Notes from the Sohn India Conference

(Disclaimer: The stocks mentioned in this post are for informational purpose only and not a recommendation to buy/sell)

Attended the second Sohn India Conference today.

The Conference opened with opening remarks by Nitin Saigal,Founder &CIO, Kora Management

He explained the format of the Conference:

1. Every speaker will be allotted 15 minutes
2. The speaker have to give their best idea
3. No Q&A

The first speaker was Raamdeo Agarwal of Motilal Oswal:

• Raamdeo Agarwal’s best pick was PNB Housing Finance. He termed it a ‘Lakh Crore Ki Kahani’
• In India, there are only 27 Companies which have a market cap of more than 1L Crores.For a company to break into this elite club, there must be strong tailwinds and a long runway in place.Some such megatrends that he has seen in his career are IT Services,Private Banks,Pharma etc
• He analyzed the Company using his QGLP model.
• Its a business with secular growth drivers.India’s Mortgage to GDP is very low (9%) and level of urbanization is only 33%.Both these figures can only go up.
• The Gross NPAs in this business is only 0.8%
• For all practical purposes, it is Carlyle which owns 38% of the company is running the business.They have put in top class processes and practices.
• Raamdeo Agarwal quipped –‘I own a housing finance business myself and hence can judge the high quality and scalability of PNB’s processes’
• The management plans to double assets by 2020. Modi’s ‘Housing For All’ can create a 50L Crores Mortgage Market.
• The Company has grown at 52% CAGR in the last 4 years and increased its market share
• He expects the stock to break into the 1 Lakh Crore Club by 2024…a CAGR of 24%

The second speaker was Sunil Singhania of Reliance Mutual Fund

• Being from Mutual Fund Industry,compliance demands he can’t give stock picks but can speak on sectors
• His pick was the  Cement Sector
• Felt while the current demand is low,the sector will benefit from the Govt’s infrastructure and housing boost
• The problem is that cement stocks have significantly increased in price
• He presented an interesting way to play this sector
• Said the most significant wealth creation in Shree Cements happened when capacity when from 15 Million Tonnes to 25 Million Tonnes–stock price went up by 3x/4x
• He suggested to buy two companies-one North/Central India and the other South India-which have around 15 Million Tonnes each and are ramping up capacity
• Enjoyed the clear thinking and analysis of Sunil Singhania

The third speaker was a doctor from the Tata Memorial Hospital

• Explained about pediatric cancer
• Explained that cancer cure in India should not only be effective but also affordable
• Appealed to participants to contribute to the Tata Memorial Trust

Here would like to take a time-out and request readers to help the cause of cancer cure by contributing to Tata Memorial

The fourth speaker was Shankar Sharma,from First Global

• Explained that he liked companies with high leverage because when debt gets paid off, correspondingly market value increases
• Recommended MEP Infrastructure Developers Ltd
• Basically, a toll operator with 19 Toll Plazas including Mumbai entry points,Bandra sea link etc
• For the first time since inception it has made a profit now
• Expects debt leveraging to happen

The fifth speaker was Saurabh Mukherjea of Ambit

• Recommended Garware Wall Ropes
• Top manufacturer of nets and ropes in the world
• Exports 3000 SKUs to 80 countries
• Its expertise in blending high end polymer chemistry with high labor intensity is unmatched
• His Primary checks tell him customers are very satisfied with the Company products
• Growth will come from Defense,Agri,Infra etc
• Management is prudent in their capital allocation, had bought back their own shares in the past

The sixth speaker was Navneet Munot of SBI Mutual Fund

• Being from Mutual Fund Industry,compliance demands he can’t give stock picks but can speak on sectors
• His sector pick was Telcos
• There will be a bloodbath in the sector for next 2-3 quarters
• The Telcos which survive will make a lot of money as
  • Data addiction now is a bigger addiction than alcohol,tobacco etc
  • Push by the Govt-show a Modi video clip
  • Consolidation–>Pricing Power—>ROCE

The seventh speaker was Aanand Chouhan, a 2nd Year student from IIM Bangalore

• Aanand had won a stock picking competition organized by Sohn and hence was given opportunity to present his idea
• His stock pick was Infoedge
• Felt the company’s core business (Naukri), Internet Portfolio (99acres,Jeevansathi etc) and VC Investments (Zomato,PolicyBazaar etc) were valuable and could grow well
• Gave a target price of 1570 Rs/share over the next 3 years

Next was a video clip by Jeff Gundlach of Doubleline:

• He said there is no such thing as passive investing as the index constituents are decided by a Committee
• Said to go long EM and short US 500

This was followed by a tea break where I met the redoubtable Samir Arora. He was amused the Munot was recommending the sector he was short on !

The eighth speaker was Kenneth Andrade of Old Bridge Capital Management

• His top pick was ENI
• Its the market leader in the Radio space with 30% market share and recognizable brand (Radio Mirchi)
• It will have second frequency in 11 Metros
• National footprint with 60 cities
• Radio is an attractive space with 4% of Media spend and growing at a CAGR of 16.9%
• ENI has already done significant capex and its time to reap the benefits

The ninth speaker was Shashank Singh of Apax Partners

• His top pick was DCB Bank
• His investment thesis was
  • Retail private banks with clear product/customer strategy will do well
  • DCB Bank reinvented itself after 2010 under current leadership
  • Suppressed earnings due to network rollout and hence attractive valuations
  • Felt the Bank has a conservative credit culture with the CEO himself doing surprise audits
  • Earnings will improve with time as the branch network gets more ‘seasoned’

The tenth speaker was Hiren Ved of Alchemy Capital

• His top pick was Varun Beverages
• Said the Company is a good proxy for Pepsi in India
• Not just a bottler but also a manufacturer,marketer and distributor
• Felt one unanticipated impact of 24*7 electricity is more people consuming more beverages
• Coming to valuations, he said Varun is cheap compared to other consumer plays like Jubilant Food/Page Industries.Found the comparison very funny

The eleventh speaker was Ashwini Agarwal of Ashmore

• His top pick was Persistent Systems
• Said the company was not a typical IT services provider as it is into outsourced product management
• Three investment reasons
  • IBM-Watson tie up begins to pay off
  • Growth in Digital business -40% CAGR is possible
  • Core IT services revenue shows 6-8% CAGR
• Two investment risks
  • Rupee Strengthening
  • Curbs/high fees on H1B Visas

The last speaker was Akash Prakash of Amansa

• His top pick was Infoedge.
• Second time the stock was discussed today
• He felt it was the ultimate India Internet play
• He also felt due to network effects the value of Naukri,99 acres,Zomato etc will keep growing
• He feels the real estate classifieds space is 5x bigger than the recruitment space and the restaurant space is bigger than the real estate classifieds space
• The companys VC fund also lets the investor bet on interesting Internet opportunities which otherwise one could not
• He felt the downside risk was minimal while upside could be 3x/4x

The conference ended by a video clip of Social Capital’s Chamath Palihapitiya who discussed Tesla and made a case for buying its convertibles.

Met Ramesh Damani on the way out. Was blown away by his charm and humility.He was kind enough to indulge our request of a selfie !