Any comments on this perhaps impending transaction in HUL and the basics space in general if you have been watching it closely?
Deepak Shenoy: To be honest, I haven’t been keeping a close eye on this. We have made an interesting move, but they don’t make ice cream, they make frozen desserts. Here in India they are not allowed to call it ice cream, but globally they have one company, so maybe they have to sell the ice cream business to another company globally and then the only way in India for it to work in a meaningful way would be if they demerged HUL within HUL and then the frozen dessert business would be a separate business and then the new buyer would take it over. That’s how Indian markets prefer demergers like this to happen because otherwise it would be a sale to a parent entity and that doesn’t go down very well with shareholders because it may not be valued. India is valued at 66, 70 times earnings. Nowhere else is Unilever valued at that amount. So, no buyer will want to pay the Indian level of valuation for that business, so I don’t think that will work. They will have to demerge it. So that may produce some kind of value release if some capital is released or some change occurs, but I don’t expect that to actually result in a cash inflow. THEMSo, while everything is up for grabs at the moment, we don’t know much beyond the announcement. I would say let’s wait for this to play out globally before making a decision on what will happen with the business in India.
What exactly is going on with PFC? That particular stock is down about 6%. We’ve seen stocks like PFC and REC Enjoy a nice run. But do you think this run is limited at the moment or that essentially nothing has changed and we are simply seeing a period of profit-taking in these names?
Deepak Shenoy: To be fair, I think stocks have been weak for a while. We’ve owned them, so we probably have a small part even now. But stocks have performed phenomenally. So having a 3% to 5% correction is not really a big deal because they went up similarly.
He Fundamentals This stock has always been good. Ten years ago it was great with a P/E of 8. Then it went to 2 times P/E. So the price fell and earnings rose. And now it’s back up to 8 or 9 times earnings, so at its core I don’t think it’s a significantly overvalued stock.
But overall, I think that the flows into stocks and the fact that earnings will take a reasonable amount of time to start to show will be one of the factors driving daily growth here. stock prices. So, I don’t know where it is, whether this 6% is the end or whether there will be another 6% or 10% drop and all that. But I do know that fundamentally speaking, certain things have changed for the company. There is a greater focus on renewables. I think that was reiterated last week as well. And as India becomes more and more energy efficient and maybe
As we move away from coal, oil and gas, we will see PFCs and RECs playing a key role in ensuring our move away from these fossil fuel-based energy sources is funded and sustained over the next decade.
Of course, stocks should be volatile as we move forward, but I don’t think the fundamentals are in bad shape at any of these companies.
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