In Conversation with Saurabh Mukharjea

About

Marcellus Investment Managers' founder & chief investment officer

Saurabh Mukharjea received his education of economics from London School of Economics. He graduated with a BSc in Economics with First Class Honors & an MSc in Economics with distinction in Macro & Microeconomics. 
Saurabh Mukharjea co-founded Clear Capital in London, & the Extel Survey named him one of the UK's best small-cap analysts in 2007. According to Asia money surveys, Saurabh was India's top equities strategist in 2015, 2016, & 2017. Before founding Marcellus, Saurabh was Ambit Capital's CEO. Saurabh Mukharjea is a name which doesn’t need any introduction in the BSE, NSE & the indices such as Nifty50.

Saurabh Mukherjea Portfolio – Marcellus PMS

PMS Product Performance

(Source: pmsaifworld)

The Impact of Chinese Dumping on various sectors, Specialty chemicals

Question - Let's dive right in. Chinese dumping seems to be affecting a wide array of sectors in India. Can you give us an overview of the current situation?

Answer - Absolutely. China is facing economic distress, & in an attempt to alleviate its situation, it has been dumping products in various sectors. India, being a geographic neighbor & economic rival, has unfortunately become a preferred dumping ground.

Question - You mentioned in the article that there's a degree of variation in policy responses across different sectors. Could you elaborate on that?

Answer - Certainly. When it comes to certain sectors like tyres, electronics, or those related to the PLI (Production-Linked Incentive) schemes, the government has taken a firm stand. It's essentially saying, "No, we won't allow China to sell below cost in India." However, there's a noticeable lag in policy response, particularly in specialty chemicals.

Question - That's interesting. Why do you think there's a slower response in the case of specialty chemicals, despite China cutting prices significantly?

Answer - Well, it's a bit ironic. If India gets cheap chemicals below cost from China, it does make our economy more competitive. However, this puts a strain on Indian specialty chemical companies. The government hasn't explicitly addressed this issue, & it's affecting investments & portfolios, especially in smallcap specialty chemical stocks.

Question - Speaking of portfolios, your Little Champs portfolio includes companies like GMM Pfaudler & Alkyl Amines, which have faced losses. Can you share your insights into how this sector is faring?

Answer - Absolutely. The specialty chemical stocks in our portfolio have indeed taken a hit due to Chinese dumping. I foresee another wave of Chinese price cuts in chemicals through December. However, looking at the bigger picture, the specialty chemicals sector in India remains strong. Over the last decade, our infrastructure has improved, access to capital has increased, & automation has made labor costs less relevant. We are now a more competitive economy poised for growth in specialty chemicals.

Question - Fascinating insights, Saurabh. Despite the short-term challenges, it seems the long-term outlook for specialty chemicals in India is positive.

Answer - Indeed, it is. The story is yet to fully play out, but India's competitiveness in specialty chemicals is on the rise.

About the Bajaj Finance Ltd.

Question - Let's jump right in. The decision to trim your stake in Bajaj Finance seems quite strategic. Could you walk us through the thought process behind that move?

Answer - Absolutely. Bajaj Finance had raised concerns about its B2C portfolio during the Q2 earnings concall in October. When a player of that stature flags issues, you pay attention. The industry needs to take cues. We promptly trimmed our position in the stock in response to those concerns.