'Indian cos are now thinking global'

Last Updated: Mon, Jun 02, 2008 07:06 hrs

Srinivas Rao Ravuri rues that there is no restaurant serving authentic Andhra cuisine in Mumbai. And with spiralling realty prices, he doesn't see the chance of anything coming up soon. Otherwise, he is happy to have made the move to the maximum city, fourteen years ago.

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Srinivas is a senior fund manager at HDFC Asset Management company. He has over 12 years experience in Indian capital markets, primarily in equity research and fund management. He joined the company in October 2004 and manages the HDFC Growth Fund and HDFC Long Term Equity Fund.

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Srinivas has also worked with top brokers such as Motilal Oswal Securities and Edelweiss Capital. He is a commerce graduate and possesses an MBA (with specialisation in Finance) degree from the Osmania University, Hyderabad. He spoke to N Sundaresha Subramanian and Khyati Dharamsi.

How was the move from being an analyst to a fund manager?

It was smooth. Personally, I aspired to be a fund manager. Fortunately, I have covered almost every sector at some point or the other in my career, barring pharma, oil and gas. This has helped me a lot as a fund manager.

What is the difference between two jobs?

Here the buck stops at you. You are responsible for your decisions.

What do you look at when you are picking a stock?

We look at the sustainability of the business and the opportunity for the business and for the industry, in which the business operates. For example, take a company in welding industry. It's a Rs 2,000 crore industry.

However, good may be your opportunity, your upside is capped. On the other hand, in telecom industry the potential is big. We also look at the returns they generate and the potential returns from the stocks.

What about valuations?

What we are paying for the opportunity is also important. The company may be great. But buying at reasonable prices is crucial.

How important is visiting the company?

Seeing the facilities and the processes makes a lot difference. It helps you understand the business better. Typically, once a week, I'm out of Mumbai visiting companies. I like to travel. You must have visited a number of companies over the years. What change do you see in them?

One remarkable change is that most of them are looking global. The perspective has changed. They are no longer looking at the local market alone. China has been a big eye opener.

Sometime back, when we were not growing as fast, companies and individuals were forced to look at outside market. That has given the confidence that they can sell outside India.

Multinationals who have come here for business have taught us a lot about people management and shop floor.

But, we still have to catch up with China in a lot of things…

We lack the infrastructure. For example, a Chinese company's consignment typically reaches its US consumer in a week's time.

But, for an Indian company, the same may take a couple of months. They have reached the scale, which makes it possible. We are getting there.

What is your assessment of the current market fundamentals? What is the strategy you are following?

We have seen a PE derating in the last four months. Rising commodity prices and high inflation and falling currency have put a question mark on corporate earnings growth. We need to wait till clarity emerges. As a house, we are taking a cautious view and moving to relatively safe sectors such as FMCG and pharma.

Does being cautious also mean holding cash positions?

Right now, we have 10% cash in the two schemes I manage. In the infrastructure fund, we are slightly higher position around 20% as we are still deploying.

What is your view on the real estate sector especially with real estate mutual funds coming up?

In the long-term real estate MFs would be good for the investors. But, on the real estate sector, we have a negative view.

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What is your view on the IT sector?

The IT companies will do well. But, there are concerns on profitability. If India does well, then rupee will appreciate. That in turn puts pressure on margins.

What price you are paying is also important.

We are underweight on IT because of concerns over rupee, cost pressures and profitability.

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