Re: {LONGTERMINVESTORS} Must read Interviews & Columns - Thread
Rajesh Desai
Won't be afraid to borrow and invest in Indian equities right now: Rakesh Jhunjhunwala
By ET Now | 11 Jul, 2013, 09.54PM IST
Not afraid to borrow & invest in Indian equities: Jhunjhunwala
The risk-reward ratio is in favour of Indian investors, but the market is unlikely to give huge returns for the next two years, he admitted.
NEW DELHI: Observing that retail ownership of equities is at the lowest level, Rakesh Jhunjhunwalaof Rare Enterprises told ET Now that the markets are witnessing unseen pessimism. "I have never seen such dislike for equities, the macro situation is precarious," Jhunjhunwala said.
The risk-reward ratio is in favour of Indian investors, but the market is unlikely to give huge returns for the next two years, he admitted. "There is a lot of uncertainty in Indian equities, the valuations are unpredictable," he said. "The current valuation of Nifty stocks is unbelievable," Jhunjhunwala added.
Jhunjhunwala doesn't see the Nifty falling below 5500 levels and advises investors to put their money into individual stocks and not the market as a whole. "The current market is offering a lot of buying opportunities," he said. "I am currently long on Indian equities," he added.
"I recommend looking at companies with good corporate governance & debt profile," he said. According to Jhunjhunwala, the Indian IT sector has matured and will offer good returns.
While Jhunjhunwala is bullish on the agricultural sector, he expects manufacturing companies to go up in value terms. He feels that investors should enter through SIP route.
Commenting on specific stocks, Jhunjhunwala said that he won't be surprised if Lupin reports good earnings growth. "Rupee depreciation will boost Lupin's earnings growth," he said. Asked aboutTitan IndustriesBSE -0.48 %, he said that the return on capital employed for Titan is likely to collapse.
Jhunjhunwala expects Nifty stocks to give 5-10 times returns in the long term. "It is the best time to buy equities from a 4-5 years timeframe. I won't be afraid to borrow and invest in current market," he said.
"I expect India's macros to improve in the long-term," he said. We need more steps, other than curbing gold imports, to improve the current account deficit, he said.
Not expressing any concern over the imminent entry of new banks in the sector, Jhunjhunwala said, "India's is the most un-banked country in the world." "PSU banks are available at attractive valuations," he said.
Jhunjhunwala is of the opinion that the US Federal Reserve Chief Ben Bernanke will not put a stop to quantitative easing. "Bernanke is confusing global markets, we will continue living in a world of easy money," he opined. The US & economy is like it is on 'steroids', he added.
Jhunjhunwala feels that emerging market (EM) economies are facing structural imbalances. "We have seen a moderation in growth of EM economies," he said. He expects non-commodity EMs to perform well going ahead. "The commodity super-cycle has peaked," he said. "Except for oil, most commodity prices have fallen sharply," he substantiated.
--
CA. Rajesh Desai
Rajesh Desai
TELECOM
Reliance Jio’s entry to liven up spectrum bids; Bharti, Vodafone, Idea, RCOM and Tatas too in fray for auctions
NEW DELHI: Reliance Jio Infocomm joined top telcos Bharti Airtel, Vodafone India and Idea Cellular in applying to bid for spectrum in auctions beginning February 3, setting the stage for a grand fight, especially in the 900 Mhz band. Other applicants include RCOM, Tata Teleservices and Aircel, several people familiar with the matter said. In a statement, Telewings, the Indian unit of Norway's Telenor, said that it too had submitted its application. January 15 was the deadline for applying to take part in the auction of pan-India bandwidth in the 1800 Mhz band, and airwaves in the 900 Mhz band for Delhi, Kolkata and Mumbai service areas.
Auctions Critical for Bharti, Voda
January 15 was the deadline to apply for taking part in the auctions for airwaves in the 1800 Mhz and 900 Mhz bands. The auctions are critical for India's top two telcos Bharti Airtel and Vodafone India, which need to win back airwaves in the 900 Mhz band to continue offering telecom services to subscribers without disruptions. Bharti holds airwaves in the lucrative band in Kolkata and Delhi. Along with those two cities, Vodafone also holds spectrum in the band in Mumbai.
"We haven't opened the bids to see the details. Most of them have applied in both 900 Mhz and 1800 Mhz; one or two may have applied for spectrum in the 1800 Mhz band only," Telecom Secretary MF Farooqui said. "We will be able to exceed the Rs 11,343-crore target."
People familiar with the matter said Reliance Jio, the only company without any current services to be entering the auctions, as well as Bharti Airtel and Vodafone India have applied to bid for bandwidth in both 900 Mhz and 1800 Mhz bands. The main battle though will be in the 900 Mhz band, because it is more efficient and has been put up in lucrative circles, said BK Syngal, former chairman of VSNL and currently consultant at Dua Associates, a telecom consultancy. "It is the band that will offer the government some real money, when companies whose licences are coming up for renewal bid aggressively to acquire spectrum," said another analyst, asking not to be named. The government has budgeted nearly Rs 41,000 crore from airwaves in the current fiscal year, including from the annual spectrum usage charge (SUC) and one-time bandwidth fee, hoping to use the funds to rein in fiscal deficit at 4.8% of GDP. Two previous rounds of auctions - in November 2012 and March 2013 - saw poor responses, garnering only about Rs 12,000 crore as operators mostly stayed away citing high floor prices.
For the latest round, the government sharply cut the starting price in both 900 Mhz and 1800 Mhz bands to attract wider interest among telcos which need airwaves to offer more and more data services, which is expected to drive the sector's growth in the years to come. The applications can be withdrawn by January 27. The contentious SUC issue could, however, trip up the auctions if it isn't sorted out before the sale starts. "Everyone is waiting for clarity on SUC. We can take a call (on bidding) only when clarity is there," Bharti Group Deputy Managing Director Akhil Gupta told reporters separately. Bharti, along with Vodafone, had warned they may be forced to stay away from the auctions if a flat SUC regime wasn't levied.
Telcos pay between 3% and 8% of their annual revenue as SUC to the government. GSM operators, including Bharti Airtel and Vodafone India, have demanded the government should implement regulator TRAI's suggestion of a flat SUC - 3% for auctioned bandwidth and 5% for airwaves given at government-set rates. If accepted, Reliance Jio, which holds a broadband wireless access licence, will need to pay higher than the 1% it currently needs to pay now and has opposed the GSM players' views. Many blame the differences as the reason for the latest 10-day delay in the start of the auctions.
The telecom department is trying to find a middle path, also keeping in mind that any uniform SUC could mean lower revenue for the government. Farooqui said the telecom department expects to sort out the issue shortly. The issue notwithstanding, there is a general mood of positivity surrounding the sale process, say analysts.
"These auctions should see much more active participation than the one in 2013," said Mohammad Chowdhury, leader (telecom) at consulting firm PwC India. He said the expiry of licences in the Kolkata, Mumbai and Delhi circles in November 2014, coupled with lower floor prices, greater regularity clarity and growth in data services are the key reasons why the upcoming auctions should be successful. Bharti Airtel, Vodafone and Loop Mobile, which were among the first to be given airwaves in the 900 Mhz band in the three circles when the sector was opened up to private players in 1994, would have to give up the bandwidth when their licences come up for renewal in November 2014.
This would force them to go all-out during the auctions to win back the licences, but they could face a stiff contest from Reliance Industries' unit Reliance Jio Infocomm and Idea, which could be eyeing frequency in the same band. Reliance Jio needs alternative, better-quality airwaves to offer 4G services as its current 2300 Mhz bandwidth is considered less efficient. Loop, which has been facing financial troubles, hasn't entered the contest at all. In a statement, Loop said it has moved the Telecom Appellate Tribunal, appealing against the government move to put up its bandwidth in 900 Mhz for auction. The company said it has the right to an extension of its licence for another 10 years by paying a market-determined price for the airwaves.
[Source: Economic Times]
Impact:
Reliance Jio’s entry into the spectrum auctions can be a significant threat, if it choose to bid aggressively in the 900 MHz band space. As there is limited spectrum in the band, it may result into higher final prices of the same. Higher spectrum prices in 900 MHz band may remain negative for the industry in long run. However, availability of sufficient spectrum in 1800 MHz band and its lower efficiency is likely to restrict the growth of spectrum prices in this band. Furthermore, clarity on Spectrum Usage Charges (SUCs) will remain the key to determine the final participants in the auctions as they have an option to withdraw their bids by 27 January 2014. The intensity of higher spectrum prices impact, which can eat up a significant part of telcos bottom lines in long run, is expected to remain lesser for larger operators than their peers. As a result, Bharti, Vodafone, and Reliance Jio may remain outperformers within the sector. In addition, Bharti’s pacts with Reliance Jio, its Indus Tower venture, and African operations are anticipated to further lessen the adverse affect of this phenomenon. With this, we continue to remain positive on the stock for a long term perspective.
Note: The circles and spectrum class wise bidding is yet to be known as the bids are not opened and details of the same will come in due course. As a result, the view is based on Mr. MF Farooqui’s statement that most of the players have applied in both the bands.
Regards,
Team Microsec Research
CA. Rajesh Desai