If you are very bullish on infrastructure sector in India read my view on it and try to answer few of the questions and concern I have for this sector.
Right Stock at Right Price for Right Time
Have you ever invested in a stock on someone's advice to make profit and then has to wait for months, maybe years, to recover capital? Not anymore.
I am very cautious on the infrastructure sector and I express the same here at the blog in many posts and so get tons of emails and comments like in Reliance Infrastructure Fund asking for reasons as to why I am cautious on Infrastructure sector as a whole. Even after suggesting some of the Best Infrastructure Funds I still get questions as why I am so cautious and so I am suggesting the main reason behind it. This is my personal views and understanding.
Infrastructure sector as a whole in India uses very outdated methodologies and process which can never compete with the World’s growth. As an example many of the Asian Peers like Japan and Singapore work 24×7 where as in India its mainly 9-5 and that too only on weekdays. We do not have the methodologies or I would say we are not ready to accept methodologies and technology to achieve better ways of building our infrastructure faster.
We do not build Airports and Ports at the same rate as many of the peer Asian countries.Malls / Shopping complexes cannot be done 24×7 because we do not have the necessary technology to make the construction site sound proof and nearby area does not get disturbed and execute the project faster. Do you think this is something we cannot do or its something we are not willing to do?
Lets take an example of Reliance Power which has a market cap of few billions but would take few years to start operation. Have you questioned why? The main reason is completing the infrastructure of Reliance Power would take so long. Does this mean ADAG group does not have the ability to execute it faster. I doubt on this. The main delay comes in the process where there is lot of Government approvals which normally does not start very soon.
We use IIP number which does not included the data from many very important industry and we are using the one used few decades back. Can’t find a single reason why it is not updated apart from not willing to update it by the authorities. If you can find some other reason please do share it with me.
Moving to slightly different sector but related is Real Estate. This sector has one of the biggest disadvantage I have ever seen. The builder never tries to complete the Residential apartments faster because the slower they make the higher sale value they get because price always move in one direction. Have you ever seen a residential apartment complete before time. Forget about before time. Have you ever seen it complete on time. I have seen people move into flats but the complete apartment is still under construction. At times this can be explained but I have seen it hundreds of time. Can you explain why? I can. We have no regulators for our Real Estate sector who can regulate the process.
If you have so many questions and no answer how can you be so bullish on infrastructure and real estate sector as a whole. I am not. But yes I hope we would improve sooner rather than later and so is not bearish on it but cautious definitely.