2 road stocks to bet on after correction: Sanjiv Bhasin

Sanjiv Bhasin, EVP Markets and Corporate Affairs, India Infoline, tells ET Now that if you can live with negative rhetoric, these could turn out to be a very good money makers.Edited excerpts: We know that this deal is not in the best spirit of corporate governance, but the decision has been taken. For a long-term investor is there an opportunity? Do you think the face of IDBI Bank could change if not in two but may be in five or seven years? Well it is a case of glass half full and half empty. Most people have debated whether policyholders’ money should go into an asset like IDBI. I personally think IDBI is a very undervalued investment of the Government of India and LIC. There is a very good framework. You just mentioned LIC and its branch network. Mr B Sriram has now resigned from SBI and is going to join there. So, a professional is going to be at the helm. I am not saying that they did not have a professional management before. They have cleaned up the balance sheet, they have an organisation which has been a lending institution and which is prevue to maximum amount of MSMEs and the whole corporate structure based on that. Added to that, the LIC kitty can be a very big win win situation. 81% is with the Government of India, 11% with LIC, only 3% or 4% is with the public. I personally think Rs 75 to Rs 80 is not ruled out in the foreseeable future. I would say this is a very sound investment. It will be a glass half full half empty till you see the results flow out. It is a very good alignment as per what the government is trying to make out. We have discussed the glass half full. Now let us discuss the glass half empty. LIC is not going to be involved in the operations of IDBI Bank. IDBI Bank already has got a capital allocation of Rs 10,000 crore and they still need much more capital. My challenge with IDBI Bank is that they do not have a book and have to start the lending culture fresh. LIC also has no expertise in lending. It may sound great but it is not that easy? Correct, it is the glass half empty. But at the end, we all look forward. We see most of the cleansing of balance sheet, we see the NCLT, bankruptcy code. The likes of Vijay Mallya should be ready to throw in the towel because now it is inevitable for bad corporate offenders to understand that their assets are going to be sold. And the same case would flow into IDBI. Yes IDBI has one of the lowest NIMs. It is a low cost deposit player but that whole thing will change once you start to see positives on a CASA ratio. Now LIC is not going to be part of the day-to-day management. It has made an investment, it has made an acquisition which it will leave to the professionals to manage. The next four-five years will be very good. We are seeing the green shoots of corporate governance. Corporate expansion and investments all will start to pick up in once oil settles down and there is a little bit of plateauing of the rupee. Most negative are getting priced in. You are going to encash the demographics and for that, the banking and the insurance network which they have, could be a win-win situation over a period of time.How are you approaching some of the road stocks because they too have been hammered in the recent midcap fall? What is looking interesting after this price correction? I could suggest two names. First, it would be L&T. They would also have a part in road construction. The second would be Dilip Buildcon, which has been awarded a lot of contracts. It has been in the eye of the storm over the auditor issue. From what I gather, the company is run by a very good management. There is a very professional team and at Rs 630-640, you could add Dilip Buildcon. If you can live with the negative rhetoric, this could turn out to be a very good money maker, Gadkari has a record of doing what he says he will do and that could be a very big positive on the capex.The reason why markets are down is because valuation froth was there along with over ownership. But selling has been intense among road builders. Look at where HCC has moved. Dilip Buildcon is moving from circuit to circuit. It had become a haloed stock for better part of 2018. Why markets are so nervous about road companies suddenly? So you must realise that we have an election year and both those companies have some sort of a political lineage or a liaison which is why they have become the favourite bear stocks. If you go by fundamentals, I am not commenting on HCC, but Dilip Buildcon has a lot of fundamentals going for it. The award of contracts, the type of execution book they have and the type of work they put in, you would take it with a pinch of salt. It is a perfect case of risk reward at Rs 630-640. I know you have been saying that you have seen the papers and the issue with auditors and all that but I would think this will be one company which will come out with flying colours. I am not advocating, I would say if you have a wherewithal to go through the negative rhetoric than this will make out to be a good investment which over a period of time can generate superior returns.

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