On infrastructure and economy linked sectors
It is an avoid for me simply because the money that will be flowing in into infrastructure projects is of limited nature. There will be prioritisation on the government side in terms of allocating the money for infra projects. The government has not been able to generate adequate revenues through taxation because of the Covid and the faltering economy and that has caused some degree of cost containment. One of the areas where the cost control and cost containment can happen is infrastructure.
Having said that, there is going to be privatisation for infrastructure projects. Only a few projects will move quickly and the ones that have been moving very fast are on the gas side which is city gas distribution. Now with the vaccine rollout being on the agenda, there will be some movement to infra on the logistic side.
Overall, we would not like to play the infrastructure theme just now. We will wait for the government’s finances to improve and once that happens, we might see a leg up for infra projects. Until then, remain with infra suppliers — primarily the cement and steel companies. Cement can work well. It is not just infra, it is also personal consumption moving up that is helping drive demand.
UPL has been going through its pain moments but as far as the core business is concerned, it is on an uptrend now that a bumper agricultural crop is coming in virtually across the globe and not just in India. That improves the prospects for the likes of UPL as we go forward.
The concerns on corporate governance remain as an overhang. For a long period of time, the stock was trying to shake off this concern in terms of the risk discount that they pay vis-a-vis valuations. That has been factored in. Considering that the growth ahead is going to be much sharper with large reductions of inventories and better receivables, UPL should be doing better as we go forward.
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