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Ambit - Our biggest mistakes over the If you believe there is value in a
broker like Ambit, if you like our
past 12 months approach, our product, our analysts
and sales people vote for us on Asia
Money.
This weeks edition is about honest admission. Of the mistakes weve
made, the calls that went wrong and the missed opportunities of the Step 1 - Go to Asia Money Website and
past 12 months. As youd imagine, this email has been hard to write. But click on 'VOTE NOW'
after serious soul searching, weve gone a step further to understand Step 2 - When asked to 'select
why we missed the obvious. We want to remain honest and free to take geographies you wish to complete the
an independent view, and if you want a broker that doesnt just peddle survey for, please select INDIA
BUY India please vote for us on Asia Money. Step 3 - Once you reach the India page
you will find Ambit Capital on every
dropdown. Please vote for Ambit Capital
The big macro miss: Having been one of the earliest on the street to point out and for your salesperson, individual
Modis intent to go after black money (click here for our Modi hits the reset analysts and sales traders by name.
button note from March15), we then went on to say post de-mon that GDP
growth would come under severe strain given India is a cash-driven economy.
To showcase better everything that we did
Our thesis was an expected slowing down of both - the formal and the informal
over the last 12 months, we aim to send
sectors. We had said (click here) that GDP growth would fall to 0.5% in 2HFY17, you an email every week for the next 6
implying 3.5% growth rate for FY17. We acknowledge humbly that the listed weeks highlighting:
market and formal space coped surprisingly well with the drying up of cash. Call
Week#1: We start with our biggest
it accelerated formalisation or call it the jugaad of the Indian entrepreneur, we
learnings simply put, a collection of our
missed the resilience of Indias formal economy. With the formal sector NOT biggest mistakes at the strategy and
seeing much impact of de-mon (and with official GDP #s having inadequate economy level and in stocks calls (BUYs
data on the informal sector) - the official growth in 2HFY17 came in @ 6.5% and SELLs) and reasons why we ended up
YoY - a vastly higher number. missing the glaringly obvious.
Week#2: In a world of declining attention
Stocks that dont like Ambit! Topping the charts are Bajaj Finance, span, we take pride in being rather widely
read. This edition will be our most
Britannia and L&T blockbuster stocks, which weve been perennial
thought-provoking, thematic research;
sellers on! notes with a shelf life of several years, a
Bajaj Finance: In a hard hitting initiation note (click here) we had pointed out rarity in this industry.
tail risks to this business at a time when no one else was even thinking of them Week#3: We then bring to you our best
(and so far, rightly so!). We confess that we underestimated the power of their BUYs; our BUY calls may be few but
cutting edge analytical prowess and their ability to launch new products theyve delivered rather spectacularly!
continuously and successfully despite competitive pressures on existing products. Week#4: Our best SELLs but of course!
L&T: We did get the SELL call spot on through FY16. Having never been Week#5: The very best of our corporate
comfortable with the company's growth-first approach and poor capital access (last year was a coup of sorts as we
managed to showcase corporates that no
allocation, guess what we did when they announced their intent to correct their
one else did), our reverse roadshows (that
balance sheet, sell non-core businesses and increase RoEs? Yes, that's right. We helped provide clients easy inroads into
reiterated SELL. TWICE! (click here and here). Big learning when the New Delhi's impenetrable corridors of
management openly announces intent to change and course correct, pay more power) and expert access (with the
attention please. helicopter view they bring to the table in
an industry obsessed with the short term).
Britannia: This is a stock where weve been a seller even after an analyst
change! The irony here is that the new analyst covering the stock bought it when Week#6: And finally, the very best of our
he was on the buy side. And yet, he promptly reiterated a SELL after joining Ten Interesting Things; handpicked by
the author of this product and our very
Ambit! The learning here was that in a business where long-term strength is
own Sceptical CEO, Saurabh Mukherjea!
intact, one shouldnt get swayed by near-term headwinds to margins.
If the economy is crippled, banks must be hamstrung too? Our strong
Research Analysts
negative macro views meant that we turned SELLers on all BFSI names. The
sharp drop in bank credit growth post demonetisation furthered our conviction Saurabh Mukherjea, CFA
on our SELL thesis. Not only did stocks recover sharply from the post-demon saurabh.mukherjea@ambit.co
Tel: +91 22 3043 3174
lows, several non-corporate lenders (especially IIB and HDFC Bank) actually
maintained reasonable loan growth and margins. And while the asset quality hit Team Ambit
allie@ambit.co
did come - it hasnt been quite the graveyard we thought it would be. Learning Tel: + 91 22 3043 3000
a good business/management will find a way to adapt to bad times.
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Our Good & Clean portfolio U/P: At a time when India was witnessing record high
inflows (and we had ourselves repeatedly said financialisation of savings was an
outcome of Modis resets!), it wasnt a good idea to have 15% of our portfolio in
cash.
Disclaimer
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Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views
about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this
report.