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In the short-term he is bullish on Siyaram Silk , Prakash Industries  and IVRCL .

In a year’s time he expects good returns from Surya Pharmaceutical .

Below is a verbatim transcript of his interview with CNBC-TV18’s Udayan Mukherjee and Mitali Mukherjee. For the complete interview watch the accompanying video.

Q: From the textile space, you like Siyaram Silk?

A: Yes. The textile industry, in my view, at present, is going through the best patch in the last 25-30 years. When you talk to the industry people, they are so jubilant and especially, the companies which have integrated operations. Siyaram Silk is a vertically integrated company. It is the largest blended fabric maker in the country with a very strong brand and very strong retail outlet.

If you see their financial performance posted for Q3, it has been quite good with an EPS of close to about Rs 18. If you go by their nine months performance, they have already posted an EPS of Rs 42. The numbers which they posted in Q3 are likely to get repeated in Q4 and it is likely to be much better. They should be able to post an EPS of close to about Rs 60 on topline of Rs 900 crore.

The share is virtually ruling at a PE multiple of less than 5, could be about 4.5 to 5 times. The scenario or the situation is going to remain quite profitable for the textile company, especially, for companies, which have integrated operations from start to end that is from yarn making to garment making. My view is quite positive on the stock. If somebody can keep a view of about three-four months on this stock, one can expect a return of 15-20% in this period.

Q: What about Prakash Industries?

A: Prakash Industries has an integrated setup. In fact, they have captive iron ore and coal mines and we all know the premium a company enjoys with these kinds of assets if they have such natural resources. In the past, they had problems of allegations being levied against them of taking away some material without accounting them in the books. But those things seem to be left behind.

If you now go by their product profile, they have sponge iron, mild steel, structural bars and captive power generations of about 115 megawatt (MW). The company has been posting a very good performance. They have yet to declare their Q3 results, which is due day after tomorrow. If you go by the H1 performance, they have already posted a topline of close to about Rs 890 crore and going by the EPS, they have about Rs 11.50 for H1.

In my view, the second half is likely to be better because of the better realisation of the products because of their own captive iron ore and coal mines. Even the company is expanding their power generation capacity to about 625 MW but that is a long programme, which will take about two-three years because of their captive coal.

Purely, going by the financials, they are looking at a topline of close to about Rs 1,800 crore for FY11 and an expected EPS of about 23-24 and is ruling at a PE multiple of about 4. In fact, lately we have seen all the metal stocks seeing their PE expansion happening to about maybe 7-8 times for these midsized companies. There is scope for PE expansion and earnings growth for the company in FY12 on the topline and bottomline. At Rs 96 a share, it looks quite reasonable, which can move to about Rs 125 to Rs 130 in maybe four-six months time.

Q: You have picked a midcap pharmaceutical name as well, Surya Pharmaceutical?

A: Surya Pharmaceutical is an established company which has six plants in Northern India and offers a wide range of products, API formulations and the fine chemical derivatives. Apart from that, they have presence in herbal products, mint and menthol derivatives as well.

If you see their financial performance, they are already out with their Q3 results where they have posted a topline of Rs 398 crore with an EPS of Rs 1.50 paisa. Recently, the company has split the face value of share from 10 to 1. Going forward, for FY11, they should be having a topline of at least Rs 1,500 crore.

The company has been going into forward integration as well with the pharmacy source of about 102 stores which they already have under the brand name Viva. That is also value expansion. Their bottomline of close to about Rs 100 crore for FY11 can easily move to Rs 125 crore. They should be able to post a growth of 25% in FY12 over the expected bottomline of about 100 crore, which they are likely to post for FY11 considering their nine months result.

The share is ruling presently at about 23. If I take an EPS of about Rs 560-570 for FY11, it is ruling at a PE multiple of about close to 4 times. In such a case, I don’t think even if you take this company as a pure API play, it doesn’t deserve a PE multiple of 4 times. So, maybe in a year’s time one can see at least 50% rise from the current share price at what it is ruling.

Q: IVRCL has been smashed up over the last few weeks but you like the company it owns, Hindustan Dorr Oliver?

A: We have all been hearing that IVRCL has been passing through a huge liquidity crunch. Hindustan Dorr Oliver in which they have about 56% stake, they have put that company earlier also on the block where it was indicated that probably they got a bid for at about Rs 135-140 but they were wanting price of Rs 155-160.

Now it seems that they are progressing well. If they want to salvage IVRCL, the parent company, they need to tide over their liquidity crunch, which is only possibly by exiting their promoter stake which they are holding in this company.

If I take a call on this engineering company with rich assets, earlier also we had heard that the Piramal Group have shown interest because of its core real estate presence in the engineering and infrastructure space. Their EPS is very much in place of about maybe Rs 11-12 for FY11.

Though their business model is very much in place, you can give the valuation alone on the business model itself. The trigger seems to be more of this stake sale by the promoters, which in my view is expected to happen maybe in a month or so. That can give a valuation of about 125 in the next couple of months or so.

Q: There was no formal conclusion at the fertiliser meet yesterday. Are you hopeful there will be some headway and do you think it will happen on the budget day itself or it may happen sooner than that?

A: What is the point of calling all these meetings for urea decontrol because there are much larger issues involved. Firstly, the availability of gas to all the plants to their full requirement, secondly, migration of the feedstock from naphtha or diesel oil to gas and then taking a call. Probably, this is going to take maybe another two-three years time because there has to be some capital subsidy scheme for migration of feedstock.

They have all been deliberated at the secretary’s levels, whether you talk of the fertiliser ministry or at the finance ministry or at the oil and petroleum ministry. I don’t think there has been any coordination but there has been a lot of deliberation. I don’t know what the idea was of synchronizing all this again at the committee of secretaries’ level and then forwarding it to the group of ministers.

I don’t think one can really think of taking a call on urea decontrol or for the NBS scheme at this stage. Let us hope that the gas allocation is first taken up on a priority basis by the government.

Q: Would you buy Reliance here at Rs 930?

A: On a fundamental basis, I don’t see any problem. Yes, the kind of volatility, which it has been showing and moving below or close to about Rs 900, it would be prudent for investors to look for entering into the stock purely as an investor at Rs 900 levels.

Q: What did you make of the two infrastructure numbers out yesterday, Punj Lloyd and Lanco Infrastructure ?

A: Again disappointment on both. I don’t think that there has been any surprise from Punj. Yes, from Lanco, it has been a disappointment considering the situation prevailing in Hyderabad, gives the indication that things are not looking good for the company’s presence in that state.

Q: Do you track BEML? The stock is down around 16% in the last seven days. What is bothering it?

A: I am not closely tracking it but again maybe disappointment with nothing coming in. Generally, this stock always moves ahead of the rail and general budget. That could be the only reason for the negative performance of the stock.