By Ayesha Faridi
Founder of Renaissance Investment Managers says India is on the cusp of a big technology revolution
What would you say is the right approach amid this uncertainty: cut through the noise, do not look at one-two quarters because no retail participant, FII or for that matter any global leader or companies themselves have any clarity on when we are going to get out this mess, whether there is going to be any vaccine or not, whether to look at science, whether to look at macros or micros for any sort of cue, look ahead, go into the next five to ten years, make your list and start buying?
Absolutely. Obviously there are a lot of concern around health and economy. Most people are intrigued by the behaviour of the market, because we have sown the seeds of the bull market in the midst of the biggest health and economic crisis. The fact is, markets up 40 per cent from the lows and that is the kind of return you make in a firing bull market. To expect that kind of return at index level -- and a lot of stocks have done much higher than that -- in middle of a crisis is not something anyone had anticipated or expected. So I think there are too many moving parts to this.
My view is two-fold; one, just to cut all the noise let us be very clear that we are firmly in a bull market. Whether we like it or not, whether we can reconcile to it or not, we can keep debating and conjecturing, the fact is global equities are in a bull market. Now we can discuss and debate what is driving this bull market. The second thing is, investors should not think too much about global economy, US Fed, central banks and so on and so forth. They should just have their list of three, five, 10 businesses which they think are rock solid and because of this crisis there would probably be an opportunity for them to buy at prices that could be lower than what they would have otherwise bought at. Buy those businesses with the five-year, 10-year view and just let things work out. If there is problem with the economy, if there is problem with liquidity, there are enough regulators and policymakers doing their job and they will sort it out. As long as five or ten-odd or whatever companies you have invested in, if they are doing fine, you will be fine and markets will figure out their own way.
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Obviously there is euphoria as it is. In fact the kind of euphoria itself tells you we are in a bull market because you do not have euphoria in bear markets. So, there will be pullbacks, there will be corrections and there will be noise. The key thing for investors is if you are taking a medium-term to long-term view, which is what is needed for wealth creation, then just cut all the noise, focus on companies, get five or 10 companies, invest into them and let things play out.
Your next top pick is Info Edge I believe. Would you want to talk about it? Why do you think we should invest in that for the long term?
One thing is really apparent that in India we have seen explosive growth in smartphone penetration in last two-and-a-half years and if at all anything, businesses that use technology are going to increase both on the consumer side and on the enterprise side exponentially over the next 15-20 years. What has happened in the West probably will play out in India over the next 10-15 years.
We are on the cusp of a big technology revolution, if I may say so in India, and we are at the beginning of that cycle in terms of what we have seen over last 15-20 years. I think Info Edge is a classic technology company. Its businesses cut across very unique and strategic segments or sectors in India, with their three businesses around the flagship business, which is the cash cow currently, is the jobs portal Naukri.com, Given the growth potential of India from overall economy point of view, India will always be a country where there will be scarcity of good talent and job portals or recruitment portals have a significant role to play there. So that business will keep on growing. They have other two technology-driven businesses which are in the real estate space and in the match-making space. All three businesses over time should do exceedingly well and with the greater adoption of technology, the customer base and penetration level should increase further.
Apart from that they also invest into lot of other emerging technology businesses. Obviously as we know, technology is a high-risk business. So some of those investments may not work well, but when it works, some of them would work really well. Their two big investments obviously are Zomato, which is now probably a leading player in food distribution and on the restaurant platform, and Info Edge owns a very significant stake there. The other one is PolicyBazaar. Obviously, they have a portfolio of other companies which are at different stages of evolution in which they have invested and probably will keep on investing.
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The good thing is they have clarity of thought where they have certain businesses that give them cash flows and where they have 100% ownership. Having said that what is important to understand is that no one has a monopoly on technology ideas. So idea generation can happen anywhere and most of the idea generation generally happens on campuses or in small-time cafes and stuff like that. They do not happen in large corporate board rooms and I think they very well recognise that. As a result of which when they come across some great ideas on the technology side, and they find that those ideas along with a good set of people, they invest into those businesses as an investor. So it is a comprehensive play on technology evolution or the technology curve that India is going to experience over next 15-20 years. My firm view is that there lies all the potential and the makings of a very large company. My view is probably it will become an index stock in the foreseeable future.
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