Why Telecom Stocks Are A ‘Comfortable Avoid’ For Marcellus’ Pramod Gubbi

Watch | Marcellus' Pramod Gubbi On Sectors That Are A Good Investment Bet

As India’s telecom stocks remain battered out of shape amid an industry upheaval, it’s not the right time to buy into them, according to Marcellus Investment Manager Pvt. Ltd.’s Pramod Gubbi.

There are still a lot of “moving parts” in the telecom industry, making it more “comfortable” to avoid the stocks, said the founder of India’s second-best portfolio manager so far this year, which looks at sustained stability in companies rather than recovery.

“We still don’t know what is the business model for this sector. We used to think tariffs, then we used to think there is an overlay of services which will be monetised to justify the spectrum and network cost, even that we haven’t seen so far yet,” Gubbi told BloombergQuint in an interview. “The hope was consolidation. We are down to three big players and hopefully those players will play in a way that profitability emerges back into the sector. That also doesn't seem to be panning out.”

Also, the government’s unrelenting resolve to extract revenue share dues adds to the companies’ woes, he said.

This comes at a time the BSE Telecom Index has fallen to its lowest since 2012. Shares of Vodafone Idea Ltd., India’s largest telecom operator by subscriber base, have fallen to its lowest since listing.

Here are the key highlights from Gubbi’s interview

• Can’t make a call on valuations based on fund flows.
• Street expects government measures will boost economy.
• Lot of new entrants coming in e-commerce space.
• People are not investing in real estate and gold anymore.
• Like Axis Bank and ICICI Bank.
• Cement is a protected industry in some ways, suggest invest in a bottom-up way.