Can you bet on MMTC, SAIL, United Spirit now? Tulsian tells

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Can you bet on MMTC, SAIL, United Spirit now? Tulsian tells

SP Tulsian of sptulsian.com in an interview to CNBC-TV18 gave reading and outlook on stocks across various sectors like MMTC, Hindustan Copper, ONGC, SAIL, Tata Metaliks and others.

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Excerpts from After the Bell on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

SP Tulsian of sptulsian.com in an interview to CNBC-TV18 gave reading and outlook on stocks across various sectors like MMTC , Hindustan Copper , ONGC ,  SAIL , Tata Metaliks and others.

Below is the edited transcript of Tulsian's interview with CNBC-TV18. Also watch the accompanying video.

Q: Is the market slowly recognizing that maybe for the last couple of days its exuberance was a little misplaced on the PSUs?

A: It seems so because I don't think that there is any rationale for this kind of valuation for MMTC first and Hindustan Copper. I am not contesting or disputing the valuations of other stocks like Neyveli Lignite , NFL or RCF . But in case of these two stocks, where government of India is holding 99.5% stake, definitely this kind of valuations are unjustified.

Sometimes it is difficult to understand the kind of volume which we have been seeing in this stock. It is very strange that who are these courageous traders those who are going for. Sometimes as a fundamental analyst, you don't stop at this level that the valuations are unjustified with Rs 70,000 crore market cap for MMTC.

But sometimes one wonders that who is taking the delivery of 30,000-40,000 shares and who is creating this kind of volume. This is because unless and until delivery is taken, we cannot see prices moving up by 60-70% in last one week or so. So, it is very difficult to understand. In fact one tries to correlate trading patterns also with the investors who are buying. So, it is very strange to see this kind of volume and value jump happening in the stock.

Q: Why the large ones like ONGC, NTPC, SAIL beginning to come off? Do you think people are realizing that maybe large dividends, those kinds of handouts between now and the budget may also not come through?

A: In fact I have other view. With ONGC declaring 125% interim dividend, reinforces that the government may fall back on declaration of the interim dividend which may not be very hefty. So, it is premature again to reach on this conclusion that nothing will happen on this front. One thing seems certain that Finance Ministry is very determined to mobilise these Rs 40,000 crore.

Earlier, we deliberated on the Special Undertaking of the Unit Trust of India (SUUTI) monetization of holding, taking loan against those shares and then going for the buyback. This means Finance Ministry or the Disinvestment Ministry have been deliberating on the various pros and cons. It only seems that they are determined that they need to mobilise this money.

I am not comfortable except in case of Steel Authority. Sometimes one is not comfortable with the kind of valuations at which it has been prevailing. But lets presume if the government for any reason opts to divest part of their stake in ONGC, there should be huge value buyers who can come forward. It is for the government to take a call whether they will be comfortable to divest maybe 8-10% stake in Steel Authority at a market cap of Rs 40,000 crore.

But if it happens, as a fundamental analyst or a fund manager of insurance company, I would have been too happy to have these shares at the current valuations. So, one cannot just take a call that the window has been shut for divestment of these stocks. Everything is floating. It can settle on Steel Authority, BHEL or ONGC and anything can happen. One thing is sure with respect to those two earlier stocks thet irrational exuberance is prevailing and valuations are unjustified.

Q: Strange movement in the Mallya Group stocks today. United Spirits and Kingfisher are down. UB and UB Holdings are up some 8-10% each. How do you read that?

A: Yes it is a strange movement, but fundamentally, first lets take a call on United Spirit , which was up by about 10% yesterday. It is a Rs 10 stock and yesterday even at the increased valuation it was ruling at a PE multiple of 12. United Breweries which is having an EPS of not more than Rs 6 and it is ruling at a PE multiple of Rs 60-65. Since a major chunk of this United Breweries stake is held by United Breweries Holding, we are seeing a corresponding increase in the share price of United Breweries Holding also.

I have been taking a call on United Breweries for last one week, 75% of their stake is held by promoters, 37% is held by UB Group and about 35% is held by the Heineken Group, Scottish and Newcastle. So, there are all the possibility, if Vijay Mallya wants to salvage Kingfisher Airlines he has to exit from one big company and that could only be the United Breweries. This is because United Spirit is the largest spirit maker in the world.

United Breweries is largest beer maker in India. So, that could only be the reason. One can't digest the PE variation or the PE multiple variation in both the stock, one at 11-12 second at 60-65. Except for this reason, I don't see any fundamental reason for the stock to move up. That is the reason for both the stocks which are positive today.

Q: Do you track Tata Metaliks?

A: Yesterday we have seen the up move in Tata Sponge and today in Tata Metaliks. I don't know the unconfirmed reports that there are kind merger talks with Tata Steel. But honestly, I am unable to keep a track that what could be the reason.

Yesterday, Tata Metaliks was up marginally by about 6-8% but Tata Sponge was frozen yesterday upward. Today is the case with Tata Metaliks. So, unconfirmed reports because purely on better working ahead that this can't be the reason. There has to be some corporate event lined up or some undercurrent.