SP Tulsian of sptulsian.com in an interview with CNBC-TV18 shared his views on why the investors who got an allotment of D-Mart in the IPO should book pr0fits when it reaches levels of Rs 540-545.
He is also upbeat on pharma stocks like Aurobindo, Glenmark and Kopran.
He is not too upbeat on the Idea-Vodafone merger.
Below is the verbatim transcript of S P Tulsian's interview to Sonia Shenoy & Anuj Singhal on CNBC-TV18.
Anuj: You have been consistent on profit booking call on Idea Cellular ever since that stock moved to Rs 115-120 but after the finalisation of the deal now what next for this stock?
A: If you really go by the broad contours of the deal, I don’t think that there is any kind of attraction seen in it. Let me just quickly start with the process, the media and the market was expecting that it will be a 50-50 merger deal. I don’t know what kind of or maybe people were expecting that both the Vodafone and Birla Group will be having equal stake in the company. If you see 50-50 valuations has been given to both the companies per se that means an equity of the enlarged Idea will increase from Rs 3,600 to 7,200 crore roughly.
Firstly, if you see promoters of Idea got 21 percent and by paying about Rs 3,900 crore they bought addition 4.9 percent. That itself shows the compulsion or the desperation on the part promoters of Idea group to consolidate with Vodafone going forward. Secondly, if you see the enterprise value - I said that Rs 7,200 again the 32 crore shares or 35 crore share having bought by Idea or by the promoters of the Idea that is Birla that Rs 108 per share and by paying Rs 3,900 crore to Vodafone, Vodafone seems to be more in an advantageous position.
If I take Rs 100 as the share price for the Idea the market cap will be Rs 72,000 crore and if you add the debt of about Rs 1,08,000 crore existing in books of both the companies, the enterprise values come to about Rs 1,80,000 crore. Definitely, that will be seen quite rich, on a comparative basis also if I take a call on Bharti Airtel and Reliance Jio there is no point in expecting that maybe two years down the line or three years down the line or presently the situation will be that they will be having a market share of 40 percent because it will be very difficult to take a call on all these things.
So, in nutshell, I would say that the merger on which the benefits which were expected to flow into Idea shareholders have not seen coming in, they have gone more in favour of Vodafone. But anyway now since the event is behind us people will start taking a comparative valuations between merged Idea, Bharti Airtel and Reliance Jio. These three players only will be seen as a serious player there is no writing off the telecom sector but the value capping will be seen happening for these three stocks beyond a point. I am not too enthused with this because as I said that Rs 4,000 crore if you are paid just for 4.9 percent stake having acquired and is still if you are left with 26 percent stake I don’t think that there is anything to really cheer about.
Anuj: You have been calling for a buy on D-Mart in the IPO. But for those who missed out, a lot of them would have actually with the kind of subscriptions that we had, what would be a good attractive buying price?
A: Difficult to say that because we have to wait to see the stock getting listed. But still if you want, probably, I have said that after closure of the issue also, I do not see the stock going below Rs 450 and if it goes beyond Rs 500, then valuations will definitely be seen getting stretched because if you take a call on the valuation, the enterprise value (EV) of closer to about Rs 19,000 crore at an issue price of Rs 299 and if you take the listing at Rs 500, probably you get a valuation of about Rs 30,000 crore on EV basis for the stock which definitely makes it fully priced.
So, I will not be worried till a price of Rs 500 is seen on the stock. Again, with a view to have medium-term to long-term view only because at Rs 500 you will be seeing the full price. But yes, if the momentum takes the stock to move beyond Rs 530-545, which I am expecting that tomorrow probably we will see those prices, I will advise that those who have got the allotment, they can go for profit booking at a level of Rs 540-545. But yes, Rs 450-500 seems to be the reasonable range on pure valuation basis for the stock.
Anuj: Your take fundamentally on some of these names? We have seen Granules India, for example up today, Divis Laboratories, we have just spoke about, Strides Shasun has made a move. So, these pharmaceutical stocks, from low levels over the last few days, have made a move.
A: And in fact, we have discussed on this last week also when I have said that probably 2-3 stocks are looking good. One is Aurobindo Pharma and the other is Glenmark Pharmaceuticals based on the news flow or maybe on the valuations having seen too much corrections. And if you see the trading pattern also of all these stocks, they seem to have consolidated and now we are not seeing any kind of negative news flows coming in from US Food and Drug Administration (USFDA) front.
So probably these stocks are seeing a value buying because if you take a Wockhardt case, where there has been sporadic or maybe a couple of negative news from the other geographies of the world, in spite of that, the share has not corrected. So, it seems that probably the pharmaceutical stocks seem to have bottomed out and there are many frontline and in the smaller places also, there are many stocks which are looking quite good.
And we have in fact, one amongst the smaller cap or microcap, we are giving a buy call on Kopran which is also looking quite good because of their research space and the kind of good financial performance the company has been posting and which has seen reflecting into the Q3 numbers as well.Disclosure: Reliance Jio is a part of Reliance Industries that owns Network 18 Media & moneycontrol.com