- I think there is a need for the Reserve Bank of India or some agency to come up with some kind of guidelines, says the Equity Strategist , MOFSL.

Lots of data points to look into but let us first start with earnings. Reliance’s earnings have been postponed now to 30th July. We are going to begin by reacting to Axis as well as Unilever results. What did you make of Unilever’s numbers given that 80% of the portfolio has managed 6% growth? Is that a remarkable feat?
Absolutely. The numbers show that there is a beat on the sales EBITDA and PAT in the most challenging environment. There could be some additional benefit because of some channels not operating well in March and that is really coming back. But despite that, what they have achieved in terms of the numbers where 80% of the portfolio is growing at 6% in this quarter despite the lockdown impact is quite remarkable. Some of the other categories like skincare are also showing signs of recovery.

On the rural demand side, the indications are that we might see much better monsoon and that could lead to a much better growth outlook for the next few quarters. In this kind of an environment, here is a company which despite being of a very high scale, is showing remarkable growth even compared to some of the smaller companies which is giving a lot of comfort.

We continue to remain positive on Hindustan Unilever from a medium to long term perspective, encouraged by the robust earnings growth potential beyond the near term as the portfolio execution strategy is implemented. There are a lot of synergies in terms of merger with GSK Consumer and the overall growth trajectory is working out to be much better than what it was three years back. We are extremely positive and we have revised our price target up to Rs 2,550 which means there is a 10% upside from current price point.

Would you revise your upside target for a stock which is richly priced? On the institutional side, post the Glaxo deal, the appetite could really be limited. What is the fundamental logic in revising the price target when HUL has seen large supply because of the Glaxo deal and since the valuations are supportive?
The company’s earnings growth in the last three years is 17% versus 12% over the last 10 years. We are looking at a 5% increase in the earnings growth and this is happening in an environment where the overall earnings growth environment is tepid. There is a weak mid and single digit earning growth posted by many companies including smaller companies. Since HUL has the ability to show growth in a difficult environment with extremely good analytics and execution ability and successful implementation of strategies, people are likely to prefer these companies in the current environment.

How should one read into the Axis Bank moratorium confusion? The management first said it is 9% but the fine print and the calculation is dramatically different. How has the moratorium moved for them?
The way each company is showing this moratorium book and the numbers -- right from NBFCs to the banks -- I think there is a need for the RBI or some agency to come up with some kind of guidelines. Our understanding of the Axis moratorium book is that there was a big surprise and from 22% it has come down to sub 10%. But when you look at last June, 25% of the people have not paid. If you consider that, it looks like the actual book is 15%, which is not bad but what is questionable is the way and the manner in which people are showing the moratorium book and how the market would probably react to it,

There might be a case that in the subsequent quarters, this number may look totally different. This is a contentious issue for the banks and NBFCs and we need to come out with a set of standard practice so that investors are in a better position to take a call.