With the government deregulating petrol prices, Fortis Investments Senior Portfolio Manager (Equities) Amit Nigam expects that the 10 years’ de-rating of the public sector oil and gas stocks will get corrected now. In an interview to Priya Kansara Pandya, he gives his views on the energy sector as well as the new base rate regime in banking. Excerpts:
Have public sector oil and gas companies really become long-term bets? Will they be taken seriously now as a sectoral theme?
Freeing up prices was a very difficult task politically. In the last eight years, kerosene was not touched. Raising prices – along with the intention of the government to gradually de-regulate the sector – is a path-breaking move and, indeed, a positive one.
The government has ensured that it is taking steps for letting this sector operate economically. The market could not analyse the true profitability of these companies earlier and, hence, were not giving higher multiples. We expect that the 10 years’ de-rating of the public sector oil and gas stocks will get corrected now.
What is your reaction to the different base rates announced by banks? How will it impact the various categories of borrowers, especially mid- to small-sized companies as well as retail, especially housing?
Things will not change overnight in the sector. Banks will offer the floor rate to the best company and offer a premium to risky borrowers. This is especially good for small- and mid-sized borrowers, as they will now have transparency and know their risk weightage. If this rate is not agreeable to them, or they think they can get a cheaper rate, they can raise funds from other banks or other sources. Thus, the corporate bond market has the potential to develop.
Q1FY11 is over but no money has been raised through disinvestment. Do you think the government will tweak the target due to the huge collections made by way of the telecom auctions?
After the 3G and BWA auctions, the government is not in a hurry. Rs 45,000-crore, or $10 billion, is a large amount. So, how much and when will it be raised depends on market sentiments.