Delisting candidates: How to trade them now?

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Delisting candidates: How to trade them now?

In an exclusive interview with CNBC-TV18, Jagannadham Thununguntla, Equity Head, SMC Capitals, & Aashish Tater, Head of Research, Fort Share Broking, speak about various delisting candidates and give their outlook going forward.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS ABB open offer opens: Should you tender shares? 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

In an exclusive interview with CNBC-TV18, Jagannadham Thununguntla, Equity Head, SMC Capitals and Aashish Tater, Head of Research, Fort Share Broking, speak about various delisting candidates and give their outlook going forward.

Below is a verbatim transcript of the exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: AstraZeneca where the maximum price indicated is Rs 1,152, the stock price is at Rs 1,300, how do you see that situation evolving?

Thununguntla: As we have discussed it last time it is almost a guaranteed sell, it is better to sell it up. If somebody is also already having AstraZeneca shares in their portfolio, do not wait for a minute. The Rs 1,152 is a rare phenomena because generally the companies have a tendency to give the offer price, which is the base price, which is as per the legal requirement, but cap price generally not many companies give. But here if the company is giving what it is indicating is at beyond Rs 1,152, they are reserving a right for regretting the offer, if the price that is determined in the reverse book building is more than that.

Yesterday, the share price has already corrected 5% and it is matter of time before the share price may come down below Rs 1,152 leves. Even at Rs 1,300 the share is trading at 60 times PE multiple. So by any standards it is not undervalued. So there is no point in living in a hope that company may revise the offer price or the reverse book building price so it is better to be sensible and book the profits.

Q: Can you explain this curious phenomenon of the stock trading at Rs 150 above its maximum indicative price?

Tater: I feel this particular stock has been chased by some high risk takers who feel that the stock might have a revise open offer. Even we have recommended an exit from the stock definitely. But, yes, we do feel if this stock cools off to that Rs 1,000 levels again, we would be entering into the stock. But as of now we recommend an exit from the stock.

Q: What are you telling your clients to do on the ABB open offer, where the gap between the offer price and the market price is not significant?

Tater: We are recommending our small clients to actually enter into the open offer at Rs 900. Going by the pure valuation ratios, I feel that company is fully priced. The quarter one dismal performance was based on foreign exchange fluctuations that the company had to go through and few projects that had a cost over run. But, however, we still feel for next year the company would do around Rs 24-25 of EPS (earning per share). That translates into mind boggling PEs. Given that this is a strong presence and the parent has a huge cash and they have been on acquisition spree, but we still feel that small shareholder should definitely go and tender into the stock. As of arbitrage, there is no arbitrage left into this particular stock that is what we believe.

In fact if we even adjust that LIC will not go and tender a single stock, there is a good amount of success ratio. But if someone is trying to actually play on the open offer price would be revised or something like that, I think they are taking a risk because if I compare it with peers this stock can definitely pull out by 10-15% from here, once the open offer euphoria sets out from the story.