Trade with caution in Nykaa; IDFC First a better bet than Yes Bank: Hemang Jani

“When I compare a Yes Bank with an IDFC First, what is coming out very clearly is that in terms of numbers and growth trajectory, IDFC First is far better placed and I do not think there is a significant variation in terms of valuations,” says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL

What do you think is happening in Nykaa? The delay with respect to crediting of bonus shares and the record date for that does not seem to have held the stock back for a long time because in the interim it was able to stem the supply. But it seems to be coming in now?
There are two-three things that are driving the Nykaa stock price. One is that we are seeing a bit of a revival in the entire start-ups space and the appetite has reversed. As we all know, the primary driver for some of these fintech companies and the startups and the platform companies was what sort of appetite is there in the US market and that is seeing a bit of a revival. Also a large part of the selling were by these investors where the lock-in period got over. That has got over and we had seen a 60-70% cut.

Performance-wise, there is nothing to write about and there is a long way to go before Nykaa or many other companies can report any meaningful performance but still they are quoting at a very high market cap of almost about Rs 52,000 crore. So there is nothing in terms of valuations; it is all about the change in the sentiment. We might see a pullback of maybe 10, 15, 20% because they are high beta companies but we do not see them as companies where you can see a meaningful growth in stock prices or financial performance. So trade with caution and trade for maybe a 10, 15, 20% move. That’s about it.

Do you have a similar for other recent listings like Delhivery as well as PB Fintech? CLSA is quite bullish on them. They have written a note this morning on Delhivery wherein they have upgraded the counter to a buy with a target price of Rs 532 and even on PB Fintech, they have initiated coverage and a buy with a target of Rs 600. Would you rather wait a tad bit?
As I said before, these are the companies which may look very exciting on the face of it but when we do a deep dive into their business model and some of the numbers which have been reported, they are far away from showing any meaningful traction and the market currently is not in a mood to give very high kind of a PE to such companies where things are not looking that great in terms of the financial parameters.

We might see a little bit of move in the case of PB Fintech. At the management conference call they were very clear that there was not much clarity about when they will turn into profitable. So, it is more about technical factors. The lock-in period is getting over leading to a sharp correction but nothing in terms of meaningful revival in the business prospects.

Not as hot as it was when we saw recovery coming out of the Covid dumps for the real estate sector, but how one should approach realty now?
We did a management meet with one of the Bangalore-based realty company, Prestige, very recently and the response that we are getting is that there is a good amount of buying interest for some of the newly launched projects that people are queuing up for. It was a law and order situation there. We are hearing similar views for some of the other key markets like Mumbai and NCR also.

Despite the increase in interest rates, the overall liking and the growth for the new project has not come down. In Mumbai, redevelopment is becoming a big theme for many of the real estate players. You also have one IPO which is launched by Keystone, the Rustomjee guys. Overall, we like the space and we think that from a two to three year perspective, there are good opportunities for players like Lodha or some of the Bangalore-based companies like Prestige and Brigade. This can be a very decent sustainable earnings related story that one can participate in.

How would you approach Yes Bank? There is capital infusion there. The banking sector outlook has changed, their ratios are coming under control and the fact that this franchise will now be backed by two big PE investors clearly means that tier one capital shortage has been taken care of?
There are two ways to look at Yes Bank. One, do we want to bet on a very low price stock where there is a lot of hope vis-a-vis the management and the capital infusion. That really plays out well. One may see 50%, 60%, 70% kind of an upside. Versus that, we have existing listed players and I am not talking about the largecap private sector banks like ICICI, Axis etc. I am talking about an IDFC First.

So when I compare a Yes Bank with an IDFC First, what is coming out very clearly is that in terms of numbers and growth trajectory, IDFC First is far better placed and I do not think there is a significant variation in terms of valuations. So depending on your appetite and the kind of investor you have to choose I would rather prefer an IDFC First because the risk is much lower and I can get 30-35% kind of an upside. In the case of Yes Bank, from Rs 15, the stock has moved to Rs 17. Everyone is talking about it but in terms of deployment and in terms of comfort, that is not looking great.