Anupam: Hi Listeners, we at Aditya Birla Sun life Mutual fund have come up with a special podcast series called MF 101 in collaboration with Bloomberg Quint. MF 101 is an informative series that will help you understand the recipe behind mutual fund investments and what’s more? It’s coming from the chefs of the mutual fund buffet table. From the very own fund managers and analysts who are the manufacturers of the funds that help you realize your investment goals.
Hi I’m your host Anupam Gupta, B50 on twitter and in this episode, we are going to discover the recipe behind Emerging sector from our guest chef Kunal Sangoi who is a Fund Manager and Senior Equity Analyst at Aditya Birla Sun Life mutual fund. Hi Kunal, welcome to the show. Before we start tell me something about yourself you know how you started your career
KUNAL: Thanks, Anupam for having me at the show so I am a CA by qualification and was always wanting to make a career in equity markets. So, after qualifying you know I joined Edelweiss securities, there I worked as equity analyst on the IT sector on the institutional desk. So, I have been looking at this sector since 2005 and have seen you know some of the major blow up of Satyam scam and the other things. So, since then almost 13-14 years in IT sector. After that I joined Aditya Birla sun Life Mutual Fund in 2012 so have been looking at IT, media, telecom, internet sectors and also you know in the capacity of fund manager in some funds. So, it's been fantastic journey and I have always wanted to do equity research and that's what I have been enjoying.
Anupam: Fantastic! You had really long period of time to look at these sectors. They are all new in a certain sense, but they have also had the life cycle in the last 10-20 years. Can you tell us something about these sectors IT, media, telecom and internet? Each one of them are like one entire sector on their own. But if we consider them altogether what do you think is the approximate size you know in terms of the revenue or their weightage in the benchmark indices.
KUNAL: Sure! So, you know I will take sector by sector. As we look at IT sector, so IT is a sector which gave India its recognition on the global map. If you look at from a size perspective, you know we do about 130 billion dollars of exports annually from the sector and 40-billion-dollar from domestic market. So, that is in terms of the top line. In terms of contribution to the GDP it contributes almost 6% to the GDP and if you look at the people employed almost 4 million people work in the sector so it's fairly large in terms of impact on the economy in terms of when you look at the weightage indices IT sector has 14% weight in the Nifty, if you look at media that is about 1.5% in telecom also is relatively smaller weight which is 1.5%. But you know media and telecom the way they do impact is again very significant because media is one where you know you have print media, broadcasting, multiplexes and the OTT content players. All these you know basically give a significant reach to all the Indian residents and citizens’ telecom is a medium through which you reach. So, a major disruption happening on the sector in the telecom side. We are seeing a converges theme starting to work out, so you know telecom, media and technology enabling together. So, there is a convergence theme through the disruptor as we know in two years back went down into the market. This is you know the kind of sectors we are talking about.
Anupam: Yeah, quite you know they have different drives they have got different growth drivers, they have different strengths and weaknesses these bunch of sectors as compared to say traditional ones like Banking or FMCG. Maybe you can tell us something about the strengths and weaknesses of these sectors.
KUNAL: Yeah so if you look at IT in terms of the technology so when you look at you know all the clients that they cater to be it BFSI, retail, telecom the technology intensity across businesses is increasing and technology is now no more just you know no more a spend in terms to run the business but you know to grow the business you have to invest in technology and that is what you know has been the growth driver for the sector so that is a very key strength you know across all verticals is where technology has to be developed and applied into so that is one. Second is that in terms of media again media and telecom, telecom is the pipe through which you reach and media is the platform through which you are reaching all the audiences so these are critical sectors of the economy which are driving viewership and telecom is an enabler sector and you know IT is enabling it.
Anupam: So, Kunal all the sectors have new opportunities and I know for a fact that a lot of them are also enabled the massive fall in cost of data. I recall two three years ago the cost of data was where it wasn’t today, I read it today that India’s monthly consumption of data is among the highest in the world. Let’s have a look at these numbers and tell us what are the new opportunities that you see going forward for these sectors.
KUNAL: What the data usage is enabling is that one is that more and more number of users are coming online, and they are experiencing first time internet through mobile. So, if you look at today India has like 450 million internet users and that is the second highest in the world after China.
Anupam: In absolute numbers.
KUNAL: In absolute numbers
Anupam: 450 Million
KUNAL: 45O Million
Anupam: For a population of 1.35 Billion
KUNAL: Absolutely and the second level that is happening as you know become more familiar using internet online what’s happening is that then you start as you graduate you start transacting online and that is driving a lot of commercial activity on the internet. Be it in terms of purchases so that will drive consumption. Be it in terms of payment so which enables the peer to peer banking transactions. If you look at BHIM app which is a government app, there if you look at the number of the value of the transactions it's growing at a phenomenal pace. Now that is driving a lot of opportunities for companies across the spectrum and you know more number of more consumers are coming online that is driving a lot of opportunity online. So, that is the whole shift is happening from an offline to online in terms of the consumption.
Anupam: It has a lot of impact on media also I guess there is so much of controversy videos that come on WhatsApp and stuff like that. It has impact on content also the way we consume it Right?
KUNAL: Absolutely so even if you look at the digital media, I think that is the fastest growing media because if you look at TV and Print, Print is one where we are containing to see the downward trend in terms of the overall print advertisements revenues the AD dollars are shifting from print essentially to digital media and that is where you know there is a change pattern because of particularly all these consumption pattern, more users coming online, more users transacting online.
Anupam: Sure, you know so when I look at the disruption base all I see are startups you know really big startups unicorn stuffs like that which have been really hot in the last few years. You think any of these startups will remain private forever or actually move to the public space giving you as a fund manager an opportunity to invest in them?
KUNAL: Right. So, you know it’s quite going to be a different story here because you know all these internet companies startups at their initial first five years to six years or maybe even up to ten years they have to invest to you know build the market and that is you know where the profitability in not going to show up. India investors usually have it’s a growth market and it’s a profit focused market so you know we are used to saying our pad growth, EPS growth and that is you know where it requires a very long term investment thought process which I believe would take you know longer duration for all the startups to come and list in India. We might have we already have couple of internet names which are listed in India. But a big bunch of internet companies I would foresee that it would take a longer duration for them to come on the bourses.
Anupam: Great so what are the trends I mean we know for a fact that IPOs of these big companies that they might happen at a global level, but they are not happening in India at least in the near future. You know what are the few major trends that you see going forward maybe in the next year or one or two years?
KUNAL: Since the last you know 4-5 years what is happened is that one is the user who start transacting online in India are closer to 80-90 million users. I think over the next 3-4 years we will see that user base growing to 200-250 million in terms of the transacting.
Anupam: Out of 450 million who have internet about 80-90 million are actually transacting and that base will grow.
KUNAL: Yeah transacting that base will grow and you know we are seeing a lot of demand coming from tier two tier three cities and they are going to transacting a lot more and that is going to drive a lot pf consumption. So, that is one clear trend which is going to pick up. Second is that in terms of technology again we have you know technology investments across the sectors are growing up. If you look at retail and BFSI they are the sectors where they have a significant investment, they invest a lot more than the manufacturing companies being in a B2C focus. So, technology in terms of more machine learning, automation, cloudification those are the trends which are happening, and which is already driving a lot of demand for Indian tech companies in the US at this point in time. But the same is going to follow in India as well.
Anupam: What’s happening in the US will also translate good opportunities for the stocks that are listed here in India, right?
Anupam: Kunal Thank You so much for doing the show! Folks that is a wrap on our show. For more such interesting know how’s continue listening to our Podcast MF 101 or simply follow the blog page of Aditya Birla Sun Life Mutual Funds, Bloomberg quint, IVM podcast or wherever you get your podcasts from. If you have any queries or some specific subjects you want us to talk about, with regards to mutual fund investments, reach out to us on our Twitter handle @abcabslmf. Thank you for listening to this podcast!
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