Not comfortable with high leverage of Adani stocks and never bought any: Daljeet Singh Kohli

“After the deal with Adanis, Ambuja Cement straightaway went to Rs 580. At that time we were puzzled why the stock was running so high and that valuation was not giving us any comfort. Many people were saying that capacity will double and all of this, but this is a cyclical industry and this is a commodity company ultimately. So it is better to buy these things only at comfortable valuations,” says independent market expert Daljeet Singh Kohli.

Have you ventured into any of the Adani Group of stocks in this decline?
No. Since the beginning they have been always over leveraged companies with very little cash flows, most of the companies in the business were with very little cash flows except Adani Ports where there was a steady state of cash flows but that was highly linked to the economic performance. So we were not comfortable with the high leverage and that is why we never bought any of the stocks.

It is an independent company with a beautiful track record. It is not an original Adani Group company. Would you be looking at buying into Ambuja Cement because the stock has fallen from about Rs 560 to about 340-350?
Yes. In fact we have added it at Rs 325 and Rs 340-350. So that is again from Rs 325-340 levels. Before this Adani deal happened, this stock used to be trading at this level only. And then we saw there were a lot of issues with logistic cost, coal cost which kept going up and prices were not coming up for cement companies so most of the cement stocks were down. We are very bullish on the cement sector as such. Our preferred picks have always been Shree Cement and Dalmia Bharat and Ambuja is added because of the valuation comfort which came at Rs 320-350.

After this deal with Adanis, it straightaway went to Rs 580. At that time we were puzzled why the stock was running so high and that valuation was not giving us any comfort. Many people were saying that capacity will double and all of this, but this is a cyclical industry and this is a commodity company ultimately. So it is better to buy these things only at comfortable valuations. In this mayhem, the valuation has come to a comfortable level and we have taken that opportunity. It is now a part of our portfolio.

What is the best way to let us say participate in this entire 5G mega capex which is now underway?
We have not done too much work on this space on 5G and what could be good opportunities. Overall, in the automation space, we are very bullish. We have Honeywell Automation in our portfolio that we like and then Siemens is another one which has again been taking a lot of news flow on the locomotive and other things. Otherwise their automation business is also very strong and is coming up well. We are playing through these two companies, exactly with the telecom we are not doing any major thing.

In the insurance space, LIC has been under pressure vis-a-vis the entire Adani saga but other than that, if you had to pick any name from private or even general insurers, what would be your top bet?
Insurance is a very long term play, where one can look at some stocks as beneficial based on some news item but one has to keep in mind that this is a very long term play and if you want to really stay with it for a very long term, meaning three-five years, then only you should look into this space. The stocks will keep moving up and then come down within the next two days, five days only.

This is what we have seen with a lot of insurance companies including HDFC Life, SBI Life and all that. Right now our preferred pick is SBI Life because they have been consistently gaining market share. They have been maintaining the new business very well and margins meaning that the new business is coming not at the cost of margins for the company, which is a good thing for the company and because of this changes in the Budget regarding some high network policies etc there was a lot of mayhem in the stocks. SBI Life actually gave a very good opportunity also. It is even now valuation wise quite attractive. So we like SBI Life.