In an interview to CNBC-TV18's Sonia Shenoy and Anuj Singhal, SP Tulsian of sptulsian.com spoke about his readings and outlook on the fundamentals of the market and specific stocks.
Below is the verbatim transcript of the interview.
Anuj: Your thoughts first on HDFC Bank. Good numbers, but the stock at Rs 1,500 now. What is the call here?
A: The numbers are quite good and I do not have any complaint in spite of seeing slight increase in the provisions having made by the bank for this quarter because if you see the overall asset quality, that is what has been maintained and good growth in the net interest margin (NIM) and good growth in the bottomline return on assets is all seen maintained. So overall good numbers.
Sonia: The space that has rallied a lot today is sugar. Bajaj Hindusthan is up almost about 12 odd percent. Once again, tall claims made by the Uttar Pradesh Chief Minister on increasing the number of sugar mills, providing more subsidies, etc. but at this point, how would you trade in the sugar space?
A: Firstly, I do not think those are tall claims having made by the Chief Minister because mills have met the Chief Minister day before and if you see, two points were raised when the Chief Minister asked about the sugarcane areas and all that and the use of molasses which is going for the liquor purposes where the realisations are made or accruing or flowing more to the liquor makers than the sugar mills. So, he has taken that stand very carefully.
And second is regarding the dues which the companies have to recover from the power supply having made because cogen, when the sugar companies are processing the bagasse, they generate power and supply to the state government. And they have not been receiving this with those payments from the state government, number two.
Number three, if you really see the situation in UP, actually east UP has a lot of potential. If you take, sugar mills are divided into three – central, east and west. West and centrals are already seen running at well capacity, but in eastern UP, there are many cooperative sugar mills and all that. And whatever information which we have been gathering that they are not running at a good capacity and maybe those units can be given to the private players.
If you see, in the past also, many of the cooperative sugar mills have been given to the private players but at throwaway prices. So, overall people may call it as a political move also because Yogi Adityanath belongs from Gorakhpur which comes in eastern UP. But if you see the situation prevailing on a sugar front, overall for the country, it is very precarious.
We are going to, as I have maintained earlier also, 193 lakh tonne is the estimated production though Indian Sugar Mills Association (ISMA) has given a production of 203 lakh tonne for this season and conveniently if you see ISMA has not released the production figure for the last three fortnights. So, that is again showing that yes, something is very serious on the production front.
But if you come on the UP front, UP produced 68 lakh bags of sugar in the last season. This season, they are likely to end up with a production of about 85 lakh tonne. That means 25 percent production growth vis-à-vis 42 percent fall seen in Maharashtra and Karnataka, the two other sugar producing states and UP will be the highest producing state ever of 85 lakh tonne. Come the situation going forward, it is very difficult to take a call, but still I do not think that production is going to increase more than 235 lakh.
So, rightly so, if UP will not interfere at this stage or will not take pre-emptive moves, I do not think that will be seen very right on part. And rightly so, the Chief Minister has taken up this matter on a priority basis and is very keen that if, as I said, those cooperative mills and all that can get revived or even whatever problems which the companies are facing in UP on account of the sugarcane availability and all sort of things or maybe recovery of the old power dues, those are things getting sorted out.
So, those things are very pragmatic and those will be helping the companies in UP to improve further because as I said 25 percent increase in the production, probably you may not see increase in the production going for the next season for UP state. But even if they maintain those kind of production, that will be seen very profitable and in the interest of the farmers because a majority, the major crop for the UP farmers are sugarcane and I am quite positive on the sugar sector and UP based sugar mills.
Sonia: How would you be positioned? I know we are going to ask you this questions several times on Monday as well, but for now, Reliance, this quarter? Hopes are high because of how well the stock has done too. But what should investors expect?A: We have not yet worked out the exact numbers, but yes, petchem, we are expecting that probably company will be showing the better performance. On the refinery front, on the refining margin front, about USD 11 per barrel should be the margin, but we have to work out the exact numbers which we will be doing maybe this evening or tomorrow.