Looking out for Future Infys !

SEctor which has always been considered defensive till now but which will only expand: "In sickness & in Health, till death do us part" - Pharma & healthcare..

hello guys!

I m a fresher in this group n in this field too so plz correct me if i get wrong somewhere ...taking the discussion further I would add that the defense sector is today and will always be pinned some way under the govt controls... The management or the promoters wud not be at their free will to give direction to their products ...I mean ..they ll face strict govt regulations and controls(both transparent and opaque ) in global business...as regards to the countries to which they can sell their products...also one can't expect these to sell their entire produce in their own country.

So, I feel that the investors might have to take greater precautions while investing in this sector. The country risk wud be high!

Keya

Riding my learning curve...

hi keya,
its all about perception, how you look at things. take India for an example, almost entire of India's defense procurement is from US, Israel, France,South Africa, UK and of course Russia being the largest arms supplier. my simple question is how the country could be safe when we are at the mercy of foreigners. wouldn't you think home grown industries would be much more better bet, in which the government has a say.

i always believe every industry should be properly regulated. regulators not only safeguards consumers, but also investors, lenders, workers, and of course the industry at large. government regulation is not bad. what really matters is how things move at the government. it took narayanmurty 6 months to get an license to buy a computer during the early 80's. even after 15 years of liberalization things at the government office hasn't really changed. remember, if you want to sell a simple Hot dog in the US you need to obtain more than 90 different licenses before you could hit the road. but then its not how many but how you get your things done.

the perception of risk is a very vague term, particularly is todays world. you really do not need to have canons or bombs to put a country at ransom. the simple PC you are using can be used as a lethal weapon.

cheers,
jdm.

Dear JDM

I understand the importance of regulations for any industry. But we need to assure that who the regulators are. In cases where national security is concerned the government always has a major role to play and it should! But the Government here can not entirely be trusted. U c the move of US to sign the nuke deal with India was to thwart or rather put a stay on the oil pipe line which was on cards of Indian govt.This nuke deal took the attention of the govt away from pipeline issue(now no points for guessing why US wanted to thwart the attempts to make the oil pipeline operational)

If govt really cared abt the industry i wud ve gone ahead n done smthing in this regard...

Considering the Indian scenario, here indusrty and government do not necessarily go hand in hand....unlike US or Europe where the scenario is is entirely different the policies of the government r actually driven by the industry leaders...say the heads of US major MNCs..

The point I am trying to make is that the profitability of any defense company will have little share in the eyes of Indian govt. ,while it ll be of prime importance to the investors.

Well i understand ur concern that we are at the mercy of foreigners...but analysisng the sector potential from the point of view of an investor and as an Indian citizen r different.

No doubt we need defense companies but... but profitability can't be assured.These companies face the fear of nationalization and bans (many cos in russia have had a similar fate..they wer accused of possessing deadly weapons and nukes...Nothing is certain if they wer really into this or just uncle Sam was not happy with them)
Defense cos have always been under the speculative eye of when Uncle Sam always.

( Guys...my writing may not have a proper flow...just learning to write ...)

I hope i could make my point clear. Pl correct me if I got the understanding of the subject wrong.

Regards

Keya
on the learning curve..

Hey Guys!

I appretiate the points suggested by jamil.

I was just wondering if I cud add to those 10 points....i propose to adopt the approach of fundamental analysis..I mean analyse the company on an EIC frame work.(those 10 pts are the I n C parts of the EIC approach)

We need to consider the economic and political environment of India while studying the industry prospects. Like there are some sector which might be under strong controls of the govt..and other countries.(i ve talked abt it in my previous post )

we need to analyze if the economy and politics of our country provide a healthy habitat to the specific sector concerned. I agree change is the name of the game..its the only thing that ll remain constant in future...the makets are dynamic

somebdy is well said" the markets are changing at a faster rate than the decisions taken in the board room"

So..may be we our predictions go wrong wen the time comes...but y not go ahead on this...

Cheers!

Keya

well its perfect for the US to stop the iran-India pipeline. its suit their national interest. as for India, well it has two options. either to get her nuclear program ratified by the world body or go ahead with the pipeline and save some green-bucks. India choose the former and if you ask my opinion, i would have done the same.

i always believe the job of the government is to run the country and not hotels or bank. buts its a pity thats exactly whats the government is doing. running hotels and banks. the job of the govt. it to regulate. instead of running banks and hotel. the govt. should regulate those industries. just look at the chaos when one speaks of the cable tv industry. the govt. does not knows what to do. the force of globalization is so strong, that it gives only one message - change or perish. china has recognised the fact 25 years back. India may be late in realizing this simple fact. but better late than never.

the job of the govt. is not to make profit but what really should be the govt. worry is about the social well being of its citizen. just think how many job a sector like defense (India spends 14 billion US dollar annually on defense) will create. and if it helps the investors, as long as the investor is Indian I'm happy. theres acute dearth of good script in the Indian market. as i already mentioned early in this thread, 2500 scripts are traded in BSE on a daily basis. 80-90% are jhumrutalaya & co. any good company will be welcomed by all.

if the investor is an Indian, well thats a bonus. but even if the ownership lies in foreign hand, look at the jobs they are creating. and above all the the govt. has an access over the plants. just imagine a situation, India in a midst of a war and its foreign suppliers refuses to supply crucial defense materials. remember during Kargil India has to buy coffins each costing more than ten thousand US Doller. well a nation in the midst of war have no choice.

profitability of any company in any sector cannot be guaranteed. we wont set up companies because it may not make profit is certainly not the perspective in which we should really be interested in.

ok bolivia is nationalizing its gas reserves. but then its a step backward. any country which eying tomorrow and i believe India is one of them will never take such drastic steps unless as i said if you want to go back.

SO!, India is a sovereign country. and as for Uncle Sam well don't you think its normal for them to do so. any defense company of Indian origin not only mean competition for Uncle Sam but also a shrinking market for its goods.

no need to be modest. you are doing fine.

cheers,
jdm.

hey jdm...

Do u think politicans...the regulators wer regulating wen they wer making big bucks during the defense deals(there have been so many cases)...We are at the mercy of politicians, who in the name of regulating make deals with companies that take care of their pockets...

I don't govt to make profits..but to provide an environment that aids in entrepreneurs make profit

If we r making ammunitions...Firstly we need to see the market(clients)...what is our market..definitely not civilians and terrorists..Our mkt is army...making it simpler..the government..the politicians...This implies that there does not exist a fair play

wat u say is wat is ideal..but how much of this expenditure is actually routed to defense ppl.


the fact i m emphasizing is that ..the defense sector..or making ammunitions is not just another sector...it is much dependent on the favours from politicians

Just a good product from such the company won't make it successful..nor marketing...It will depend on the govt...who gets the contract???


Keya

Hi Friends

Way back in early 90s some of us decided to accumulate future blue chips.We thought about the scrips and finally zeroed in on Indian Shaving Products, now Gillette india.It was quoting below 20 and we decided to buy 100 shares every month.
Reason for selecting ISPL was that its parent gillette was the company with the highest GP margin in the world and we knew the company will survive as long as men have whiskers on their face

The share peaked around 600 in 1992 and fell .it took another six years to reach that level again.During this period I lost patience and sold out.

Eventhough we cant compare with infy it gave me reasonable appreciation

Now let us try and identify some future bluechips.

Regards
Niranjanam.

look, what you are saying is fundamentally differnt from what we are discussing. theres no dobut corruption is a big issue. but corruption is not an indian phenomenon. but a global one. look at US - enron, tyco, CA so many governence failure. you must be knowing by now the boss of the korean company deawoo has been imprisoned for 10 years on corruption charges. yes india may be a bit late but what appeses me is the fact India is in the right direction. its matter of time before the force of globalization put things to right. its matter of time before we will see these polititian, corrupt govt. official and shady business persons are booked as they are now in US UK korea and other developed and not so developed country.

thats what i say. the job of the govt. is not to run hotel but to run the country. the sooner the govt. realises this the sooner we have good governence.

look we are already making some defence materials (hindustan aeronotics,HAL for example). we are exporting the same to other countries also (dhruv helicopter made by HAL to chile for example). we have made quite a big progress in space technology. look nasa is sending some of its equipment along with the moon mission of isro. but the scale is still too small. the oppurtunity and the market is still untapped. the question of foul play arises only when we have a saturated market.

which sector is not dependent on politicians or i would use the word government.

well again you are taking about corruption. which i discussed in the first para.

cheers,
jdm.

An excellent thread!!
My two bits of thought......
I think future multibaggers will probably be from
(a) Pharma & Health care
(b) Retail & Agri retail
(c) Aviation sector;
(d) Innovative tech sector - Nanotech

Why ?????????? -

(a) Pharma & Health care - People will always fall ill and will need medicines; Medical tourism set to boom. Organised health care sector covers very few regions presently.Drug companies investing in R & D on huge scale. Trained and qualified manpower available.

(b) Retail / Agri retail - Very very miniscule organised retail market in India. Will have to change - Reliance betting heavily on it. Mittals of Bharati entering Agri / agri retail business...... both are extremely sharp and shrewd business minds ( Waltons - Richest family in world before Bill Gates - all fortunes from retail; Many European fortunes also based on retail).

(c) Avaition - India again ready for a huge leap with private players. What does it need - planes, runways & airports & trained personnel. So though airline companies may not do too well besides being cyclical in nature related companies such as aircraft manufacturers / avionics / radars etc etc will benifit. Also if planes are imported because of sheer size of deals lot of subcontracts are given to the importing country which benifits the countries ( mainly politicians though!!!) and make the deal go through faster. Next you have to have good runways and airports to use these planes.... so infrastructure companies going to benifit. Also companies training pilots, technicians stand to gain as there is acute shortage for them. Those providing technical support services will benifit immensely since many airlines ( especially smaller ones do not have full fledged tech support..... they subcontract or lease out these)

(d) Innovative tech sectors - mostly they are funded by venture capital chaps.... unlikely to be in capital markets in initial stages ... however if they do strike upon something will seek listing though at very high premiums cos mostly based on media hype etc etc. But there will be surely some small companies there waiting for just the right break at the right time!!

Also I think we have to go on purely fundamental analysis. Warren Buffet (WB)does that so does Rakesh Jhunjhunwala (RJ )( at least i think so). So we have to find out companies with high returns on capital ; good dividend yields returns and low PE ratios - as simple as that!!!! Only problem is to dig them out. I know that in intial stages WB did not have too many people doing reasearch for him . Even now RJ has probably just 7-10 people doing research for him............. so i guess with all our collective wisdom (members of Traderji) we should be able to zero in on atleast 10 companies.

Regards