Betting on specific private banks, NBFCs: Sanjeev Zarbade, Kotak Securities
“Interest is coming back in the IT sector because of the improvements in the US economy”
What is your view on SIS India?
Someone rightly said that it is a new IPO and is engaged in the business of providing security solutions and the good thing about the business is that it is not very asset heavy and the capital employed is also very low. Plus, you see that the staffing services can be a big market going ahead because of the sizable nature of unorganised market that exists. There is a lot of market share that the organised players can actually take in the staffing services market and incidentally our institutional team has also come out with initiating coverage on the company and have a positive view on the company.
Do you have a target on SIS India?
Yes, they do have a target though it is not very significant from the current levels but the view is positive and the kind of numbers that they have announced yesterday also bodes well for the growth outlook going ahead.
Is the opinion changing on IT? I mean Infosys is holding out in an otherwise lacklustre market, would you make that call?
On Infosys I am not at liberty to speak because of the compliance reasons related to the buyback but I do see interest coming back in the IT sector because of the improvements in the US economy.
What is your view in general in some of these staffing companies like, Quess Corp, TeamLease? SIS for me is more like a staffing company, security management is part of staffing. Is there scope for some of these businesses to go higher because none of these stocks are cheap?
Yes. In my view, there is good opportunity for these companies because these are sectors which have not really been in the limelight and now they are below the radar. In terms of organised and unorganised sector, they are moving to the organised sector. And importantly, these companies are growing through acquisitions and that is the opportunity available for these companies. In my view, given the kind of demographic situation we have, I believe the growth opportunity is very significant for the staffing services, especially in the security side and even the teaching side or the police side, there is huge opportunity available. We have a buy on Quess Corp.
Your top picks among banks include Yes Bank, IndusInd Bank with the kind of inclusions they have seen in the Sensex, I am told that Yes Bank also joins the MSCI World Bank Index. Would they be your preferred bet, what is the pecking order among private banks?
Among private banks, we like IndusInd Bank and also Federal Bank. However, on Yes Bank, we are a bit negative mainly on account of the high valuation that the bank is trading at. Otherwise we are quite positive on the private banking sector because of the kind of opportunity that the secotr has as they only have around 25% to 30% of the overall lending business that is there in India and there is huge headroom for growth in market share. So, we are positive on the private bank space and on IndusInd Bank but on Yes Bank we would be bit cautious.
Which is your favourite financial stock? Looking outside banks because the minute I say bank stocks before I finish my question the automatic answer is actually HDFC Bank so let us not go there, let us talk about something which is in financials but is not a bank?
In the non-banking finance space, last quarter’s earnings by the NBFC sector were quite good because the rural sector has seen a good improvement in cash flow plus there was not much of impact because of GST. Hence the numbers reported by the likes of Bajaj Finance, L&T Finance as well as some other names were quite good. We are positive on HDFC because the demand for housing finance as well as affordable homes continue to be good.
We also like Chola Finance because of the demerger scheme that is happening. These are the two stocks that we prefer on the nonbanking space.