Latest news with #IMECapital
Economic Times
7 days ago
- Business
- Economic Times
Clarity on global tariffs key to Tata Motors' long-term valuation: Ashi Anand
"When we launched our Digital Disruption Fund, we were very clear that the markets already understood the strong long-term growth runway for these companies — that they could grow faster than most others. What was less understood was that their underlying business models are not just profitable, but highly profitable. Quarter after quarter, as these companies continue to outperform street estimates on profitability, more investors are beginning to recognise and factor in their long-term profit potential," says Ashi Anand, Founder & CEO, IME Capital. ADVERTISEMENT You track some of these new-age tech companies quite closely — Paytm, Policybazaar, etc. What do you make of the earnings they have delivered so far? Ashi Anand: In what has otherwise been a fairly bleak earnings season, new-age digital platforms have clearly stood out. Take Paytm, for example, which has achieved profitability well ahead of market expectations. In the quick-commerce space — with players like Blinkit and Instamart — where investments were expected to remain high, we've actually seen a peaking of quarterly losses, again ahead of expectations. You've also seen the market reaction to Zomato (earlier referred to as Eternal), which has been positive post-results. When we launched our Digital Disruption Fund, we were very clear that the markets already understood the strong long-term growth runway for these companies — that they could grow faster than most others. What was less understood was that their underlying business models are not just profitable, but highly profitable. Quarter after quarter, as these companies continue to outperform street estimates on profitability, more investors are beginning to recognise and factor in their long-term profit potential. At the time of launching the fund, most of these companies were still reporting hundreds of crores in quarterly EBITDA losses, but our models projected healthy margins over the long term — we've built forecasts out to 2030 and 2032. As these businesses mature, they can continue growing without the same level of investment in customer acquisition or transaction incentives. A large portion of their cost structures is linked to the hyper-growth phase; once that moderates, some costs even decline in absolute a largely fixed cost base and rising revenues, there is significant scope for both operating and financial leverage. Our models show clearly that the long-term profitability of these companies will be very attractive, with strong free cash flows. The combination of scale from hyper-growth and healthy profitability is a powerful recipe for value creation. This is why, not just in the short term but over the next decade, we believe digital platforms will remain a major investment theme — and the results so far have been encouraging. ADVERTISEMENT Let's talk about Tata Motors. The JLR division has faced uncertainty from tariffs, weak demand in some key markets, and valuations have corrected sharply — the stock is almost half its all-time high. Do you think this is a good entry point? Ashi Anand: Tata Motors is interesting. One part of the investment case is relatively straightforward — the domestic business is doing well. In passenger vehicles, over the past three to four years, Tata Motors has launched strong products, gained market share, and built a strong position in electric vehicles, which is the direction the market is heading. In commercial vehicles — a duopoly with Ashok Leyland — Tata has also regained lost ground. Unlock 500+ Stock Recos on App The domestic business is therefore the easier call, with clear value. The challenge lies in JLR. Here we've seen large fluctuations in margins, balance-sheet health, and demand. JLR has strong brands, but faces global headwinds — such as tariffs affecting the important North American market and intense competition in China, particularly from BYD. There's also growing competition in developed markets. ADVERTISEMENT From a long-term perspective, JLR's positioning versus BMW and Mercedes is a concern — both rivals are further ahead in electrification, and JLR will need significant investments to catch up. Valuing JLR accurately is challenging, and this uncertainty drives the volatility in Tata Motors' share price. While the recent fall may make the stock look attractive, the key variables will be the evolution of global tariffs and overall demand. So, avoid Tata Motors until there's clarity on tariffs? Ashi Anand: It's not so much about avoiding it entirely, but about understanding the relative tariff picture. For Tata Motors, what matters most is the US' tariff on the UK, and how that compares with tariffs between the US and China, as well as other markets. Once there's clarity on global tariffs — and on global demand — the investment case becomes clearer. ADVERTISEMENT The latest quarterly earnings were encouraging on the profitability front. Given the stock's sharp correction from its highs, buying even at current levels might not be a bad idea. But for a stronger conviction call, I'd wait for more certainty on both tariffs and demand. (You can now subscribe to our ETMarkets WhatsApp channel)
Economic Times
29-07-2025
- Business
- Economic Times
Ashi Anand sees defence indigenisation as key growth driver
IME Capital's CEO, Ashi Anand, sees strong growth in Indian defence stocks due to indigenization efforts, despite Bharat Electronics' slightly below-expected revenue. However, Coal India faces investor hesitation due to the long-term shift from coal to renewables, questioning the sustainability of its earnings and dividend yield amidst rising costs and uncertain future. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads "This is a space we like quite a lot. There are limited opportunities where you have such clear growth visibility over the next 5 to 10 years. In defence, given India's historically high level of defence imports—India was the world's largest importer until Ukraine overtook us recently—there's a strong government push to indigenise, which provides a robust growth runway for all defence-related stocks," says Ashi Anand , Founder & CEO, IME you look at Bharat Electronics ' numbers, the revenue has been slightly below expectations. But this isn't something that concerns us too much, because the order momentum remains quite strong. The long-term macro tailwinds—particularly the push for indigenisation of India's significant defence imports—are clearly structural growth drivers. So, a one-quarter miss for a company in a sector with such strong tailwinds isn't a major said, another positive is that margins have come in better than expected. While we haven't had a chance to go through the fine print yet, both margins and profits have outperformed. So overall, the numbers are reasonably is a space we like quite a lot. There are limited opportunities where you have such clear growth visibility over the next 5 to 10 years. In defence, given India's historically high level of defence imports—India was the world's largest importer until Ukraine overtook us recently—there's a strong government push to indigenise, which provides a robust growth runway for all defence-related course, order flows in this sector can be lumpy, and delays are possible, which could lead to quarter-on-quarter variations. But the long-term outlook for the sector remains very it comes to Coal India, the issue is more about the company and the sector, rather than a lack of interest in PSUs overall. In segments like railways, defence, and PSU banks—where there's clear business momentum and earnings recovery—we are seeing investor interest across the PSU why is Coal India missing out? When investors try to value a company—even if based on dividend yield—the key question is the long-term sustainability of its earnings and Coal India's case, from a long-term perspective, there's a clear shift underway—from thermal coal to solar and other renewables. This is happening at the macro level, at the government level, and even within individual companies. While you may have visibility for the next 3, 5, or even 7 years, as a fund manager, it becomes difficult to project earnings 10–15 years out, especially when the very longevity of the business is in Coal India offers a high dividend yield. But if there's limited growth and you're relying primarily on yield for returns, the concern becomes: how sustainable are those earnings? With year-on-year inflation pushing costs up, you also need revenues and prices to rise. In a sector facing long-term existential risks, that sustainability is uncertain. That's the core reason why investor focus and momentum are missing from the stock.
Economic Times
15-07-2025
- Business
- Economic Times
Q1 earnings trend so far does not point to big growth recovery this quarter: Ashi Anand
Ashi Anand, Founder & CEO, IME Capital, says early results from TCS and DMart offer little clarity on growth recovery. TCS' guidance lacks indication of a rebound, while uncertainty surrounding Trump's tariffs and their impact on the US economy clouds the IT sector's outlook. DMart's struggle to restore its merchandise mix and margins, coupled with quick commerce competition, further suggests that consumer growth recovery is not yet evident. ADVERTISEMENT What is your view on the limited set of earnings that we have seen so far from TCS and DMart? Given the kind of updates we have seen across the board, do you believe that this quarter could be better than the one before it? Ashi Anand: It is probably just too early to comment on that at this point in time because only a few results have come in. With the TCS result in the IT sector, people were looking at some kind of an indication of a growth recovery. TCS' guidance does not provide any clarity on that yet. For any longer-term growth recovery in IT, we will need some clarity around what is happening with Trump and the tariffs, and the impact that is going to have on the US economy as well as overall corporate demand, specifically on IT spends. The other key element was DMart. It's true we are very early into the results season, but with DMart results as well, we have seen that the whole consumer growth recovery is still not very evident. DMart is still struggling to get its merchandise mix back up to levels it was historically, to be able to get back to the margins that they were delivering earlier. This whole new quick commerce competition and the implications of that on a model like DMart is something that we are trying to evaluate. The result season is going to be extremely important and we are watching it very closely. We have had the two key results so far and trends so far are not really suggestive of a big growth recovery compared to what we saw in the previous quarter. What is your take on the whole insurance pack because from general insurance and even from life insurance, the month-on-month growth data has been quite stable. Is there any particular insurance segment that you are finding attractive at this point in time? Ashi Anand: Insurance is a space that we like. It is there currently in our portfolios. What we do particularly like about insurance is that valuations have come up quite significantly and if you try building out longer-term growth models, you are not factoring in very robust growth in a sector which is still highly underpenetrated in the Indian economy. Just as financialization of savings continues, you are going to continue to see decent growth and penetration increase. This is a space that we like. We see it as a very attractive longer-term buy and hold kind of a play. What you are going to see, however, is month-on-month and year-on-year volatility in numbers. This happens for a couple of two or three key reasons and this is what has been impacting performance for the sector over the last few years. ADVERTISEMENT The first element is around the state of the equity capital markets that does have an impact on ULIP growth and the margins that these companies make on ULIPs versus other products that are quite different. ULIP is a lower margin product and because of that, whenever you see a strong equity market environment, you see positive growth but that is very often accompanied by certain amount of margin pressure and which is where the core number that we tend to focus on is the growth in absolute VNB. That is something which we believe over the next 5 to 10 years has the potential to continue to grow in early teens as is what is you have been seeing over the past some amount of time and that for when you can buy companies at two, two-and-a-half times price to EV, it is not something which is very expensive and which is why we like the space. The insurance space has not really performed as much over the last couple of years, and this has been because we have seen changes in underlying regulations. Some of these regulations are helping make the sector stronger from a longer-term perspective. So, we see it as a space which does have room to grow and outperform. As growth comes back, we expect the space to do well. ADVERTISEMENT (You can now subscribe to our ETMarkets WhatsApp channel)
Economic Times
19-06-2025
- Business
- Economic Times
Markets eye tariff clarity and Middle East calm for next big move: Ashi Anand
"The RBI has also cut CRR amidst various other liquidity measures. Monetary policy is clearly easing and the overall growth slowdown that we have witnessed both in the Indian economy and in corporate earnings, as interest rates start to come down, this should help propel consumer demand, it should help propel larger ticket consumer purchases such as auto, real estate, etc, so you could see some form of a demand revival happening there," says Ashi Anand, Founder & CEO, IME Capital. ADVERTISEMENT What is the next trigger that the markets are awaiting because we have been pretty range bound if you please for the last many trading sessions now and quite lacklustre on many days. Ashi Anand: So, in terms of the next trigger, I think there are three core things that we are really focusing on in terms of wanting to see clarity on that. Firstly, there are two looming uncertainties on the market. Any clarity around what is happening either with Trump tariffs and what the overall endgame is. Any clarity around that could very clearly act as a trigger for some form of an up move. The second element is really what is happening with Iran and Israel, that is a potential conflict that has the potential to escalate quite significantly. Hopefully, it remains where it is at this point in time and Iran does not go in and blockade the Strait of Hormuz is one of the concerns or like other players get involved in this conflict. As long as it does not escalate further, that is good news. Every passing day where you are not seeing further escalations would be seen as the markets of sign of this not going out of hand. So firstly, for a more prolonged up move some clarity around both of these elements would help, some amount of negativity associated with this basically going away and could help markets move up. From a slightly longer-term perspective, the one big positive for this year is the fact that interest rates have been reduced by 100 basis points. The RBI has also cut CRR amidst various other liquidity measures. Monetary policy is clearly easing and the overall growth slowdown that we have witnessed both in the Indian economy and in corporate earnings, as interest rates start to come down, this should help propel consumer demand, it should help propel larger ticket consumer purchases such as auto, real estate, etc, so you could see some form of a demand revival happening there. It is again also very positive from a capital goods perspective because ultimately the IRR and the payback periods on new incremental capex are determined by a cost of borrowing. So, this overall growth slowdown that we are currently witnessing, having interest rates come down is a very important first step towards an eventual growth recovery. And as markets get more confident about this, I think that is really what kind of waiting for in order to see a more sustained up move in the markets. ADVERTISEMENT What is your own sense of IT and I am asking because that is perhaps the most US- linked sector if at all. Other than a few niche IT companies from within the midcap arena, the larger services play and the concerns around if the tariffs are slapped, what kind of a slowdown would it get into and then what happens to client spends and it is pretty much a domino effect from there. Do you think it is still worth risking it? Ashi Anand: So, it is a bit of a difficult call, but the one important thing to understand is a very large amount of the concerns do seem to be priced into valuations. So, if you are looking at Infy, you are looking TCS, look at any of the mainstream IT companies, look at their valuations to the overall markets, to peers, to their own history, there is a lot of valuation comfort that is there. Our view on it as a sector is that if you are going to see a more prolonged US economic weakness or recession, if you are going to see a growth slowdown, we do not necessarily see further downside in these companies. ADVERTISEMENT We believe you are factoring in a lot of these concerns. However, if one were to be able to take a call on things not being as bad as they are currently being panned out to be, that Trump is actually using this as a negotiating lever, but the actual tariff outcomes are going to be a lot more benign than tariffs being thrown around at this point in time. If we do end up with an outcome a few months down the line where there is greater clarity around tariffs, it not being as bad as expected and therefore a lot of pent-up demand of US corporates who kept spending on hold actually gets unleashed, this could be a place to get a fairly interesting bounce back rally where given how cheap valuations are, but you are quite dependent on that event in terms of how exactly US trade, US tariff, and the overall economic outlook does pan out. ADVERTISEMENT (You can now subscribe to our ETMarkets WhatsApp channel)
