The Hindu Business Line : Focus shifting from large-caps to mid-caps: Prabhudas

Most of the big companies have got limited growth opportunities, and they cannot grow beyond a certain size, whereas in small-cap with a M&A route or organic route they can grow faster

Mr Ranjit Kapadia, Head (Private Client Group) at Prabhudas Lilladher, says that the focus is shifting from large-cap segment to mid-cap and small caps.

Stating that valuations in mid-caps are slightly better than large-caps, he says that export-oriented companies are to be avoided as the future of the dollar-rupee parity is still unclear.

Excerpts from CNBC-TV18’s exclusive interview.

What is the stated view now that the mid-cap would outperform for the last 4-5 months of 2007 or would the focus still be in the large caps?

The focus is shifting slightly from large caps to mid-caps.

Do you believe that there would be a lot of private equity interest for the mid-cap space because of the kind of capex that some of those companies would have laid for themselves?

Most of the big companies have got limited growth opportunities, and they cannot grow beyond a certain size, whereas in small cap with a merger and acquisition route or organic route, they can grow much faster than the big companies.

How are overall valuations stacked at this point, where do you see value in this mid-cap universe?

Valuations in mid-caps are slightly better than the large caps because mid-caps are not getting fancy valuations.

On sector-specific valuations, you like mid-cap pharmaceuticals. What about the two other spaces which have been drawing a lot of interest – banks and IT?

I cannot contribute much on mid-cap IT and banks. But I certainly see that across the board the mid-cap companies in the engineering, auto and other spaces, are doing exceedingly well during the last 1-2 months.

What are you bearish on at this point in time what is it that you would avoid?

At the moment I would advise to avoid export-oriented companies because the rupee has started appreciating.

So, the revenues will start coming, but one doesn’t know what is going to be the future of the dollar-rupee parity.

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