Midcap story is the playpen of India which FPIs avoid: Ajay Srivastava

"Investors have choices built for them you do not have to choose, the universe is so small that you work with it and it works very well. One does not have to do extensive research. So four power players, two hotel players and three defence players and you are done with a portfolio of nine," says Ajay Srivastava, CEO, Dimensions Corporate.

It has been a good June and July for you and you made a lot of money?
God is kind to older people and not only to younger people and start-ups.

Are you calling yourself old?
Almost reaching dinosaur stage.

So how has the old man made money?
It has been good because of some of the sectors which were the most surprising; one sector which has made the maximum money for us is the sector where I never invested for 20 years and that is the hotel industry. After paying out the kind of money I was paying in the last couple of months on room tariffs and events in December-November, we have been pretty large on hotels and that is one play which has done well.

Defence continues to be extremely good at this point of time. Smaller consumer companies have managed absolutely fantastic rerating. All the plays that we see so far are what I call a good playpen for Indian investors. These are the non-FPI driven plays because there we do not go through the issues of supply hitting the market suddenly and by and large thanks to RBI, with negative interest, the demand for equities remain strong.

The midcap story is the playpen for India where FPIs are not there..It has become a happy hunting ground for all investors. One need not worry about the largecaps at this point of time. There is enough action in spaces where FPIs are absent like hotel stock, power stocks, defence stocks and even consumer names. Four big sectors delivered very well for us.

What do you like in defence, hotels and consumer stocks?
The good part is there are not many choices in defence. I do not want to name the stock but there are not many choices and unfortunately they are all PSU stocks. Sometimes, we have to buy a PSU which we should not normally buy but in this case, maybe make an exception because there is no other choice. There are only three stocks so nothing to look at.

In the case of hotels, there are only two stocks at the end of the day. This is so strange because I do not call Oberoi a great hotel stock because they are not expanding anywhere. They have never made money at the best of times. They are making money but they are not expanding significantly. So two hotel chains, three defence stocks and four power stocks!

Investors have choices built for them you do not have to choose, the universe is so small that you work with it and it works very well. One does not have to do extensive research. So four power players, two hotel players and three defence players and you are done with a portfolio of nine.

You are done with the portfolio of nine but what about number 10? Also what about consumption? Today crude is sub $90; what is the view on crude related sectors and consumption in specific?
The consumption sector was getting hit because of inflation but we were not factoring in the fact that a huge movement is taking place from unorganised sector to the organised sector. The shoe companies are the biggest gainers in this market because the unorganised sector is literally dying in this country and therefore the economy may not be growing, crude could impact, inflation can impact purchasing but the movement from unorganised sector to organised has been wonderful.

Look at kitchen appliances, shoes, apparels – three large sectors that have gained so much traction at the smaller level. Then there are niche healthcare companies.

I think oil is a worry but these companies are doing smarter thing and instead of reducing the prices for inflation hit customers, they are attacking the customer segment of the unorganised sector and in the last few years, everybody is gaining share from the unorganised sector. Even the economy is growing 4% to 6% and therefore the branded smaller companies, a renamed shoe company etc. have done so much better than the rest of the market because they are seeing a huge demand transition and they do not need to worry about economy growing or inflation or oil or anything of that order.

We understand you are looking at land and buying land in exotic places. Tell us more about that?
If God is kind, you should be able to afford it. You can buy land. There is a limited stock of land in the world and in India it is so limited. stock as you can see what is happening there.

I have started investing in the most undervalued segment. The tea industry is sitting on hundreds of hectares of land and valuation is less than even Rs 100 crore. Forget the tea and develop an eco resort, develop townships, develop the north eastern belt. That land could be worth maybe Rs 1,000 crore.

It could be a long term bet but I think the tea industry offers the best real estate bet if you ask me in this country, something that textile industry did for Mumbai. The northeast is going to see a huge upside from the tea industry. The valuation that you are getting from some of the companies that we have invested, I cannot name it but he has done five buybacks in six years. Can you believe in the kind of cash flows coming through? And they sit on 200 hectares of land. It is going to be a huge play at this point of time. It will take its own time to mature but one cannot go wrong when one is buying hundreds of hectares of land in a profitable company at less than Rs 100 crore valuation, You need patience but you would not be wrong.

So where else have you bought land or is that the only theme that you are looking at, in the past when you have come of course you talked about InvITs and REITs too.
It has worked so well in Goa. It has beaten all stock returns with no risk. Delhites are right sometimes, we may be crass but we are right sometimes and I think it works well. But having said that, on a serious note, people have ignored the power of REITs at their own cost because those have given the best return in the last two years including all the stocks combined.

Every quarter they have got a 40% appreciation in value and they continue to pay you quarterly at the rate of 9%, 9.5%. These are fantastic and the best part is they are so liquid that the moment you want to sell and park into equity, it can be done almost instantaneously. You got to balance your portfolio and these have done well.