Expect telcos’ profits to improve going forward: Shibani Sircar Kurian

What do you do with Reliance now? Just when you thought that Reliance also is ebbing off with the rest of the market, here comes this deal and it puts Reliance into a different orbit altogether. You think this further improves the prospects of telecom as a sector? Similar in the line would also be Bharti which has fallen the least in the current market fall since March?
While I cannot really comment specifically about a particular company, let me talk about telecom as a sector. Now this is a sector where we have been positive. We believe that even in the post-Covid situation, this sector will continue to gain traction. Also, it is a two-player market or a three-player market. Clearly the market players are now focussed on profitability and hence it is a great possibility that price stability or price increases are here to stay, which means that on the overall basis, the sector and the players will see improvement in terms of their profitability and that is what we expect going forward.

Overall from a sector perspective as well as from a market perspective, consolidation has been the name of the game and in this sector, too, we have seen that market share shift taking place and that is something that is likely to bode well for the sector as a whole. So pricing is likely to remain firm. Possibly over the next 12-18 months period, you are likely to continue to see price hikes, which is likely to flow through into better profitability for the sector as a whole.


In terms of some of the other movers that we have been tracking, particularly media, we are just seeing a fantastic move coming in on Zee. That also has several other factors but do you see any merit in perhaps some of the more content-oriented media companies?
So overall, the media as a sector has been one where we have been extremely cautious. Even before Covid, it has been undergoing a significant amount of disruption and the way of functioning for the sector as a whole has undergone a change. This is likely to undergo further changes as we go along and therefore disruption will be rampant in the sector.

Also, given the fact that overall economic activities are likely to be under some degree of stress, even the advertising part of the revenue for the sector is also going to see some degree of stress. So I think this sector is one where we would like to remain cautious. We have been avoiding the sector as a whole and the view does not really change for the media as such.

Wanted to get your perspective on the crude cool off beneficiaries. You know a lot of these ancillary names which use crude as a key raw material; paints for instance even in the last lap of the market in the run up to those all-time highs up until February had paints hold out just beautifully. Even when we were awaiting earnings recovery, paints was one segment which continued to post great amounts of volume growth even amidst the slowdown, which we were grappling with before the pandemic struck. Do you see sense that these are names to be bought afresh even now?
Yes, while there are some segments of consumer discretionary which benefit because of the crude oil price coming down, our overall view has been that in the consumer space, the preference has been towards staples over consumer discretionary. For consumer discretionary demand to come back, it will still take a significant amount of time and even post the opening up of the lockdown, until and unless consumers get a sense in terms of their own job security and salaries, it is likely that large ticket consumption will still take some time to come back to normal.

Staples on the other hand; while there has been some degree of disruption because of down trading or because of logistics, clearly from an earnings perspective, they still are better-placed and the impact on earnings will be lesser than the rest of the other sectors. One may argue on valuations but these companies clearly have balance sheets which are strong. They are not leveraged and therefore, in this uncertain environment, they could still be a good hiding spot as such and therefore, from the consumer sector, overall the preference of staples over consumer discretionary remains.