For the consumer point of view, it has been a big relief that railway passengers can do more bookings at this point in time. But what could it mean for IRCTC because IRCTC has always been flooded with a number of bookings with respect to Tatkal as well. What could the latest enhancement of the number of bookings per minute mean for IRCTC financial metrics?
Amnish Aggarwal: For the IRCTC stock or the company in particular, this technology upgradation will enable them to handle much more traffic in their systems or bookings. But it remains to be seen what is the limiting factor. Is it the technological capability to handle the number of booking or is it the number of the overall seats in trains that are available or the number of passengers booking the tickets online?
If we increase that capacity five times, it does not necessarily mean that it is going to have a very sharp jump as far as IRCTC revenues are concerned because for a revenue jump, more seats have to be available for more consumers who will start booking online. Will it have a positive impact on the earnings? The answer is yes, it will have a positive impact, but it might not turn out to be immediate. It will play out in the longer term. It will remove the bottleneck for growth, but it is not going to be a very big game changer that boosts numbers dramatically.
Other than that, where do you see a question mark on what earnings are going to look like in the upcoming quarter?
Amnish Aggarwal: We are yet to freeze our numbers for the quarter because it is just closing by but whatever I am learning as of now, if you look at say some of the names you talked about and look at the consumption space. So, in the consumption space, first of all, there has been lot of impact of the weather because we did not have the intense summer like what we had last year. So, in the consumption space – the companies in certain segments of the consumer durables or some companies catering to the summer demand – particular segments are going to hit those specific companies.
Similarly, if you look at the broader staple space, we are not learning of any major acceleration over there. There is some bit of improvement in demand which is happening over there. If we look at other segments in the broader consumption – be it retail or QSR, it has become very consumer, and very company and segment specific and there is no broader uptick in the consumption visible so far. That is one particular sector or the segment where we might see some improvement, some stability in the margin, but not in the entire broader consumption space
Secondly, it is something which does not look that exciting as of now. Among the segments which will continue to do well, one could be capital goods because last year we had elections, so some sort of execution delays were there in the first half and that will continue to do well. Travel continues to do well. I believe even pharma, healthcare, and hospitals are another segment with reasonable levels of numbers coming in. So, they are not likely to change fundamentally in this quarter than what we had seen in the Q4 as far as your sectors are concerned. There are specific sectors which were doing well earlier. They will continue to do well, but there are not likely to be any big changes as of now. We might have to wait for say another quarter till the time the full impact of the tax cut or the monsoons actually flows out into the system.What is your view on the power space? More data now seems to be indicating that the power demand which was expected to go higher in May and June has not happened. New policies in the state of Maharashtra also means that the power prices or the power realization for merchant power companies is unlikely to move higher. Is it time to check out of power stocks, power utilities, or power producers, or for that matter power transmitters?
Amnish Aggarwal: Yes, I do not think it is a structural trend. For example, as far as your demand is concerned, this time around we had a very patchy summer. Patchy in the sense that in May, even in the western or the southern parts of the country, monsoon arrived 15 days earlier than usual. Even in the northern and the central parts of the country which usually have intense heat waves, we had continuous rains every week or 10 days. As a result, the power demand this year has not moved up like it used to.
It has been happening from the last two to three years, but definitely as the consumers are upgrading, as the technological systems are upgrading, more your usage of AC, more power appliances and all, the demand eventually is going to go up in the longer term. Now, as far as the other regulatory aspects are concerned, they continue to come. There are two ways to look at the power sector, one that it will give growth in the longer term.
But as far as buying the stocks are concerned, usually in between, there are one or two bad quarters or the numbers are not that great and one gets stocks at a lower level. But given that the power stocks over the last two-three years have given you multibagger returns, now incremental returns depend upon how much growth one can sustain and the longevity.
Longevity is definitely there, but we are not in a phase where we will just take out any name, pick it up, and in the next six months we will make money. So, we will have to be very resilient. We will have to wait for the returns to play out over here. Yes, there can be one or two soft quarters intermittently which is likely to be the scenario for the Q1 of this year also.
