ET Now

In an interview with ET Now, G Chokkalingam, Founder, Equinomics Research & Advisory, shares his top two wealth-creating ideas. ET Now: What are your top two wealth-creation ideas?

G Chokkalingam: I like an old name Hyderabad Industries. This is part of CK Birla group. It is into building material business. The beauty of this company is that it has got multiple plants, old plants and least leverage.

It has been paying excellent pidend. In the September quarter, it has posted marginal loss. That is why the stock has crashed. But the fact is that this company is being engaged in building products primarily for rural housing and the monsoon always coincides with the September quarter. That is why this company has historically posted very poor results in September quarter. The market did not understand this fact. In the last three years, this company has increased its capex by 50 per cent. Going forward, in the next two years, its earnings per share can expand substantially. So I recommend this stock.

The second idea is Andhra Sugar. This is one of the most efficient producers of caustic soda and sugar in the country. Despite operating in commodity businesses, this company has been giving pidend for the past three decades, without any interruption. Now it has turned around the sugar segment. This is one of the few companies in the country which have already turned around the sugar business.

It is a asset-rich company. It has got investment in Andhra Petro and AP Gas Power Corporation. The replacement value of the assets is more than Rs 2,000 crore, whereas the enterprise value (EV) is hardly Rs 500 crore.

And with rupee depreciating badly, I firmly believe that caustic soda being a import substitute could be benefited. Therefore both business verticals – sugar and caustic soda – can give robust earnings in the next two years. Last sugar cycle it hit the EPS of almost around Rs 30. I do not see any reason why it should not hit Rs 265 level with same fundamentals in the next one to two years.