Government capex spending is seen to be back in March and April and that is what the macro data is suggesting, but nobody is really talking about the PSU pack right now. It is not the flavour of the market right now. Do you believe that it can be the flavour of the market going ahead, any particular pocket that is looking good to you?
Krishna Sanghavi: As a broad trend yes, PSU companies are on their own growth path. As we know in the last couple of years, the capex story is driven more by PSUs vis-à-vis the private sector till now. Those PSUs are on their way to do their capex and have a much larger balance sheet and higher profitability going ahead as and when those capex materialises. It is choosing more on valuation but broadly one looks at power on one side, you look at PSU banks on other side. Look at maybe defence and the other capex-related themes. Broadly it is good, yes, some adjustment on valuation always helps adjusting the portfolio but PSU as a pack is an interesting investment opportunity.
You have maintained your FY25 GDP outlook at 6.5% saying that it looks reasonable following the three years strong growth of 8% plus expansion that we have seen. Yesterday, Nomura slashed their outlook to 6.2%. What is driving this optimism when it comes to our overall macros. The MPC outcome is at the end of this week. What are you pencilling in?
Krishna Sanghavi: Yes, FY25 we broadly ended with 6.5%. The expectations are that FY26 we can have a similar number. One good support for this year is clearly the monetary policy stance which is accommodative. If you look at last year versus this year, both the liquidity in the system as well as the cost of that liquidity in terms of interest rates are lower than last year, the availability is higher and we have realised that monetary policy creates that additional support to the growth.
From the government side, the broad stance is pretty much similar. Yes, you are right, maybe 6.5% is a current estimate and as such based on the event which plays out, notably tariff which can be one variable and that can change this upward or possibly marginally downward, but 6.5% is a good rate for India in the current context to assume.
Your portfolio holdings show you are positive on the sugar space because EID Parry is one of the top holdings in your portfolio. We have had some word coming in from sugar industry players wherein they have asked the government to hike the process of ethanol blending. How do you think the sugar industry is slated to grow and what is your view on the sugar space?
Krishna Sanghavi: Let us look at the core structure. India has a large population. The domestic demand for sugar is in place from a consumption perspective. As an economy we are moving ahead, possibly with a slightly better lifestyle, more processed food, sugar consumption can technically rise again. From the supply side, while we have been historically running an excess supply of sugar vis-à-vis the demand, the ethanol blending programme has taken a reasonable share of that excess supply.
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Broadly we are now balanced on sugar where the excess supply is partly absorbed in by way of this ethanol blending and little bit from marginal exports/rise in domestic consumption. So, demand-supply is in place and little bit pricing power which either because of ethanol prices or maybe the sugar price can clearly make sugar companies go ahead.
