Axis Bank offers best return potential among other large private sector banks: Sandip Sabharwal

"So for a liquor ex of beer, I think the story is still not so clear because demand was subdued and input prices remain elevated and would remain elevated for some more time given the dynamics of both the spirit supply from the sugar sector where overall production estimates of for sugar can have been cut substantially as well as grain availability and prices of grains," says Sandip Sabharwal, asksandipsabharwal.com.

The liquor space and for last two quarters numbers have not been great either for Radico or for United Spirits. United Breweries also, they have their own set of problems. Now that inflation is coming under check and summer is around the corner, is it time to go back into liquor stocks, especially United Breweries, it is into beer?
Yes, UB beer should do well and that is typical of the summer demand and if there is a hotter summer then beer will do much better and that is the reason why people are also bullish on AC fans and other beverage companies right now. I would think that for UB the story could be strong only issue which most investors do not realise with liquor companies is that their pricing is highly regulated by the government. So it is not that if the raw material prices move up, they can just go in and increase prices. So each stage requires approval from government which is long drawn and to that extent that impacts and many of the governments have been very reluctant for some reason to give price hikes especially for liquor companies and that is what is impacting their margins.

So for a liquor ex of beer, I think the story is still not so clear because demand was subdued and input prices remain elevated and would remain elevated for some more time given the dynamics of both the spirit supply from the sugar sector where overall production estimates of for sugar can have been cut substantially as well as grain availability and prices of grains.

Get in a view from you on Mahanagar Gas. Given the fact that the company is in focus largely on that acquisition Rs 531 crore do you believe it is going to be an incremental positive? And if you do not track this one specifically within the entire space is there anything that stands out?
Yes, gas companies I have not been looking at lately but just as a comment I believe that the fall in gas prices especially globally LNG supply etc. and all that supply increases as well as fall in prices should incrementally be positive for these companies. But on a stock specific basis I do not have any view.

What will it take to scare the bears?
Bears will be scared as the markets move up so that is very simple as bulls get scared when the markets fall down. So I think bears will be scared earlier than people expect.

Quite a bit of battering and bruising when it comes to the Adani names are you finding any merit in investing at all?
No I do not even look at that group to invest in actually. So I am looking at it more from market stability point of view.

Axis Bank and the Citi Credit Card business acquisition is over, however, they also said that we are paying less because of the total truncated value of the franchise. What does that mean for Axis Bank because in the near term the acquisition has gone through they do not have to raise capital?
Yes, they do not need to raise capital and I think the customer sort of attrition has been in line with expectations so I do not think it is a negative. I think some of analyst got concerned because they will need to do some goodwill write off etc. which is in any case non-cash so it does not matter so much. And on valuation it is the cheapest large cap bank with similar dynamics to most of the other banks now after a period of difficult time so I would think that I would be positive on Axis. I would think that from a percentage gain perspective if we combine ICICI, HDFC Bank, Kotak Bank and some of the other larger private sector banks in terms of pure return potentially Axis offers the best return potential.