"I would say that on anticipated lines. As we have maintained our view this largecaps in IT are 5-6% growth story for long term, I do not see numbers going beyond that, in some year growth is zero, then it can be 8-9%, 10% but broadly this has become a 6-7% revenue growth story sector for largecaps. Midcap could be slightly better," says Sandip Agarwal, Fund Manager, Sowilo Investment Managers.
Noise but no large fireworks also.
Sandip Agarwal: So, these results as anticipated were a no event to slightly negative because the miss in the revenue is quite sharp and the deal wins are okay. Unfortunately, despite BSNL ramp down and no wage hike, the margins increase is also very-very nominal. So, there is nothing to cheer about in the whole number, that 5,000 addition also on a base of six lakh is a very-very nominal addition.
So, I would say that on anticipated lines. As we have maintained our view this largecaps in IT are 5-6% growth story for long term, I do not see numbers going beyond that, in some year growth is zero, then it can be 8-9%, 10% but broadly this has become a 6-7% revenue growth story sector for largecaps. Midcap could be slightly better.
So, 6-7% revenue growth, PE multiples with the exception of HCL Tech, all almost north of 20. So, can I say that it is a no-brainer avoid?
Sandip Agarwal: Absolutely. In a way that looks a logical argument. But then, when we speak to some of the investors in the market, they say that we have FMCG at 45-50 multiple with same output, that is they are also growing at 4-5% growth. So, some people are shifting their FMCG investments to it as a defensive and that could be only reason why some stocks could hold on a little bit. But otherwise, this sector I do not see the largecap growing at more than 6-7% for next five-seven years at least. It is very-very tough to grow beyond that.
Now you are a fund manager. So, as a fund manager, do you own largecap it? It is your favourite sector and as a sell-side analyst you had a view on the sector, now but as a buy-side fund manager, you have to put your money to work where your belief is. So, do you own any largecap it in your portfolio? If yes, why? If no, why not?
Sandip Agarwal: We do not own anything. We were owning two years back when there was no wage hike, there was no bonus, and there was lot of pain in the sector, we bought at that time. We made quick 40-50% for our clients in one year time and then we decided that at the current multiples it makes no sense for us to keep them.
So, we sold everything. We have very small position in one or two small and midcap but very-very minuscule position that too. We have a very clear view that this sector would not grow and the multiples of five times PEG ratio and four times PEG ratio, honestly we are a deep value fund we cannot afford to give that kind of multiples.
Noise but no large fireworks also.
Sandip Agarwal: So, these results as anticipated were a no event to slightly negative because the miss in the revenue is quite sharp and the deal wins are okay. Unfortunately, despite BSNL ramp down and no wage hike, the margins increase is also very-very nominal. So, there is nothing to cheer about in the whole number, that 5,000 addition also on a base of six lakh is a very-very nominal addition.
So, I would say that on anticipated lines. As we have maintained our view this largecaps in IT are 5-6% growth story for long term, I do not see numbers going beyond that, in some year growth is zero, then it can be 8-9%, 10% but broadly this has become a 6-7% revenue growth story sector for largecaps. Midcap could be slightly better.
So, 6-7% revenue growth, PE multiples with the exception of HCL Tech, all almost north of 20. So, can I say that it is a no-brainer avoid?
Sandip Agarwal: Absolutely. In a way that looks a logical argument. But then, when we speak to some of the investors in the market, they say that we have FMCG at 45-50 multiple with same output, that is they are also growing at 4-5% growth. So, some people are shifting their FMCG investments to it as a defensive and that could be only reason why some stocks could hold on a little bit. But otherwise, this sector I do not see the largecap growing at more than 6-7% for next five-seven years at least. It is very-very tough to grow beyond that.
Now you are a fund manager. So, as a fund manager, do you own largecap it? It is your favourite sector and as a sell-side analyst you had a view on the sector, now but as a buy-side fund manager, you have to put your money to work where your belief is. So, do you own any largecap it in your portfolio? If yes, why? If no, why not?
Sandip Agarwal: We do not own anything. We were owning two years back when there was no wage hike, there was no bonus, and there was lot of pain in the sector, we bought at that time. We made quick 40-50% for our clients in one year time and then we decided that at the current multiples it makes no sense for us to keep them.
So, we sold everything. We have very small position in one or two small and midcap but very-very minuscule position that too. We have a very clear view that this sector would not grow and the multiples of five times PEG ratio and four times PEG ratio, honestly we are a deep value fund we cannot afford to give that kind of multiples.