Can you play India’s new infra story with just three stocks?
You must have heard some imminent market voices calling the Budget 2022 a constructive, conservative, pragmatic and a forward-looking budget.
Our research team has published a comprehensive note on Budget 2022 which has discussed all the key announcements and has indicated companies that might benefit from various budget announcements.
However, comes next week and we may not hear any chatter about Budget 2022 announcements in the market.
What happens then to a long list of stocks that you must have prepared after the Budget for further analysis and active tracking?
Following a minimalistic approach may help keeping your active stock tracking list short, without you missing on the major macroeconomic opportunities. Sounds good?
Broadly speaking, this time the government has ticked three major checkboxes—CASCAL—Capex, Fiscal Deficit and Digital.
As you must be aware, the government has allocated Rs 7.5 lakh crore for capex. It has guided with a containment of the fiscal deficit to 6.4% of the GDP and has given a sneak peek into future policies of digital India.
The Budget 2022 has identified artificial intelligence, geospatial systems and drones, semiconductors, space economy, genomics and pharma, green energy and clean mobility as sunrise sectors.
Now if you try to spot “hidden gems” from each of these areas, you will have to have a large pool of resources and only time can tell whether it was worth all the effort it will involve.
All that could be eliminated by tracking the RALT watch-list.
“Now what’s that?” many of you might wonder.
It’s the minimalistic approach where RALT stands for:
- Adani Ports & Special Economic Zone
- Larsen & Toubro
Now if you sit back and think carefully, you will realize these three companies touch upon most of the sunrise opportunities.
For instance, Reliance Industries is targeting opportunities in renewable energy, green hydrogen ecosystem, telecom, retail and digital.
Reliance Industries aims to become a net carbon zero company by 2035.
The recently inked strategic partnerships with companies such as Stiesdal, Ambri, NexWafe, RE Power, Faradion, and S&W, amongst others, have been crucial for Reliance. They are expected to help the company acquire necessary technology and build scale in areas such as solar photovoltaic module manufacturing, energy storage and electrolyzer factory for green hydrogen, amongst others.
The company has already signed a Memorandum of Understanding with the Gujarat state government for Rs 5.95 lakh crore of investments. Reliance is setting up four giga factories at Jamnagar.
In the first 9 months of FY22, the company has incurred a capex of Rs 69,303 crore excluding the spectrum acquisition cost of Rs 43,589 crore.
Despite the huge on-going capex, Reliance Industries has a net debt position of just Rs 2,862 crore as per the latest disclosures.
Speaking about 5G, the government will conduct spectrum auctions in 2022.
Jio has already started trials for some advance 5G use cases in healthcare and industrial automation. These include 5G robot delivery food trays, connected ambulance, site inspections using 5G connected drones and 5G robotics in warehouse automation, amongst others.
It’s noteworthy that Reliance Jio has a subscriber base of 42 crore.
Another conglomerate, Larsen Toubro, is not only a construction giant but has a significant presence across other segments such IT and financial services.
As per Q3FY22 disclosures, L&T has an order book of Rs 3.4 lakh crore, with infrastructure and hydrocarbon segments accounting for 73% and 16%, respectively. The company has guided for a strong pipeline as well which gives it a strong revenue visibility.
As revealed by the ministry of heavy industries about a fortnight before the Budget 2022, the Production-Linked Incentive Scheme (PLI) for Advanced Chemistry Cell (ACC) battery storage has received an overwhelming response. Against the bids invited for 50 Gwh of capacity, the scheme has received bids of for ~130 Gwh.
Reliance New Energy Solar and L&T have applied under the Rs 18,100 crore PLI scheme for ACC battery storage.
Now let’s shift focus to another infra-focused company, Adani Ports & Special Economic Zone. We recently published a comprehensive report on Adani Ports. Our research team has estimated that the company can expand its present market share of 28.6% in import-export trade volume to 38.9% by 2030.
If India aspires to become a manufacturing hub, port and logistics infrastructure becomes a prerequisite.
As you might be aware, Budget 2022 talks extensively about PM Gati Shakti—a national master plan for multimodal connectivity. The government has laid out a clear roadmap for the development of each of the seven engines of the PM Gati Shakti programme—roads, railways, airports, ports, mass transports, waterways and logistics infrastructure.
Contrary to the expectations of many, the government has avoided populist measures and has decided to channelize deficits towards the creation of infrastructure. If the trinity of PLI schemes, green bonds and private capex achieves its desired target, RALT might reflect the quality and momentum of India’s progress in sunrise sectors.
As some market veterans have pointed out already, for the first time in many years all three balance sheets—government, corporate and that of the banking sector are looking strong.
With government planning a capex of as much as 4.1% of the GDP (including provisions made for grants-in-aid to states), growth momentum for RALT is likely to be strong. Is it the beginning of a multi-year capex cycle?
What’s your take on this? Do let us know.
You may also like to read: 5 things that make the LIC IPO an interesting proposition
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