“Value migration from public to private sector organizations for the recognition disbursal is happening and that is going to give a massive advantage to the banks which can do well, ” says Raamdeo Agrawal, Chairman, Motilal Oswal Financial Service. When we talk about history, the big-hearted variable cause is inflation on one side and interest rate fluctuation on the other. That is how the markets please give doubled toe returns. We are look at this place a different environment of excess liquidity and perhaps low-pitched interest rates. How does future figuring and premises alter because of that? Interest rate has played a major role because till 2000 we are talking more like doubled digit or 12 -1 3% -1 4 %; 15% used to be the NCD bails. Then we spoke 10 -1 2 %, then we spoke 7-8% and now corporates are getting money at 4-4. 5% likewise. So there is unprecedented change in the cost of money. Even inflation has moderated in India to around 5-6 %. The markets are very world-wide, Europe is at zero or minus, America is at about 1.5% 10 years paper and Japan is again flat. So the issue is that in a globalised environment, the money is pouring in from all regions of the world. The forex balance has went on to $ 650 billion and the interest rates cannot be very much misaligned. If the US 10 -year is at about 1.5%, we can only have 6.5% or 7% as your 10 -year paper. So if US proportions do not go up hugely then we are looking at 6-7% interest rate for a very long time and that is a fundamental shift on how we appraise growing because this is a growth economy. The main economist is saying that we will grow for the coming decade at 7 %. He expects the economy to grow at about 7% for the next eight, 10 years and so with 4-5% inflation, we will be discussing 12% nominal GDP and the corporate earnings will grow at 13 -1 4-15 %. At 7 %, 6% various kinds of a discount rate, we can see the growth of 12 to 15%. So having an index PE of 25 -2 7 is not out of line. When you say this bull market cycle is different, what is so different? Every time the market cycle conversions, you have also changed as an investor. Ten years ago you would have even went close to investing in a company which was loss hit but now you have invested in Zomato? Yes, so “thats what” I am saying I am increasing the circle of competence and I could be wrong, I am not saying that I has now become master of the game or anything like that but, essentially the emergence capex is coming from P& L not from the balance sheet and that has to be understood. When one looks at a loss-making P& L, in a number of cases, they are actually realizing losings. What they are saying is that is the scene and they will always be compiling losings. One has to figure out which are the companies that are showing losings right now. But they have the potential to form billions of dollars of profit in the next four, five years, six years old. One has to differentiate between the companies which will never move gain or will oblige very thin profit and the companies which are actually destined to make a lot of profit because they are not basically addressing a$ 3 trillion economy, they are addressing a $90 trillion global economy and that changes opportunity size for these companies. We have to go and see in our due diligence whether these guys are competent and have the business model which is going to match the expectations. If I look at your famous wealth creation study — Infosys, Wipro, Kotak Mahindra Bank, HDFC — time and again these are the consistent wealth architects. Since you are talking about the digital start up world coming in, hypothetically if this is the wealth creation study of 2030, do you think the identifies now would be very different because between 2010 and 2020 the refers have not changed? A lot of new mentions have come. There are two categories; one is the largest wealth builders and the fastest wealth creators so the larger set has not changed much, I make the changes are slower, they have changed but they are slower in the changes. But in the fastest, every time it is a different colour. That manifests the fastest in 5 year. The fastest resource designer companionships are the companies which are flavour of the activities of the decade or flavour of the time. So, that flavour has been converting. If you go to see its first year 2000 study, almost all of them are tech companies. The 9/10 fastest growing companies were the tech companies and often the mortality rate in the fastest wealth creating companies is highest because you exactly cannot sustain 200% compounding, 100% compounding for 10 times. 100% deepened for five years will be like 100 epoches. The question is that the level of stretch in valuation is very difficult to justify by fundamentals and when people realise that it is not possible, then things come disintegrating down. So, this is going to get repeated in digital fellowships. I have construed it happen with the soya firms, tech companies and real estate companies. This is the time for digital companionships. In the past, you have invested in Asian Paints, HUL, Nestle– all classic customer rights, huge ROCE fellowships. They do not heighten uppercase. If one makes a basket of top three consumer corporations and top three buyer tech business, which basket will create more wealth? Second one. Why do you say that? Because the opportunity size is so gargantuan. Three world-wide consumer tech companionships are the best lesson. The pace at which the consumer tech companionships will encompass the whole country or around the world, can’t be done with the old-time customer firms. Old consumer business has so far been expanded their dissemination and their growth rates are very close to the normal GDP growth rates. So they will struggle to grow even at nominal GDP. For all these mentions, double toe growing is very aspirational — 10 -1 2 %, 13% which is basically your nominal GDP growth rates; even “thats been” engendered with the help of some kind of inorganic possession. These companies are very competent with big free cash flows. Almost 100% of profit is free cash flow so there is a tremendous value creation for the stockholders. But these companies are available at 80 -9 0-100 PE multiple. So they will make as much as these three tech companies but today the growth in the profits from a humble Rs 100 or 200 crore to maybe Rs 2,000 crore, 5,000 crore will happen in digital companies and not so much better in the old-time firms. Read likewise: Market will correct and mini sounds are likely: Raamdeo AgrawalMy smell is that the old business will continue to keep going at 12 -1 5 %, whereas these companies will be increased at the rate of 40 -5 0-60% and maybe even 100% for a few years and then operating leverage will kick in and they will grow slower. The next 10 times are more strange meter for the digital firms. When one invested in the IT area, the idea was to buy a application companionship because the sector did well but Zomato’s business model is different from Nykaa and Nykaa’s business model is going to be very different from Policybazaar. You can call them digital firm but how does one understand which is a good digital busines? One of the challenges with the digital fellowships is that they are different. Every single company is different. Two companies are not the same at all. Zomato is different from Nykaa and Nykaa is different from some other companies. They are addressing highly niche opportunities and since they always conduct in the digital infinite, very quickly there is consolidation even while swelling is there. So there are typically “re going to be” two or three actors. It is almost like a winner takes all in that special gap. They are going to be very unique and right now they will be doing it in India and they have a potential to go global likewise. Once the framework is clear on how to be addressed digital fellowships, then one has to go to the specific company and try to fit that corporation to that structure and figure out whether it fulfills your objective or not. You have extended a portfolio which by and large is tilted towards financials- private banks, insurance. The grocery is telling us that fiscals are not participating, high growth fellowships are not going to banks for asset. UltraTech Cement wants to do capex but they are generating so much of cash flow they do not go to the bank. Same is the case with Tata Steel. What happens to business? For one, private capex will start. There are a few companies like Tata Steel and they have a terrific cash flow for a few years. They do not need bank subsistence but they are the companies which actually took all the lends in the last 5-7 years. There is likely to be other segments like infrastructure or plaster companies and a lot of consumer companies. So, I do not know from where that loan challenge will come but as the economy picks up, if as a country we can deliver 7% to 8% the direction China does it in which is something we do, rest all will be taken care of. There are not many growth economies the size of India. When “theres going” from$ 3 trillion to$ 6 trillion in the next seven, eight years, it will require Rs 150 -1 60 lakh crore of approval. The constitution could be different but we will need credit. Economic development is on the back of credit intensity. Credit strength of incremental$ 3 trillion will be far higher. Now where are the banks which are going to do it? There are only five, six banks which can underwrite and even the government is saying now we want to fold up all the PSU banks into four or five SBI type large banks. So five PSU banks and five private sector banks — all in all we will have 10 banks which will underwrite maybe another Rs 110 lakh crore merit of credit, which is a huge opportunity. So evaluate movement from public to private sector organizations for the credit disbursal is happening and that is going to give a big edge to the banks which can do well.

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