If the hottest business is not generating cash flow, avoid it: Saurabh Mukherjea

Saurabh Mukherjea, Nifty, Nifty50, stock market, primary market, Marcellus

The Indian economy is at an inflection point and analysts say the texture of the stock market is likely to change over the next 10 years with new compounders driving the engines of profit growth.

So, how does one identify the potential new compounders to reap the benefits in the future?

The primary market is hot and many unicorns are headed for Dalal Street. Will some of these become new compounders?

“Yes, many of these are consolidating and are on their way to become master franchises. But no matter how good a business is, if it is not making money, stay away,” says Saurabh Mukherjea, seasoned fund manager and founder of Marcellus PMS.

Typically in a 10-year period, Nifty churns by around 50 per cent — half the names on the index are broadly gone in a decade.

“As we have seen in the last 10 years, old style conglomerates, old style setups will gradually get relegated to the sidelines of the market,” Mukherjea said. He said the core competitive advantage of the old style conglomerates was their ability to have a good connectivity with the political ecosystem.

“But their ability to keep up with the master franchises is gradually decreasing. A new generation of companies with superior technology, superior governance, superior ability to drive growth at 20-25 per cent are emerging and that’s what we are seeing now,” he said.

Mukherjea says the top 10 master franchises today account for 90-95 per cent of profits In India. “The stock market has 6,000 stocks, but just 15-20 companies make all the money in the market. Around one-third of those 15-20 names will have a rough decade between 2020 and 2030 and four-five new names will emerge,” he said.

As the unicorns start on their path to becoming master franchises, many are consolidating and formalising various sectors of the economy, which were hitherto fragmented. “So whether it is home deliveries or grocery shopping, buying cosmetics or education or poultry, the defining signature of many of the unicorns is consolidation and formalisation. But that does not mean all will make money,” Mukherjea said. “We will see a few more InfoEdges coming through over the next decade or so, and in a way they will slot in as the old style conglomerates gradually get pushed out of the index,” he said.

So should one get excited about the Zomatos and the Policybazaars of the world or should one stick to buying Mukherjea’s favourites like Pidilite, Asian Paints or Dr Path Lab?

The Marcellus chief investment officer said he is an absolute believer in India’s economic recovery. “We are in the early stages of a potential four-year economic takeoff driven by China plus one, the lowest cost of money ever seen in our country and constructive policies,” he said.

Among the new generation franchises, some are already generating free cash flow, some are not. And Mukherjea says he does not believe in franchises that do not generate free cash flow.

“We need to look for companies that can put on the table cash generated from a business. However good a business is, if it is not making money, stay away. Some of the consumer tech franchises are generating lots of cash flow,” he pointed out.

“Those IPOs will come. Be patient and wait for them. Do not get excited about getting pulled into the hottest tech IPO, just because the marketing around it is very sexy,” he warned.

Internet Explorer Channel Network
News Related

OTHER NEWS

BSF's Uniform 50-Km Jurisdiction Much-Needed Mandate in India's Security Architecture

© Provided by News18 BSF’s Uniform 50-Km Jurisdiction Much-Needed Mandate in India’s Security Architecture It is yet another case of politics trying to needlessly cloud a move towards establishing the ... Read more »

Sambhavna Seth on sharing screen with Avinash Dwivedi for the first time: I was scared to work with him

© Provided by Pinkvilla Actress and social media influencer Sambhavna Seth says that stardom doesn’t work inside the house. A star has to leave her ego and attitude outside for ... Read more »

Sunny Leone: When I got the chance... I grabbed it like a hawk

© Glamsham/Instagram/Twitter Sunny Leone: When I got the chance… I grabbed it like a hawk The countdown begins for One Mic Stand Season 2 to release on Amazon Prime Video. ... Read more »

Focus on 2nd dose coverage: Centre to states, UTs during vaccination review meet

© Provided by Hindustan Times Focus on 2nd dose coverage: Centre to states, UTs during vaccination review meet. (Representational image) (AFP ) The Centre has urged states and Union territories ... Read more »

PIP evidence in full - DWP publishes list of evidence gathered as huge changes coming

Personal Independence Payment (PIP) has been designed to provide help with living costs for people with long-term physical or mental health conditions or disabilities that prevent them from doing everyday ... Read more »

How Danny Sura did his own stunts in 'Vidrohi'

© IANS Danny Sura. Mumbai, Oct. Oct 19 (IANS) Supremely talented, suave with a sophisticated charm, thats Danny Sura for you. A British-Indian actor, Danny has been forever in love ... Read more »

New benefits set for fully vaccinated businesses ahead of Queensland border opening

The Queensland Government has announced new business benefits for the fully vaccinated, soon to be included in the reopening roadmap. The new benefits could see a reversal of all COVID-19 ... Read more »

ASIO flags dangers of foreign spies from multiple countries in 'evolving threat environment'

© Provided by ABC NEWS ASIO director-general Mike Burgess said the threats were coming from multiple countries. (Supplied: ASIO) Foreign spies are targeting migrant communities across Australia and threatening some ... Read more »

Stockland town centres cop hefty COVID hit

A quarter of retail tenants in developer Stockland’s town centres are struggling to pay rent as lengthy state lockdowns bite into store sales. © Paul Rovere NEWS November 13, 2020. ... Read more »

How to watch Besiktas vs. Sporting CP: Live stream, TV channel, start time for Tuesday's Champions League game

The Champions League is back in action on Paramount+. © Provided by CBS Sports Who will lift the Champions League trophy this season? Who’s Playing Sporting CP @ Besiktas What ... Read more »

Why didn't you object to Najib's passport application, AGC asked

© Provided by Free Malaysia Today The Court of Appeal has allowed the temporary release of Najib Razak’s impounded passport to enable him to visit his daughter in Singapore. PETALING ... Read more »

China says moon rocks offer new clues to volcanic activity

BEIJING (AP) — Moon rocks that a Chinese robotic space craft brought back to Earth last year have provided new insights into ancient lunar volcanic activity, a researcher said Tuesday. ... Read more »

The three numbers that show the UK's coronavirus situation is getting worse

Coronavirus cases and deaths are rising in the UK. (PA) Coronavirus cases, deaths and hospitalisations have all increased in the past week as experts raise concerns about the UK's approach ... Read more »

Kangana Ranaut looks like a retro DIVA in this brown checkered midi dress; Yay or Nay?

Kangana Ranaut has always been on our fashion radar for her daring and sartorial choices. After delivering a power-packed performance in Thalaivii impressing audiences and critics alike, there’s no stopping ... Read more »

India only G20 nation well on track to achieve Paris agreement goal: Kant

India’s efforts in mainstreaming sustainability and reducing carbon footprint should inspire countries across the world, Niti Aayog CEO Amitabh Kant said on Tuesday, while pointing out that India is the ... Read more »

How crowd behaviour is the basis for technical analysis

One of the earliest books I read on the market psychology — a favourite subject of mine — was Extraordinary Popular Delusions and the Madness of Crowds. Through multiple examples ... Read more »

IMD issues Orange alert for 11 districts in Kerala; red alert sounded for over 10 major dams

After a relative respite of two days, the India Meteorological Department (IMD) on Tuesday issued an Orange alert for 11 districts of Kerala indicating heavy rainfall. The weatherman has put ... Read more »

‘She would never leave the tent': mother of Cleo Smith speaks of disappearance from WA campsite

The mother of Cleo Smith says she woke to find the tent open and her daughter missing, along with her sleeping bag, on the morning the four-year-old vanished from a ... Read more »

Adults and children still in hospital after ‘harrowing' gas explosion in Ayrshire

Two adults and two children remain in hospital after an explosion ripped through homes on a South Ayrshire council estate, destroying one terraced house and severely damaging others. A local ... Read more »

PM visit to Kushinagar: Buddha relics from Sri Lanka to be accorded state guest-like status

Protocols reserved for state guests will be followed to welcome Buddha relics from Sri Lanka during Prime Minister Narendra Modi’s October 20 visit to Kushinagar to inaugurate an international airport, ... Read more »

Angelina Jolie (And Her Chin Cuff) Dazzle At The LA Premiere Of Eternals

(Photo: Rich Fury via Getty Images) Angelina Jolie brought along five of her children to the premiere of Eternals in Los Angeles on Monday night, and all eyes were on ... Read more »

PRN Melaka: Siapa Guan Eng nak halang saya, soal Norhizam

© Provided by Free Malaysia Today Norhizam Hassan Baktee berkata, beliau ada menerima tawaran menyertai beberapa parti politik namun masih terbuka untuk membuat sebarang keputusan. PETALING JAYA: Ahli Dewan Undangan ... Read more »

SC directs insurance firm to pay Rs. 3.25 lakh as compensation to man for vehicle damage in accident

The Supreme Court has set aside an order of the NCDRC refusing compensation to a man for damage to his truck in an accident, saying carrying more passengers has not ... Read more »

Turkey summons 10 ambassadors over call to release activist Osman Kavala

© Emrah Gurel, AP Turkey’s Foreign Ministry on Tuesday summoned the ambassadors of the United States and nine other countries to protest a statement they issued that called for the ... Read more »

Stephen Timms: MP knifed in previous attack says police should do background checks

© PA StephenTimms.jpg Police should look into the background of constituents wanting to visit MPs to help protect them from attacks, a politician who was the victim of a stabbing ... Read more »

London markets muted as investors mull Bank of England's next step

© Provided by City AM London markets were muted during the opening session this morning as investors mull whether the Bank of England will hike interest rates next month. The ... Read more »

'Technical destroyer' - The European wonderkid Aston Villa could sign for free in the summer

After the recent collapse against Wolverhampton Wanderers, some fans were once again questioning why Aston Villa hadn’t signed a dominant and defensively minded midfielder in the previous transfer window. One ... Read more »

Interest rate hike is coming! Markets bet on rise as new chart shows 'massacre going on'

Markets have been bracing themselves for the rise following recent comments from Governor Andrew Bailey that the bank “must act” to control spiraling price rises. Inflation is currently sitting at ... Read more »

The SEC says 900,000 Reddit-fueled traders pumped GameStop shares during the meme stock frenzy - not short-seller covers. Here are 5 takeaways from its report.

© John Smith/VIEWpress “It was the positive sentiment, not the buying-to-cover, that sustained the weeks-long price appreciation of GameStop stock,” the SEC said. John Smith/VIEWpress Reddit-fueled retail traders, not short-sellers, ... Read more »

US futures get a lift from robust earnings, despite inflation and Evergrande fears

© Brendan McDermid/Reuters Traders have been cheered by earnings but are still concerned about inflation. Brendan McDermid/Reuters US futures edged higher on Tuesday after the benchmark indices climbed the previous ... Read more »

Kerala fake antique dealer now booked under POCSO Act

© Provided by The Statesman Kerala fake antique dealer now booked under POCSO Act Monson Mavunkal, the accused dealer in the fake antique and already in judicial custody, has been ... Read more »

GRAP comes into effect in Delhi-NCR, air quality expected to dip to poor from October 21-24

The air quality in Delhi and the National Capital Region (NCR) is likely to worsen in coming days. Based on this forecast, the Commission for Air Quality Management (CAQM) has ... Read more »

Yes Bank case: Delhi Police likely to summon corporate lobbyist Nira Radia

© Provided by Hindustan Times Delhi Police said they learnt about Nira Radia’s alleged involvement in the dummy firm while questioning Yateesh Wahaal, Satish Kumar Narula, and Rahul Singh Yadav. ... Read more »

Three new sites identified for Mohalla Clinics, says Rajendra Pal Gautam

© Provided by The Statesman Three new sites identified for Mohalla Clinics, says Rajendra Pal Gautam Delhi Social Welfare Minister and Seemapuri MLA Rajendra Pal Gautam on Monday said that ... Read more »

Aryan Khan's fundamental rights violated, NCB acting out of vengeance: Sena leader tells SC

Aryan Khan’s fundamental rights being violated: Shiv Sena leader files plea in SC Shiv Sena leader Kishore Tiwari has filed a petition in the Supreme Court saying Aryan Khan’s fundamental ... Read more »

India's Testing Ties with Sri Lanka and the Road Ahead

© Provided by News18 India’s Testing Ties with Sri Lanka and the Road Ahead President Gotabaya Rajapaksa had chosen India for his first visit abroad upon assuming office in November ... Read more »

‘Beware of fake job offers', IndiGo warns candidates

Representative image. IndiGo airlines has launched a campaign across social media and its website to raise awareness on fake job offers. A statement released by IndiGo on October 19 read: ... Read more »

Bangladesh arrests hundreds for violence against Hindus

NEW DELHI (Reuters) – Bangladeshi police said on Tuesday that 450 people had been arrested in the Muslim-majority nation after attacks against Hindus in some of the worst such unrest ... Read more »

Boris Johnson's secret COP26 weapon may have to be shame

It’s now less than two weeks until Boris Johnson welcomes the world to Glasgow, Scotland, where he will host the COP26 international climate talks at a crucial moment in our ... Read more »

I Thought My Friend Got Lash Extensions During the Pandemic, But It Was Really Just This $8 Mascara

© Provided by Health AdobeStock / Amazon My eyelashes are on the short and stubby side, and the fact that they are a mix of blonde and dark hairs has ... Read more »