“For amateurs and new investors it may be difficult to invest in the markets. For them, it is safer to invest in companies with proven track record, with the big picture and how the companies are going to shape up in the next 5-10 year period,” Veliyath said.
25% of listed Indian companies likely to go bust in next 10 years: Porinju Veliyath
Ace investor Porinju Veliyath has said that at least 25% of the currently listed companies are likely to go out of business in the next 10 years and advised investors to stay clear of dodgy companies, citing the example of Videocon. Reiterating that investors should be very careful in picking stocks, Porinju Veliyath said, “ For amateurs and new investors it may be difficult to invest in the markets. For them, it is safer to invest in companies with proven track record, with the big picture and how the companies going to shape up in the next 5-10 year period.”
RBI, in its recent Financial Stability Report, had noted that in the long run, there is a need to increase the supply of quality listed securities to meet rising demand of investors, particularly through the mutual funds route. According to RBI, while there has been an unprecedented rise in demand, the last six years have seen muted growth in the number of listed companies.
Veliyath pointed out that there might be good companies available at slightly expensive valuations of 30-40 times earnings, but such companies have relevance in the future. “These companies are never going to get cheaper,” Veliyath said, adding that in the recent correction, while the broader markets corrected by more than 15%, some of these stocks corrected by 5%.
Porinju also said that investors must avoid putting their money in stocks of ‘chor’ companies. “I have been cautioning people to not invest in chor companies. Take the example of Videocon. There is a huge mismatch between asset and liabilities. So people should be very careful,” Porinju said.
He pointed out that investors must take cognisance of the huge structural change going on in the economy. “As IMF puts it, we are slowly coming out of the demonetisation blues, and the crisis of the implementation of GST. We must appreciate the government’s efforts. The banking system is getting cleaned up for the first time,” he noted.
In a recent tweet, Veliyath had written that investors can bet really big on the unprecedented improvement in corporate governance in the listed space. Giving an example of how to play the corporate governance theme, Porinju Veliyath also pointed out to the rally in shares of Fortis Healthcare after promoters Malvinder and Shivinder Singh resigned.
Source: Financial Express