Confidence results: RIL disappoints; it will probably be a week of consolidation: Neeraj Dewan

“ICICI Bank’s results stood out, followed to some extent and by Kotak as well. was a bummer because the chemical oil didn’t do as well as people expected. Results were okay, but expectations were high given the very high GRM margins that were there in the quarter,” says Neeraj DewanDirector, Quantum titles.

Which of the results stood out to you? Reliance, ICICI, Kotak or Infosys?
The first choice is definitely in regards to results. They came out with a stellar set of results and on all metrics they did very well, even loan growth was quite good and even NIMs showed good improvement.

ICICI Bank’s results stood out, followed by Infosys to some extent and Kotak as well. Reliance was a disappointment because the chemical oil didn’t do as well as people expected. Results were okay, but expectations were high given the very high GRM margins that were there in the quarter.

In the case of Infosys, revenue growth has been very good. The revenue growth they have indicated for the coming year is also very good. However, the margin is worrying and should gradually increase. Infosys may be kept under the radar as a dip buy candidate when it comes to earnings. Kotak again had a decent set of results although there were some disappointments on the earnings front. But otherwise there was nothing else that was really bad in the results, otherwise the results were pretty.

What is your opinion on these platform companies, in particular?
Policybazaar and Zomato on pure profits didn’t look good. Zomato after the acquisition of Blinkit, which did not go so well with the street, saw a correction and there too and some bad news is coming.

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I don’t think it will be taken very lightly on stocks because they are expensive anyway and they are still losing money. I really don’t see any point in chasing these companies, even in downturns. Zomato will be attractive at a certain price but that price is yet to come. As for Policybazaar, I don’t really see a case there. Let’s see how far they have to go when it comes to losses. It may be avoidance while Zomato maybe somewhere down the line, when it becomes more attractive on a pure headline, on a pure revenue basis, can be looked at, but not yet.

We have seen a sectoral change. There are computer names beaten after the TCS numbers and the hits they received that week. These are finally making a very strong rebound. Today we are going to react to the numbers from Infy and small pockets like capital goods are also catching up. Some banks are liking and some of the mid-cap banking names are taking center stage. Have you been a buyer in the last fortnight?
Basically, consumers, auto auxiliaries and even banks and large NBFCs have seen good improvement in asset quality as well as good credit growth. So big NBFCs, banks, commodity consumers and IT stocks. Infosys regarding Rs 1,400-1,420 was a good deal rather than 20 times a year ahead. These are the opportunities that have presented themselves in the last two weeks forward or 10 days back.

An important fact that came out of Infosys yesterday was about attrition. Do you think attrition itself will go down and that’s something the street hasn’t noticed so far?
Attrition is bothering them so it’s too early to say it’s going to go down as attrition is some of the business we’ve seen before. Of course, attrition has been higher in the last two quarters we’ve seen.

Attrition will continue to occur in IT companies. But the margin pressure that accompanies attrition due to higher salaries will slowly be consumed and the margin will slowly increase. It is therefore necessary to concentrate on the growth of the turnover and the business wins. If the United States manages to avoid recession, that also bodes well for the IT space. Margins will slowly recover.

What do you think of Reliance regarding weak O2C activity?
The main attraction of these results was the O2C business where GRM margins were very strong and therefore refining margins should have been very strong. This is why the expectations of the results were quite high and there we saw disappointment.

There is nothing to worry about in Jio’s business and in retail as the numbers were pretty decent. ARPUs are strong, revenue was strong, but it’s in the O2C business that GRM margins have collapsed. For this quarter, the impact of the windfall tax will also come in this quarter and therefore the figures, which should have been very good in the last quarter, this quarter will be a drag on them.

The main thing now is to look forward to Reliance’s AGM where we will see if they have any plans to monetize or list the retail or Jio business and what the plans are for the new energy business. This is what the street is looking forward to. When it comes to the numbers, there has certainly been some disappointment and this quarter the O2C business may again be challenged.

Would you wait for things to settle because there are a lot of short-term technical factors?
Earnings season continues and we need to take a close look at what is happening and we have seen a decent rally from 15,100 odd levels in the market. We also have this outcome from the FOMC meeting and I think we need to be a little more cautious this week because over the past two weeks with everyone sitting on the gains people were bullish on the market at the level of 15,500. This can be a week of consolidation where you have to watch what happens and then take the next step.

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