Daybreak - Investing in 'Ayodhya stocks'? Blind faith is not the answer

Episode Date: January 22, 2024

The prime minister will be inaugurating the newly constructed Ram Temple in Ayodhya, Uttar Pradesh today. It's quite the event. In fact, PVR INOX, has even collaborated with a news channel to broadcast the ceremony live in more than 150+ cinemas in more than 70 cities across India. The who’s who of business, from Adani, Ambani, Tata, to Bollywood celebrities and sports stars like Tendulkar and Kohli are expected to attend the inauguration.I dont think we have ever seen anything like this before and neither has the stock market.The state govt of Uttar Pradesh has set aside about $10 billion for a decade-long redevelopment plan of the town. Ever since, it's almost like a gold rush amongst investors for stocks in big or small companies associated with Ayodhya. From Taj Hotels and IRCTC to Praveg, a small luxury tent company–some in the stock market believe these companies are in all set to become some of the biggest beneficiaries of this Ayodhya gold rush.But experts are warning investors against this kind of blind faith. According to them, buying into event-related market swings does not make for a sound long-term investment strategy.Tune in.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.   

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the same. secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they managed to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into.

to the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode.

Even if you live under a rock, you know what is happening in India today. It is hard to avoid. It's all over the news, it's all over the roads, it's all over the internet. The Prime Minister is going to be inaugurating the newly constructed Ram Temple in Ayodhya, Uttar Pradesh today. It's quite the event. Just look at the kind of media coverage it's been getting. Some states have even declared it a holiday today. In fact, PVR Inox, the multiplex chain,

has even collaborated with a news channel to broadcast the ceremony live in more than 150 cinemas in across 70 cities in India. And the who's who of business, Ramadani, Ambani, Tata to Bollywood celebrities, Alia Bhad, Ranbib Kapur, you name them, sports stars like Tendulkar and Koli, and even the bench of Supreme Court judges who delivered the verdict on Ayodhya are expected to attend the inauguration. I don't think we have seen anything like this before, and neither has the stock market. The state government of Udhra Pradesh has set aside about $10 billion for a 10-year redevelopment

plan for the town. So it's almost like there is a gold rush amongst investors. for stocks in companies associated with Ayyodhya, whether they are big or small. From Taj Hotels and the Indian Railway Catering and Tourism Corporation or IRCTC to Bravege a small luxury tent company. Some in the stock market believe that these companies are all set to become some of the biggest beneficiaries of this Ayatia gold rush. But experts are warning investors against this kind of blind faith.

According to them, buying into event-related market swings does not make for a sound long-term investment strategy. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Da Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Monday the 22nd of January. What is it that could be attracting the interest of investors in Ayyodya at this scale? Surely, it can't just be because of the construction of the temple, right? Well, there is a bunch of stuff in the works apart from the temple, from an airport, railway stations to fancy river cruises and Ram-themed amusement parks.

The government is developing Ayodya as a holiday destination for Hindu pilgrims. Some executives, such as Oyo founder Ritesha Garval, are even pegging Ayyodya to become what the Vatican is to the Catholics or Mecca is to Muslims. Which is why companies linked to Ayyodya, especially in infrastructure and hospitality, are set to make all the gains. Samuji al-Ghosh, the CEO of the real estate firm, the House of Abinandan Loda, told my colleague the Ken reporter Akriti Bala that Ayyodhya is being marketed with a single. precision and appeal as premium FMCG and automotive products. On social media, a bunch of unregistered research advisors have also been floating lists of what they call Ayyodya Ram Mandir stocks, which are basically listed companies that have either already invested in the city or planned to expand there soon.

These include big names like IHCL and the Interglobe Aviation Limited, which is the owner of Indigo, India's biggest airline, as well as microcaps like Pravej. IHCL, for example, is planning to build two hotels in Ayyodhya, while Pravej has built a dense city and a resort in the town. Indigo recently launched direct flights to Ayodhya from New Delhi, Ahmedabad and Mumbai. We spoke to Prashan Tapsi, the senior vice president of research at Mehta Equities, and he said that the Ram Temple opening is the mid-sized brokerage's biggest investment theme since the 23 men's cricket World Cup. But here is something to think about. How much of this rise in share prices is only because of the temple. I mean, how much

influence does the temple really have on the stocks, especially when hospitality and aviation stocks have anyway bounce back strongly since the pandemic. Stay tuned to find out. A senior vice president of a Mumbai based brokerage told the Ken and I'm quoting, I would advise investors to exercise caution if they think share prices could get impacted on just this one factor. End quote. They explained it to us saying that share prices for small caps are prone to wild swings even on small developments and they may not necessarily reflect their underlying value. According to them, it is better to look at the whole thing as a short-term trend. The Ayyodhya theme brings a familiar dilemma to equity investors, which is stick with the investment fundamentals that

produce long-term gains or gamble on fleeting market sentiments with the potential for big returns or even big losses. Kranty Bhattini and equity market strategist gave us an important insight. They said a strong demand should continue beyond the first day and the first few months. Akrity also spoke to Amit Kumar Gupta, the founder. of Research Advisory form Fintrek Capital. And he told her that one should not misconstrue the generic nature of investing in some stocks with their association with Ayodhya. For example, a generic investment is when investors are attracted to IRCTC because of its thousands of train lines

rather than just the ones that lead to Ayyodhya. This can also be applied to other big companies like Indigo, IHCL, Thomas Cook and ITC, among others. But here is what a senior portfolio manager at a boutique investment firm told us, and I'm quoting him, Indigo runs thousands of flights, so it is not going to make a big difference if they add three or four more. Taj Hotels has about 100 properties, so if they're going to add one or two properties in Ayodhya, it is not going to make a big material difference to their business and market cap.

But for smaller market cap companies, it is a slightly different story. Take Praavich, the luxury tent company for example. Amit Kumar Gupta told again that Pravich will see about a 10 to 15% increase in tourism revenue because of the opening of the 10th city in Ayodhya. This, along with the company's comparatively premium offering and also its asset light model has actually led Fintrek placing a buy-competitive. call on the stock. Fun fact, after the whole Maldives versus Luxhadeep debate, Prauvage shares leapt up by 18% on 8th of January. Why? Because it took up a contract to manage a density in

Lakshadeep after the government's holiday in Luxhedeep instead campaign. Another Ayodia-related small cab that Fintrek is bullish on is Apollo Sinduri Hotels. The company is coming up with a multi-level parking space across 3,000 square meters near. the temple and the same building will also have a company-managed food court. But again, like we know, even small developments can cause the share prices for small caps to wild swings. However, we do need to keep in mind that growth in Ayodhya will be on a low base. So despite concerns, market participants who spoke to the Ken mentioned that there is no doubt that the town's economy will be growing multi-fold in the future.

Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.