Are new age platform stocks worthy of long-term investments? Ashi Anand answers 

Ashi Anand, CIO, IME-branded strategies, Valcreate Investment, says the ability of the new age platform companies to continue to compound revenues at over 25% from a longer-term perspective is very clearly there. The misunderstanding in terms of the listed market space is with relation to the longer-term profitability of these companies. What people do not necessarily understand is the sheer quantum of the current expenses are short-term in nature as these expenses are primarily linked to the current hyper growth phases that these companies are on.”Let’s start with your market construct. What is your view and where do you think we are headed in the near term?
We have had a fairly strong move in the market over the last few months. This has happened on the back of interest rates as well as inflation peaking. That was a clear headwind for the market which got removed and we saw the big move happening off that.

Now with this move, valuations are no longer cheap, especially if one looks at the core largecaps. However, there are still some headwinds. The global economic environment clearly is one headwind. Consumption is weak and inflation and interest rates have peaked but are not reducing yet. That kind of construct does not really lay the foundation for a very strong bull market until some of these headwinds go away.

That said, we are very clearly seeing India starting to look extremely attractive from a longer-term perspective relative to all other major global markets. We are seeing this in terms of the interest that we see from FII flows. It has been over $15 billion so far this year. We are seeing India becoming more attractive compared to China as it has a number of issues.

It is going to be difficult for people to allocate money to China, Europe is relatively weak and the economic outlook out there is quite low. India in this context is benefiting a lot and this should also help prevent the markets from falling too much.

The larger cap indices are probably going to be a bit range-bound over an extended period and is going to be there until we see either growth starting to come back or there is no major negative event which could force a larger correction. The one thing that we are watching out from that perspective in terms of a potential negative news flow is in terms of some of the developments that we are seeing in China, especially on the real estate side.

You have a PMS strategy, wherein you have invested exclusively in some of the platform companies. Now most of these stocks barring a few like Nykaa, have already doubled from their previous lows. Do you think a large part of the rally is behind us or do you still find these stocks worthy of long-term investments?
We are actually extremely positive about the space. Actually we have launched a quasi-private equity strategy. Our timing was very good. We launched it pretty much close to the bottom but if you are effectively just looking at what makes us so confident of long-term value creation and digital platforms, market capitalisation growth is always driven by business growth. These are the fastest growing businesses by far.

So if you are looking at a kind of digital platform strategy, we have investments in companies like Paytm, Nykaa, Zomato, Policy Bazaar etc. These are the fastest growing financing companies, fastest growing food delivery, fastest growing shopping spaces. Growth is something which is very clearly understood and there is a very clear value migration happening towards this particular part of the segment. We build long-term models and if you just look at the penetration rates in India and at certain underlying dynamics in terms of the foundations for long-term growth.

The ability of these companies to continue to compound revenues at over 25% from a longer-term perspective is very clearly there, the misunderstanding according to us in terms of the listed market space is with relation to the longer-term profitability of these companies. What people do not necessarily understand is the sheer quantum of the current expenses are short-term in nature as these expenses are primarily linked to the current hyper growth phases that these companies are on. there are four distinct phases of the evolution of a digital platform.

When you are in stage one and stage two, you are trying to change consumer behaviour and there is a very large amount of expenses to drive this change of behaviour. As consumer behaviour gets changed and you are starting to see this, you can actually ramp down these costs quite significantly and someone like Zomato introducing delivery fees.

Paytm earlier used to have cash backs and these are no longer there. A lot of the costs that were involved in trying to ensure that consumers participate on a platform, can be rolled down quite significantly and also various monetisation levers can be introduced. This can lead to very healthy profitability over the longer term and according to us, a combination of much above industry growth along with a shift towards profitability should lead to very attractive value creation.

Read More News on

(What’s moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

Download The Economic Times News App to get Daily Market Updates & Live Business News.

Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price