Want to buy telecom? Go 50:50 on Reliance and Bharti: Hemang Jani

I would definitely not be in a hurry to buy into any of the real estate names, says the Group Senior V-P at Motilal Oswal Financial Services Ltd.

It is all about Reliance AGM. Could today be a day of buy on rumours and sell on news for Reliance?
Yes, the expectation built up has been very high and we have seen how the stock has run up in the past few weeks and months, a) because of the entire investor community which has come into the company as investors and b) because this is one theme which is really catching the eye of all the investors.

From an AGM perspective, expectations are high and so it is possible that you might see a little bit of correction or volatility depending upon how exciting the announcements are.


Our belief is that if you leave aside that little bit of volatility overall as a theme as the way the company is positioned and more importantly, in the next few quarters the kind of positive triggers that you can see in terms of the demerger and the value creation can drive the stock.

I am not looking at any kind of short term volatility. This is a theme that every investor should have in the portfolio and from that perspective, it will continue to be our preferred one.

Talk about some of these real estate counters. Prestige is buying a stake in DB Realtors, we have got Anamudi Real Estates that is a Godrej Group company hiking a stake to 9% in Sobha as well at the end of Q1 that is coming in. Oberoi Realty numbers are as expected hit fairly hard, but margins still look intact. They are looking at raising funds as well going forward. Would you still find value in perhaps one or two real estate players that have managed to stand out despite the volatility in the market otherwise?
We should wait for some more time before even venturing into buying any of these real estate names. The numbers announced by Oberoi Realty on the real estate side shows the fall is 95% and given the way people are going to look at the business in a post Covid environment, on the commercial side also, it requires a lot of patience for one to figure out how things are going to shape up.

In terms of the worst being over, maybe yes because it is an evolving situation and we do not know how the next one or two quarters are going to be across sectors. So, real estate is the space where people do not have much of clarity about how things are going to shape up.

Anyway, there are a few large quality players. So, you have a Godrej Properties or to some extent Oberoi and Prestige. I would definitely not be in a hurry to buy into any of the real estate names because of the moving parts and because of the way the structural story is going to pan out in a post Covid environment.

If one has to play telecom, is Reliance which is more of a conglomerate a better idea or it is Bharti which is a pure play telecom? They both have their merits and demerits.
The way I look at it, the entire Reliance upside has only come from Jio. If you look at the core business, the overall valuation in the SOTP has gone down because of the positioning that the management has portrayed in terms of telecom being a very big story and the entire ARPU growth, subscriber addition etc.

Apart from that, one is excited about the entire Jio Platform and the way the e-commerce story can pan out eventually where retail is an important component of the overall business that can possibly provide a big trigger.

We do not know how it is going to be because on the e-commerce side, things may not be that easy the way people are projecting it in the US and China etc, etc. That may or may not play out but overall looking at the kind of positioning that they have, I definitely think Jio itself will provide a very big upside to the overall valuation over the next one or two years.

Remember, we all think that Reliance has gone up by almost 50% or almost 100% from the low but it is not as if that this is just a one year story because the ARPU growth and the subscriber addition will continue to keep pace over the next two or three years, if not more because there are only two large players.

If you are an investor then why have that debate whether I should buy Reliance or Bharti? You should definitely have an exposure to telecom and you can divide your allocation between Reliance and Bharti because Bharti continues to be a pure telecom play with a very strong positioning at this point of time.

I as an investor would want to participate in both the companies with a 50:50% kind of an allocation.