Banks aren't “growth stories” anymore as they have lost market share to fintech firms, according to Abhay Agarwal, founder and managing director at Piper Serica Advisors Pvt.
While banking stocks have partly dragged down Indian equity benchmarks in the past four weeks, the investment management firm has been "swapping" banks in its portfolio for the last three months and will continue that, Agarwal told BloombergQuint's Niraj Shah in an interview.
“At the end of the day, whoever is nimble and proactive in creating services and products for their clients based on what they need, they will win,” said Agarwal, who founded Piper Serica in 2004 after working for a decade with Citibank and JPMorgan private equity funds.
No large bank has shown “any real intent” yet to dive in to find technology solutions to cater the clients in this “fight with the fintechs”, he said. “The last thing you want to do, on tech, is throw money at tech because that just doesn't [work]. You just spend money, you feel happy for some time but then no solution emerges."
The portfolio manager, however, invests in such stocks only when it sees “unit level profitability", he said. “If you cannot even define... the unit level profitability matrix and when will you get it, means you do not have control over your business.”
Piper Serica manages a regulated FPI fund (Mauritius), a PMS in India and offers model portfolios for smaller investors on smallcase.com. The assets under management across these three platforms is about Rs 450 crore.
Since Piper Serica prioritises tech-related companies, it was barely affected by the commodity market selloff as the portfolio only had one real estate stock that was impacted by the rise in steel and cement prices, he said. “We haven't had to really take any portfolio change approach to adjust for this spike in commodity prices."
He, however, expects the commodity prices to settle down and move towards the long-term average.
Agarwal also expects large-scale manufacturing companies like Dixon Technologies Ltd. to benefit from production-linked incentive scheme.
As India remained protective of small-scale industries since independence, the country's manufacturing sector was “terribly non-competitive” due to restrictions on scale that was needed to compete with China, Agarwal said. “For the first time, there is an incentive for large manufacturers to become larger."
Watch the full interview here:
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