Positive On IT Services, Backed By Strong Cash Flows & Attractive Valuations: ASK Investment

Ajouté : 2026-05-24

[00:00:00]Cross to George Joseph from ASK Investment Managers who's joining us now to discuss market fundamentals and his top sectorial picks. George, thanks very much for your time here since our colleague was just talking about the cement space. Any thoughts there? I think you're overweight on the construction space overall.

[00:00:17]Do you see further upside for cement company margins and any thoughts on this Dalmia JP deal that's been announced?

[00:00:25]So, if you look at we have been what we have been telling our investors last whole year is that you know we are in a cyclical rally which started in 2020 and you know that continues.

[00:00:39]Energy crisis has only increased our belief that you know the inflationary trade which started in 2020 is going to continue. So, cement sector also is part of the cyclical sector but nevertheless the energy crisis which has been created by the almost uh state of almost issues and all those things has only put more pressure on the margins because cement sector as such is a highly power intensive sector. So, we are we are constructive on the overall cyclical sectors, be it engineering capital goods, cement, auto and also banking and financial services along with commodities. So, that is a pack which we like. Now we started liking the IT sector as well.

[00:01:27]Oh, that's interesting. You started to like the IT sector. Well, what drives your optimism on this George because the situation on ground has not changed materially barring the fact that the stocks have corrected significantly and there is some valuation comfort for this.

[00:01:44]I do want to know what's what's driving this optimism for you on IT.

[00:01:50]Yeah, interestingly you know what as a fund manager I've been trained over the last 25 years uh, to focus on cash flows and valuations.

[00:02:01]Uh, and what market does later on is is all uh, you know, it's not in my hands. So, when I look at it from that perspective, fundamentals, valuations, and uh, and also the uh, structure at which, you know, the sector is poised, there are a lot of negativities around, you know, the uh, anthropic announcement, and because of which in the stocks have corrected.

[00:02:22]As you rightly mentioned, nothing has changed on the ground.

[00:02:25]The companies are delivering results as usual. There was a lot of expectations saying that, you know, the companies will not exist going forward.

[00:02:34]You know, we are of the opinion that these are all IT services companies.

[00:02:38]Technologies are under disruption, and Indian companies are nowhere near in the technology space. They are technology services companies which handhold companies to improve their technology uh, offerings. And that's where all the technology capability in various enterprises, consulting as well as handholding is something done by our Indian companies. And you know, there is not going to be a material difference in the whole scheme of things. As technology is used more and more, you also agree that, you know, the services revenues actually has to go up.

[00:03:12]So, on one side people are worried about the technology uh, services companies, their repetitive jobs will go away, and so and so forth. But at the same time, you will agree that, you know, the valuations are really undemanding with the concerns emerging. And the growth prospects from the AI led revenues, AI led transformation is definitely on cards, and you know, that is something as a new business which will come for these companies. But AI led revenues, no visibility is there.

[00:03:44]That's where the whole uh, concerns are at this point. And so, when you get these concerns for high quality businesses like IT sector, strong cash flows, valuations. You know, we are we are turning we have turned positive and you know, we have been up in the investments in those space. I had a follow-up to this George. You know, a doomsday scenario aside, but you know, there have been updates that Anthropic and the all all of the other AI companies have been putting out which do a lot of things that the Indian IT companies are already doing.

[00:04:20]There's something the SAS the SAS bit yes. And but you know, so are you trying to say that evaluations and cash flows are the only reasons why you are you've turned positive and if you have where within this have you turned positive? Are they the large cap IT names which are the services solutions providers or within the ER&D space and so on. Where where are you increasing your allocation within IT?

[00:04:44]Predominantly the large large cap ones you know, because you know, they have the capability of investing into the new newer set of requirements the clients have. And having said that you know, the point which you are making is very interesting. So most of these technologies providers be it Claude or you know, all of these companies, they can't be system integrators. So you nowhere in history it has happened that way that you know, mainframes came in IBM mainframes came in. You know, the companies of Indian you know, Indian context I the IT services companies were the ones which will implement and do the system integration for enterprises. So that will continue for these as well. They will try out you know, the technology providers. They want to get a feel of it how it will get implemented. They will try out some of the services aspects and then you know, they will engage with Indian IT services companies or IT services companies in general to provide these solutions and take it to the enterprises. You know, enterprises are very very complex. Yeah, George.

[00:05:52]Yeah.

[00:05:52]>> [snorts] >> Uh you know, just very quickly uh since we're running out of time, these specific names that you've exited, Bharti Airtel, Titan, Bajaj Finance, Samvardhana Motherson, you know, these have done well recently. Any particular reason? I mean, uh is there no valuation comfort here? No upside do you see?

[00:06:08]You know, the markets markets have been changing at at ASK, you know, we are running very very concentrated portfolios in the PMS uh and alternate investment fund uh basket. So, uh you know, the choices are uh made in such a way that where we see the valuation comfort is very high, the growth prospects are reasonable, and also we are not paying through the roof for various uh uh aspects. So, margin of safety, fundamentals, opportunities at scale, you know, all these things when we look at from that context, it looks uh you know, the 20 stocks what we identify will be always uh uh have some room for addition and deletion. And it it's not doesn't mean that we are negative on the telecom space or something like that, but we we see some other better opportunities in place in the context of market correction. All right, George, we'll leave it at that.

[00:07:03]Thanks very much for your time here today. We appreciate it. And on that note, we'll also slip into a short break, but when we're back, we're going to be back with a Wick Fit Management to discuss their fourth quarter numbers with Chaitanya Ramalingegowda.

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