Vodafone Idea: Will the selling pressure on PSU shares continue? Sudip Bandyopadhyay responds

“While the liquidity challenge is significant, the operational challenge is equally critical. Now, after the Supreme Court verdict, Vodafone Idea will have to rethink its fundraising strategy,” says Sudip Bandyopadhyay, group chairman, Inditrade Capital.

Let’s start with telecom stocks. What is the way forward for Vodafone Idea and what advice do you have for investors who may be trapped in the stock?
Sudip Bandyopadhyay: I have always maintained that buying Vodafone Idea is like buying a lottery ticket, largely dependent on the AGR issue. Unfortunately, the decision did not go in their favour, which is absolutely devastating for Vodafone Idea. The cash requirements that they will have to face every year due to AGR dues are crushing. This is very bad news for Vodafone Idea. Another issue that has been plaguing Vodafone Idea, apart from AGR dues and fund raising, is the operational challenges, which have also been severe. Despite the fund raising that they completed a few months ago, they have been losing customers month after month, which is definitely a worrying sign for the retail business. Continuous customer loss is a very negative indicator. They need to address this issue urgently. While the liquidity challenges are significant, the operational challenges are equally critical. Now, after the Supreme Court verdict, Vodafone Idea will have to rethink its fund raising strategy.

We talked about foam building in some areas, PSUs across the board are feeling the effects. Do you see further selling pressure?
Sudip Bandyopadhyay: In some sectors, yes. I mentioned this earlier, especially in the defense and rail sectors, where valuations looked high, leaving very little room for error. A correction was inevitable and that is what is happening now. Several recent reports from research houses have significantly lowered targets, especially for companies like Mazagon Dock.

I am not saying that these reports set the final targets, but the fact remains that valuations were high and some correction was expected. None of these stocks are bad; they have good prospects. These sectors and many others where PSUs operate are seeing activity. But valuations have to be in line with reality and they have increased too quickly. So some correction is normal. One area of ​​PSUs that I remain positive on is the power sector, where there is a secular, structural change for the better. For example, NTPC has shown value unlocking through its green energy business and it continues to be a good investment in the long run. Some energy finance companies, despite recent corrections, also remain attractive. As energy demand grows and capacity is added, these companies are poised for profitable business.

Now that we have officially entered the festive season, with Navratri, Dussehra and Diwali approaching, where do you expect to see significant growth? There is a clear slowdown in passenger vehicles.
Sudip Bandyopadhyay: One area where I expect a pickup is the two-wheeler segment and Hero MotoCorp stands out. It is in a better position than its competitors in terms of valuation, with a significant presence in rural and semi-urban areas. We expect a pickup in this segment. There are also certain consumer pockets where we expect significant growth. One company that comes to mind is Dabur, which has over 50% of its business in rural India. HUL could also benefit from growth in rural areas.

In addition, some durable consumer brands, particularly at the lower end of the market, should see increased demand. Smaller retailers such as V-Mart are also likely to benefit.

Is it time to reinvest in public sector stocks or do you expect further consolidation?
Sudip Bandyopadhyay: Barring the power sector, which I still prefer, I would not look at other PSU stocks at this stage. The power sector deserves attention. Among other PSUs, Bharat Electronics (BEL) looks promising after a correction, but it is more of a long-term investment. BEL serves the Air Force, Army and Navy and has also started exporting. It has always been efficient, with strong track records. While its valuation remains a bit stretched, it is still a good entry point for long-term investors after a correction.

Do you expect a significant revival for banks? We have seen some movement, but there have been many false starts. Do you think it is sustainable this time?
Sudip Bandyopadhyay: I believe a revival is inevitable. Interest rates are bound to come down and when they do, efficient banks will benefit disproportionately. However, there will be stiff competition for cheap deposits in the coming months. Demand for credit is growing, so banks that can mobilise cheap deposits and lend effectively will emerge as winners. Among private sector banks, I would recommend HDFC Bank for long-term investors. For smaller banks, IDFC First Bank looks promising, with fast deposit growth and an improving balance sheet.

Apart from banks, NBFCs like gold lending companies and housing finance companies should also be considered, especially after the situation calms down after the listing of Bajaj Housing Finance. These sectors are good for long-term investments.

We’ve seen IPOs like Ola do well and then consolidate. Are there any recent listings that you still like and recommend if they’re at attractive prices?
Sudip Bandyopadhyay: Brainbees Solutions, the parent company of FirstCry, could be worth considering if its valuation is attractive. Unlike Ola or Bajaj Housing Finance, there hasn’t been as much hype around Brainbees, which could make it an interesting option at the right price.