Bharti Infratel IPO may not get desired valuation: Tulsian

Below is the edited transcript of his interview to CNBC-TV18.

Q: What is the problem with S Kumars, the pace at which it has fallen over the last few days?

A: On Thursday, the share corrected 12-13%, it was learnt that an FII investor has exited by selling 60 lakh shares, but on Friday, the stock moved back by 7%. The volume is quite large today at 60 lakh shares on both the exchanges.

FIIs hold around above 20% stake in the company, and if they exit from the company than that it is a cause of worry. Fundamentally, there is no problem with the stock but there is pressure on margin calls which could be the reason for decline in value of stock. The problem is still not detected and this type of correction is a cause of worry.

Q: JSPL has hit a new 52-week low today. How would you approach the stock now?

A: Many negative news is coming for the stock with cancellation of the Bolivia mines contract, coal mine or coal block allocations, poor performance in power and steel division and there is problems even in core business on all fronts. More valuations was given to Jindal Steel and Power because of their power generation operations, which have in fact come on a stand still and even as a general rule the market is not giving much valuations to any power generation companies.

All the stocks are taking a hit. The company is trying to acquire some overseas mining assets but these things might not help the company to post good financial performance in next two quarters, plus the overhang of current regulatory actions against the company is also a big fear.   

Q: What is your view on Bharti Infratel IPO; will the IPO go through, whether there will be distressed valuations and what levels the market is talking about?

A: If we take a valuation call on all tower companies than there is no appetite. A big issue like this should have support from the institutional investors and more specially from the overseas institutional investors. Reliance Infratel or R Comm has not been able to divest their 53,000-54,000 towers. It is certain that Bharti Infratel will not get the desired valuation or even a compromised valuation, if they arrive. It will be difficult to push the IPO.

Q: Are you surprised at the very significant fall we have seen over the last few days in real estate and infrastructure stocks?

A: I am not worried on realty stock as there are chances of bounce back in case of HDIL , Indiabulls Real Estate or DLF . I am excluding Unitech in this category. There are real-time worries in stocks like GMR Infra , Lanco and Adani Group, which is the most vulnerable in the lot because of the correction which we are witnessing in Adani Enterprise , as Adani Enterprise is not able to hold the valuations of the stake which they are holding in Adani Ports and Adani Power this indicated a negative trend. The results of Suzlon Energy have been bad. No negative news has cropped up in the last one week for the company. So, I am unable to ascertain or connect the reason for the pessimism specifically on Suzlon because I don’t think that this has anything to do with the regulatory concerns or general industry pessimism prevailing etc. I am keeping a negative view on all these stocks except Suzlon Energy or one or two other stocks.

Q: Where is the floor on IFCI ? Do you think there is still lot of delivery-based selling which is going on?

A: We have been seeing lot of delivery-based selling in the stock. About floor price, on a fundamental basis, the book value got pruned from Rs 58 to Rs 32 now because of government's increased equity of Rs 933 crore and EPS from 8+ to sub 4. One need to apply 0.7 to price-to-book, and a maximum PE multiple of six so, that translates a price of Rs 22-23. This kind of valuations will come into play, in next one week or so. I expect the price to settle between Rs 22-23.

Q: What is your view on Orchid Chemicals which has been quite volatile?

A: The stock has is holding Rs 100 level, post poor numbers and thereafter the stock has moved largely because of the short covering, but at the upper level or Rs 120 we have seen fresh shorts getting created. The stock can correct to Rs 108-110, but I don’t see much weakness beyond that.