Udayan Mukherjee, managing editor, CNBC-TV18 questions the timing of the SAIL Offer for Sale (OFS).
Below is the verbatim transcript of Udayan’s comments on CNBC-TV18
It looks like the SAIL OFS is forced fed to the market because of the government’s desperation on the divestment target for this year because if one looks at the present market condition, it does not look like anyone wants to buy a metal stock right now. The government could have done something else or at least waited for sometime till the market mood improved.
Like we have discussed in many other issues there is nothing but the price to play on in SAIL at this point because it is not a 2014 story, it is a 2015 story. Even if that happens, execution of the expansion has to happen seamlessly for it to become a 2015 story.
Valuations are not bad if the expansion happens next year for SAIL. Today SAIL is trading at double digit price to earning (P/E) multiples. So the question is for a metal stock, do you want to play at 10-11 P/E, for FY14 earnings, in this kind of market condition? Maybe the answer is no. So, valuations are not bad but they are not that compelling either. It is not like you are buying it at 4-5 P/E.
I doubt whether people will want to buy SAIL. It is only for a very large investor who wants to pick up a bite size quantity of SAIL and then sit on it for about two years and eventually make money. I do not know how many investors fit that category, but for people who are watching this channel, retail, high networth individuals (HNIs) and most institutional investors, should not even look at it.