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    ETMarkets Fund Manager Talk: Why is Sachin Shah of Emkay Investment Managers gung-ho on Zomato?

    Synopsis

    "We continue to own large private sector banks like ICICI Bank, HDFC Bank, Axis Bank, and also Federal Bank. We are also optimistic about the CRAMS business for the next few years and have exposure to Divi’s Laboratories and Laurus Labs. The other pharmaceutical business we like is Sun Pharma for its US specialty business and market leadership in the domestic formulations business. Some of our other holdings in largecaps are in the IT sector – Infosys and HCL Tech."

    Sachin Shah-1200ETMarkets.com
    Shares of Zomato have not given good returns in 2022, but they still remain a good long-term play in the consumer space for some fund managers such as Sachin Shah of Emkay Investment Managers.

    “We believe Zomato is a perfect play on a new-age tech company and rising consumerism in India. The company is a disruptor in the food business, albeit offering a “win-win-win” solution, Shah, a fund manager with the mutual fund arm of Emkay Global Financial Services, told ETMarkets in an interview. Emkay Investment Managers currently manages assets worth over Rs 800 crore. Edited excerpts:


    What’s your view on the much talked about theme - manufacturing? How comfortable are valuations in this space and what’s the growth potential?
    During the period of 2016-2020, the manufacturing sector had to face a lot of disruptions, starting with demonetisation in 2016, GST in 2018, and COVID-induced lockdown in 2020.

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    This resulted in lower capacity utilization for most of the manufacturing capacities. But interestingly, it is during this period that companies across the sectors have tightened their belts and focused on deleveraging balance sheets, tightened working capital, and efficient operating cost structures, leading to significantly higher cash flows and very decent cash ROCE.

    In the post Covid environment, the demand has come back much faster and higher than anyone expected or anticipated, leading to a significant amount of higher capacity utilization for most of the sectors in the manufacturing space.

    These factors have created a very strong base for the overall manufacturing sector to leap-frog into the next phase of the high growth era in the coming 5-10 years.

    Any new sector that has caught the attention of your team off-late? Like fintech, consumer tech, or any other sector?
    Many of the new-age businesses are today playing an important role in the daily or even otherwise routine activities of consumers (B2C) and business activities of conventional brick and mortar enterprises (B2B). From that perspective, they are very relevant as the consumers and businesses are hooked on to those services and in fact to my mind, the consumers are queuing up over there which makes it pertinent for investors to keep a close watch on opportunities in that space.

    We are also very closely evaluating opportunities in the new-age businesses space, particularly now after the sharp correction in stock prices over the last six months.

    We have initiated our journey by investing in Zomato over the last six months. We believe Zomato is a perfect play on a new-age tech company and rising consumerism in India.

    In the Indian context, among the listed companies we believe one of the companies, which has the potential to thrive over the next decade is Zomato.

    The company is a disruptor in the food business, albeit offering a “win-win-win” solution.

    What are your top holdings, and did you rejig your portfolio recently? Any other stocks other than Zomato that you have added in your portfolio?
    We strongly believe in the power of compounding and, therefore, we are truly long-term when it comes to portfolio holdings.

    Let me help with some data points, in our flagship multi-cap portfolio strategy – Emkay Capital Builder, more than 50% of our current holdings have a vintage of more than 7+ years, and the next 30% we are holding for more than the last 3 years. So effectively, more than 80% of our portfolio is 3+ years.

    We continue to own large private sector banks like ICICI Bank, HDFC Bank, Axis Bank, and also Federal Bank.

    We are also optimistic about the CRAMS business for the next few years and have exposure to Divi’s Laboratories and Laurus Labs.

    The other pharmaceutical business we like is Sun Pharma for its US specialty business and market leadership in the domestic formulations business.

    Some of our other holdings in largecaps are in the IT sector – Infosys and HCL Tech.

    We also own some of the mid and smallcap names in auto ancillaries like Sundram Fasteners, and in other sectors like Apar Industries, Mahindra Holidays, Blue Dart.

    In the last one year, our additions have been Zomato, Federal Bank, and Blue Dart.

    How have you managed the market volatility seen this year and enhanced returns for your clients?
    2022 has been a difficult year for capital markets and extremely volatile as challenges coming from global capital markets, geopolitical tensions, US-China trade tensions, Europe energy crisis, and high energy and commodity prices have led to very choppy markets.

    Fortunately for us, our portfolios have delivered double-digit returns and outperformed the benchmark indices.

    We believe 2-3 key reasons for this outperformance boil down to diligently following our processes; upholding razor-sharp focus on quality and discipline of purchase price and a focused portfolio of 20-25 stocks, while avoiding concentration risk by adhering to individual stock and sector allocation.

    This has helped deliver benchmark beating returns in the last one year, and even more important, over the last decade on a compounding basis.

    What is your view on the automobile pack? Which are your top bets here?
    We believe the domestic demography is underplayed for the demand for automobiles in the country.

    The young and aspirational Indian will continue to drive a secular demand for automobiles in the country for many–many years.

    The other big opportunity is the global supply chain, particularly for the auto-ancillaries. We own a few auto and auto-ancillary companies like Eicher Motors and Sundram Fasteners, both companies have a decent presence in domestic markets and are also doing well in the export business.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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