Ace investor Safir Anand who had picked up multi-bagger stocks such as MRF and Ceat pretty early, making up to 14 times returns, says that tyre stocks such as these must not be treated as commodities.
Ace investor Safir Anand who had picked up multi-bagger stocks such as MRF and Ceat pretty early, making up to 14 times returns, says that tyre stocks such as these must not be treated as commodities. “When MRF was at a market cap of around Rs 2,500-crore it announced a capex in excess of Rs 6000 crore. Looking at its history, there is no doubt that it is a very strong brand and, therefore, not really a commodity,” he told in an interview to ET Now. Interestingly, MRF stocks are the most expensive listed shares in India at Rs 75,844 on NSE. The shares have made investors richer by a whopping 15,800 per cent since its August 2001 price level of Rs 500. The stock hit its lifetime high of Rs 80,000 last week.
Explaining reasons as to why he believes that tyre companies are not necessarily commodities, Safir Anand said that unlike commodities, they are subject to antidumping duties or competitive pressures like Competition Commission, as those typically apply to businesses that are cartels or businesses that have a monopoly and not really commodities in the typical sense.
Pointing out to the strengths of MRF stock, Anand said that the entire company has been built around share capital of about Rs 2 crore. “If you think that a two-crore company with a kind of capex can take on a Rs 6000-crore expansion and in between, set up an MRF Cricket Academy go and do large deal sponsorship, the cost of one sponsorship that they do of a cricket bat would be more than the entire equity capital — then you have to understand the transition is happening in those businesses,” he pointed out to the channel.
Safir Anand is betting on the consumption theme. Explaining what exactly he sees while buying stocks from the sector, Safir Anand said that when he reads interviews coming from top level consumption companies — whether it is Nestle or Britannia, he is interested in seeing the size of the market that lies before them.
Sharing his views on the segment he said that the market is growing because of more and more people are finding the consumption sector acceptable. “It is more like a volume denominated growth and because these companies are efficient in terms of their annual reports, volume denominated growth obviously translates into better cashflows and higher margins because the companies deploy capital at a far better rate than most other companies,” he told the channel.