Old Bridge Capital Management favours vehicle manufacturers over automotive ancillary companies. However, the firm will need to exercise patience and delay its investments until entry points improve.
In an interview with CNBC-TV18, Kenneth Andrade, Founder and CEO of Old Bridge Capital Management, spoke about the state of the auto industry and the strategic approach being taken by the company in response to evolving trends.
He said, “I definitely prefer the vehicle manufacturers to the automotive ancillaries, but we will have to wait till, from our perspective, things get a little better as far as entry-level is concerned.”
The automotive sector faced a challenging phase up until 2021, leading many companies to now strive to recover the time lost. This segment of the market has immense growth potential and is on the verge of reaching a mature stage. This applies to various segments within the industry, whether it's two-wheelers or four-wheelers, driven by significant technological shifts. The traditional distribution aspect of the business remains strong, contributing positively to valuations. As a result, there is room for gradual expansion from this point onward.
According to Andrade, the automotive industry is set to remain a significant sector in India. Observing the market's trajectory, it's clear that factors like pricing, inflation, increased vehicle realisation, and an overall trend toward premiumisation are driving its growth. This ongoing pattern highlights the importance of being present in this sector and capitalising on its opportunities.
He further added that the emerging sector of electric vehicles (EVs) is marked by technological shifts. Many publicly traded companies are divesting their EV divisions to external investors, whether through private equity channels or strategic partnerships. Consequently, existing shareholders in these businesses have reduced involvement in the EV sector, which remains within the listed company.
“I am not too much in favour of how this structure plays out. I mean, a lot of the larger corporates are diluting their stake in the EV business at the expense of the public shareholders. So that may not be the best thing to happen in the longer term for a lot of public shareholdings, which is sitting in companies at this point in time,” said Andrade.
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(Edited by : C H Unnikrishnan)
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