Mehraboon Irani of Nirmal Bang Securities feels expectations from the Railway Budget are fairly muted, especially taking into consideration the Finance Minister's decision to implement spending cuts across sectors. According to him, if the Budget presents even 50 percent of what former Railway Minister Dinesh Trivedi had tried to execute in 2012, it would be very positive for the market.
From the railway stocks, Irani picks Texmaco Rail and Engineering. He is also positive on L&T Finance Holdings and Mahindra & Mahindra Financial Services among the non-banking financial companies of NBFCs.
Here is the edited transcript of the interview on CNBC-TV18.
Q: What do you expect to see from the Railway Budget from the market’s point of view?
A: Expectation is very muted and if you see what happened last year with the budget presented by then Railway Minister Dinesh Trivedi, if the present Railway Minister even does 50 percent of what he had proposed before he was chucked out by Mamta Banerjee, I think that will be very positive for the market.
The expectations are very muted, especially considering the fact that the Finance Minister has clearly hinted that there are going to be spending cuts across various sectors. So having said that, if there is not much spending I think there is not much to expect.
Among the railway stocks not many have great balance sheets and reaction if any is just before the Railway Budget and after the Railway Budget. So nothing much to look forward to, though there is one stock that stands out and it is Texmaco Rail and Engineering which has the best balance sheet among the railway stocks.
Q: Which of the Non-Banking Financial Companies (NBFCs) would you still buy after yesterday’s rally?
A: I feel L&T Finance Holdings and Mahindra & Mahindra Financial Services should be looked at positively. The stocks have already gone up. In fact, in terms of valuations, L&T Finance is perfectly valued. So should one go and buy it? If one is a long-term investor then there is not much of a problem but, one needs to understand that the banking licenses are not going to come in a hurry.
I think it is going to be 2015 by the time the companies are going to be able to transform themselves into a bank or set up a bank. I don’t think it is going to reflect anywhere in the P&L account or balance sheet of the companies in the near future.
I like L&T Finance. I hold it because there were clear cut exposures or excess to the long investor. They have the experience of handling projects with long gestation, they have a great brand and I think they would ultimately be a good player in the financial services segment. So because of all these reasons, I think L&T Finance stands out along with M&M Financial which could be having one of the better managements in this particular sector.
So is it a good bet to buy these two in a hurry for the shorter term? No, but if people are long-term investors, they already own the stocks or want to own these stocks for future consideration that they would possibly become banks. I think these two are ideal candidates and should get the nod. They could turn out to be good long-term investment bets.