Book building price discovery of Rs 48 not fair: Tulsian

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SP Tulsian of sptulsian.com tols CNBC-TV18 that when the SAT has given the stay on December 6, some hopes were revived about the authorities looking into it and its shareholders started having some hopes that probably their grievances would all get heard. "And when it turns out that first they get a stay and then that stay gets reversed, I think the whole thing ultimately is damaging the interest" he says.

 

Excerpts from the exclusive interview with SP Tulsian:

 

Q: It will be a little disappointing that Essar Steel finally goes out even after the investigation?

 

A: I would call it turning of the cycle. I don't know in what manner the cases have been presented before the SAT, because we have discussed a lot on this matter. If you just look into the legal process followed by the company or by the lead manager for initiating the reverse book build move. We have never questioned on that move. But ultimately, the participation and the valuation call is taken by the company at Rs 48 on which a stay has been given.

 

I have been repeatedly saying that when the SAT has given the stay on December 6, some hopes were revived about the authorities looking into it and then its shareholders, which are to the extent of about 4 lakh, started having some hopes that probably their grievances would all get heard, because when so much analysis is made on the valuations by the independent agencies, by the news agencies, by the media, there has to be something. And when it turns out that first they get a stay and then that stay gets reversed, I think the whole thing ultimately is damaging the interest because when you talk to the investors, they are just not prepared to listen.

 

I think the dramas or the events that are unfolding is very unfortunate apart from causing huge losses to retail investors.

 

Q: Do you think that most of the smart players saw it coming? A day before December 6, the stock shot up and if you look at the way it has moved from there, it has been coming off gradually. It seemed like some people in the market almost knew this was coming.

 

A: Definitely, I would say that Essar Steel counter was free for the last fortnight. A couple of months back, promoters played and made money. I am not again prepared to accept that there has been no clue or there has been no participation or interest having played on the counter by larger players. So, I think this counter has been free for all for quite some time at the cost and losses to the retail investors.

 

 

Q: Are you surprised that there was a genuine look into this whole matter and they came up empty handed, and that there was no suggestion of the reverse book process not having been conducted diligently and in good faith, so that the order was reversed again?

 

A: Again, there is no point in talking in absentia because either you join as a party, make your presentation before the SAT, which is ultimately in their interest. But let me just tell you, half percent of shareholders had participated in the process and the promoters have been able to mop up 35% of the shares. I think this one indication or this one episode is enough for the authorities, whether it is quasi-judicial, judicial or maybe the regulator to look into the matter. So, there is no point again because ultimately the conclusion is that the book build price discovery of Rs 48 is not fair inspite of having complied or having observed all the rules of the delisting norms and all that.

 

I don't know how the case has been fought before the SAT. But I am not prepared to accept that you don't have enough evidence or document proof to present before the authorities to convince them to go for higher valuation of this stock.

 

Q: We are trying to get details from the legal counsel as well and they were very sketchy. But what do you think was being questioned in this entire process, the price that was arrived at or like you said the kind of subscription there was, because we still don't know what the question mark was raised over?

 

A: Whatever idea or feedback I got from today's proceedings was the SAT was very unhappy on the appellant for having lodged the claim with an ulterior motive of having entered into the stock. Unless and until you really go through the minutes of the proceedings or maybe the final copy of the order, whatever information is gathered probably gives you an idea that either vested interest has been playing into the counter, merely filed a complaint in SAT, just on expectation of some positive results, ramp up the share price and again start offloading or buying the stocks from the market.

 

   

Q: The stock that has surprised today is Gujarat State Petronet. Any thoughts on why that stock has jumped up so much?

A: For the last one month or so, mainly because of the infrastructure play, they have laid their pipeline in North Gujarat and that is the biggest trigger. So, this has come on the radar of long-term analysts and those who have been having a positive expectation of about 20%+ return, find this stock to be quite safe and good.

Q: The mood seems to be turning on sugar. Would you buy any of these stocks now?

 

A: When you talk to the traders and when you take a clue from the commodity market, the future of February sugar is ruling at around 12-12.50. That means the ex-mill price is about 11. With that kind of return, how can you expect the mills to report profit, except maybe some reduction in the SAP for the UP mills and the restoration of the incentive scheme, which was withdrawn by the Mayawati government? So, even if those things happen, it will not be putting the companies' bottomlines in the black. So, it is very difficult for me to accept the revival of the interest or turn in the companies' profitability for this season.