TVS Motor Company stands out as a top investment pick following its decision to spin off its consumer finance business, while Indian-owned alcoholic beverage makers are preferred over multinational peers like United Spirits, according to Dipan Mehta, Director of Elixir Equities.
Speaking to CNBC-TV18, Mehta highlighted TVS Motors’ strong financial performance, noting that its net profit has almost tripled over the last three years.
He pointed to TVS’ recent announcement to transfer its consumer finance business to a newly listed entity with a mirror shareholding pattern, which will reward existing shareholders with free shares. “They are amongst the market leaders when it comes to electric vehicles also, and they are ahead of the curve when it comes to launching new models,” Mehta said, disclosing that he is invested in the stock.
Within the alcoholic beverage space, Mehta recommended avoiding United Spirits in favour of Indian-owned companies such as Radico Khaitan, Allied Blenders and Distillers, and Tilaknagar Industries.
He noted that domestic manufacturers manage the regulatory environment far better than their multinational counterparts. “You compare Radico Khaitan to United Spirits and you will feel that they are not in the same industry,” Mehta said, adding that he is closely watching Tilaknagar Industries following its massive systematic acquisitions.
However, market watchers suggest that United Spirits, under new leadership, is reportedly planning to reclaim market share in profitable premium niches that competitors have captured over the years.
On Pidilite Industries, Mehta suggested a contrarian approach, advising that the stock is best bought during a correction in oil prices. If oil falls to $80 or below, the company is unlikely to reduce product prices, which would lead to a surge in margins, he explained.
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TVS Motors a top pick, avoid United Spirits, says Elixir Equities’ Dipan Mehta
Addressing the financial sector, Mehta acknowledged a gradual turnaround at Bandhan Bank but noted that investors still lack confidence due to earnings volatility and non-performing asset (NPA) challenges. He prefers public sector banks, IDFC First Bank, and AU Small Finance Bank.
He is cautious on Shriram Finance due to its large rural exposure and flattening volume growth in the auto industry, preferring multi-product non-banking financial companies (NBFCs) like Bajaj Finance, Tata Capital, and Cholamandalam Investment and Finance Company.
Mehta also warned that the next few quarters could be challenging for gold loan companies like Muthoot Finance and Manappuram Finance due to intensifying competition from multi-product non-banking financial companies (NBFCs) expanding their gold loan portfolios.
However, Manappuram is slightly better positioned than Muthoot due to a recent change in management.
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