From here on, all bets are on how GST is impacting demand, says Dinshaw Irani and adds why Helios is betting on Ola
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, CEO,, says they are bullish on domestic consumption stories, recently adding Ola to its portfolio due to its potential in the EV two-wheeler space. Dinshaw Irani highlights Ola's improved profitability and the management's focus on Generation III bikes with indigenous batteries. Helios believes the worst is over for Ola, citing margin improvements from Q4 to the June quarter.The last time when we talked, there was a lot of liquidity lying around. The way RBI has gone about infusing liquidity, it is phenomenal and the fact that they have been cutting off interest rates quite regularly, means cheap money is lying around, and it needed a spark to get it ignited and the government has taken the right step.When we were going through a crisis way back in 2007, 2008, the governor at that time literally halved excise duties and that had fuelled consumption going forward. 2009, 2010 were really good years for India. I think that is the need of the hour and that is what this government also reacted to and reducing GST was the right move. But anyway, the fine print is yet to come out. Our feeling is that the worst is over in terms of earnings degrowth or rather lack of earnings growth . The June quarter was nothing to write home about. While they did show a double-digit growth in earnings, it was fairly concentrated, limited to a couple of handful of stocks.That is why if you take them off, the growth is not that great. The base is very comfortable for September. The base last September was a negative earnings growth, so that was the only quarter in the recent past which has seen negative earnings growth. So that base is fairly favourable, but given that the fine print of GST will come out probably by the middle or the third week of September, people will hold back on their spending and that quarter also may get impacted but that is built into the thing as such. From here on, all bets are on how GST is impacting demand and how demand comes back with a roar. If it does, we are on a very even keel and probably the worst is behind as such.We have always been invested only in domestic stories. We were never too keen on China plus one plays or PLI plays and so on and so forth. Anyway, our portfolio was more leaning towards domestic consumption stories. We did add a few new names. We have been talking about it and Ola is one of the new names that we added to the portfolio given that EVs in the two-wheeler space are going to be a clear winner.In fact, we have added one more two-wheeler player apart from Ather and Ola which are in our portfolio. As of July, one more player will be coming, which will be in the two-wheeler space, apart from Bajaj Auto which is already disclosed in our portfolio. We are very keen on that space. The entry-level vehicles should do well.However, in the four-wheeler space, we are still not that keen. By the way, why I am talking about autos right now is because the GST impact is going to be felt the most in autos per se. Basically, in the four-wheeler space, I do not think even by cutting out the prices by Rs 10,000- 20,000 odd – result of GST impact in the entry level two-wheeler space – that demand is going to come back. It is going to come back mostly in consumer durables and stuff like that which will be better placed going forward.Well, good you ask that question because one of our new talks is going to come out by Samir and I on our website, which is going to discuss this only. But the fact is our philosophy, which is called elimination investing, helps us in a lot of ways. In fact, that moves out the obvious bad stocks and leaves us with a pool which is probably a good pool and from there on you just have to time your entry as such and that is what helps in identifying these stocks.We felt after the quarterly numbers, that Ola had done a great job. In fact, it reminded us of the Zomato days when after that huge fall to 40s – it is a coincidence that both bottomed out at 40 literally – when Eternal came back with their quarterly numbers, they laid a lot of emphasis on how they are going to improve their profitability. The same happened with Zomato after this quarter and we said this is the time to get into this.Ola has been losing market share and the fact is they have been rolling in losses as such and that is why we never participated in the IPO. We never bought when the stock was up. But after this quarter, if you have seen the way the management has emphasised about the Generation III bikes and the fact that most of the Generation I bikes are out in terms of the guarantees and stuff like that. Gen II also is 60% over and done with. From here on, that overhang of the old technology is over.Obviously, it is a tech savvy sector per se and we saw that in the recent presentation they gave of their Gen III bikes and the way they have developed their own indigenous batteries which are ex of rare earths and stuff like that, I think it says a lot about that company and the only concern was will they come back on profitability track and that is what they tried to answer.By the way, from Q4, that is the March quarter to June quarter, the margins improvement was quite sharp and they kept on emphasizing they will be doing that further going forward. So, it is probably a faith in the management and the way they have gone about doing it earlier and that is why we feel that from here on, the worst is over for Ola and from here on it is probably a way up for them.
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