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 third Sohn India Conference today.

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

He explained the purpose of the Conference i.e. to raise funds for paediatric cancer care.

The format of the Conference was the same:

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

The first speaker was Raamdeo Agarwal of Motilal Oswal:

Delighted that his best idea was my sentimental favourite…RBL Bank.
Said there is a multi-decadal opportunity in private banks due to value migration from public sector banks as well India’s low Bank Credit to GDP Ratio (only 51%)
Applied his well-known QGLP framework to analyze the company
He pointed out that the senior management and employees have significant skin in the game-ESOPs are 9.4% of the Capital Base
He had a very interesting comparison of HDFC Bank in its first 8 years of going public with RBL Bank…RBL Bank compared well if not better on most parameters
He gave a price target of Rs.1,145 in the next 3 years and felt it could be 10 bagger in the next 10 years

The second speaker was Navneet Munot from SBI Mutual Fund

Being from Mutual Fund Industry,compliance demands he can’t give stock picks but can speak on sectors
His pick was the Healthcare sector especially Hospitals
As per him, the challenges in Healthcare are Awareness,Availability and Affordability
He felt the Govt’s insurance program Ayushman Bharat and rising medical insurance penetration can change the sector
Currently the newsflow regarding hospitals is very negative-license suspension,price controls,low revenues,low returns etc
But he felt this would change with time with the right business model and with the formalization of the economy

The third speaker was Dr.Girish Chinnaswamy from the Tata Memorial Centre

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 Centre

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

His first pick was Man Industries
As per him, the company is attractively valued at 6x FY19 earnings
Expected to grow at 80% this year
Its the third largest player in the LSAW/HSAW pipes category
Robust Order Book,Good Clientele,Low Debt,Low Capacity Utilization,No Equity Dilution etc makes this company attractive
His next pick was HFCL…this elicited eye-rolls from the audience
His investment thesis was robust order book of 10,000 Cr, Good Clientele including Reliance Jio, low valuations,increasing free cash flow, cheaper than Sterlite Technologies, new plants etc
He also provided updates on his picks from the earlier Sohn Conferences-A2Z Infra and MEP Infra

The fifth speaker was Ashwini Agarwal of Ashmore India Investment Managers LLP

His pick was Parag Foods and had 3 investment thesis
Investment Thesis # 1 – Rising share of Value Added Products
Investment Thesis # 2 – Extracting Efficiency from Operations
Investment Thesis # 3 – Limited Capex, FCF turns positive
He was very bullish about their Whey Protein powder Avvatar…said he had got the powder examined by medical professionals etc
Till now, Whey Powder used to be imported from outside.Parag can have a crack at this 1000 Cr market
He expects the stock to give a return of atleast 50% in the next two years

The sixth speaker(s) were two MBA students.Aneesh Sharma from MDI Gurgaon and Jigar Thakkar from IIM Khozikhode

They jointly presented on Delta Corp
Found it amusing that they gave a price target of Rs.601 with a time frame of 5 years !

Next was a video inteview between Chamath Palihapitiya of Social Capital and Venture Capitalist Bill Gurley of Benchmark Capital

It was a fairly interesting interview and one Question stood out for me.

Q.What do you think about India’s Flipkart?

A.They are competing against Amazon and that’s a tough position to be in

This was followed by a tea break . I noticed that the crowds were much lesser than last year.Also, the correction in midcaps/small caps had left the audience subdued…a far cry from the animal spirits of last time.

The seventh speaker was Rukhshad Shroff, J P Morgan Asset Management

He mentioned that he still liked his picks from the earlier conference-HDFC Bank and Jubilant Food
His pick this time was MCX
Mentioned that traditionally exchanges have made money for investors
Liquidity begets liquidity and once an exchange is established, there is no need for another exchange.Hence they tend to be natural monopolies
Multiple reforms underway-More Commodities,Options,New Principals,Longer Dated Contracts etc
He had an interesting comparison of Total Commodity Derivatives Vs GDP of a country…as per that India is only 0.49 as compared to 1.98 China or 2.39 US
He then took a guess at where valuations could be in 2028 (!)…arrived at a multiple of 3.5x-5x current valuations
Astonishingly, he didn’t make any mention of MCX-NSE merger.

The eight speaker was Prashant Khemka of White Oak Capital

This is one person I was really looking forward to listening
His pick was Jyothy Labs…he called it a forgotten FMCG company
As per him, its a great business (superior ROCE,Scalabale, Strong Execution and Good Governance) and attractive valuations as per DCF and relative to Sector (50% cheaper than peers)
Really liked the way he emphasised cash flows in his presentation…even while doing sector analysis, his focus was on cash flows.
He ended his presentation with a memorable line “It will double without trouble in 3 years and will triple without ripple in 5 years”

The ninth speaker was Poonam Bagai of CanKids

CanKids is a NGO working in the field of Pediatric Cancer
She herself is a Cancer Survivor and explained the work of her NGO

The tenth speaker was Shiv Puri of TVF Capital Advisors

Was a very disappointing performance
Spent 90% of his time talking about technology, disruption etc
Then gave his pick…Kotak Bank !
Found that very funny

The eleventh speaker was Sunil Singhania of Abakkus Asset Managers LLP

Sunil was earlier with Reliance Mutual Fund and couldn’t give stock picks earlier due to compliance reasons
Since now he is on his own, the audience had high expectations from his presentation
Sunil talked about the branded foods opportunity in India-mentioned India spends one-third of its GDP on food and around $200 Billion on branded foods
This will only grow with time creating huge opportunities for companies in this space
Catch is most of these companies are trading at nose bleed valuations (60-70 P/E)
His solution? Buy Bombay Burmah…it owns 51% of Brittania and 38% of Bombay Dyeing
Currently, there is a holdco discount of 73%…which he feels may reduce with time
He then did an analysis of 3 scenarios which saw Bombay Burmah giving a return of anywhere between 53% to 183% in the next 2/3 years

The session ended with a video clip by Chamath Palihapitiya of Social Capital where he spoke of investment opportunities in the Artificial Intelligence space.

I found this clip to be very interesting and a part of it can be seen here