Impressed with JSW Energy IPO, see no problem: SP Tulsian

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Reliance Power's Dadri setback:Farmers can regain proj land Allahabad HC rules against Reliance Power land buy: Reports Expect Rs 8-10 dips in Reliance Power: SP Tulsian Subscribe to JSW Energy IPO at lower band: SPA Sec Subscribe to JSW Energy IPO, target of Rs 150-160: Swastika 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 Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news JSW Energy | Adani Power | JSW Steel | Godrej Properties | Peninsula Land | Marathon Nextgen Realty | Brigade Enterprises | Mahindra Lifespace Developers | Hindustan Petroleum Corporation | Bharat Petroleum Corporation | Indian Oil Corporation | Maxwell Industries | BASF India | Dr Reddys Laboratories | Reliance Capital | Manaksia |

In an interview with CNBC-TV18, SP Tulsian of sptulsian.com, spoke about his take on a few stocks and they would perform going forward.

Here is a verbatim transcript.

Q: Reliance Power has reacted a bit to the Dadri land developments do you expect more damage on the stock or do you expect the stock to stabilise here?

A: It should stabilise around Rs 130-135 per share; maybe a further fall of Rs 5-7 per share because it's a big set back to the company. If they have to really shift a 7,500 megawatt (MW) power project to any other place that will not be easy for them because we know this land issue has been catching on in all the states and they will be requiring 3000-4000 acre of land. So, if this kind of shifting happens that will put a delay of over two years for the project. Even if they try to redress the damages caused in Uttar Pradesh or at Dadri that will also get delayed by three-six months. But I am taking the later scenario that they should be able to continue Dadri because even the UP government wants such a big power project. So taking a lesser damage happening on stock price still can result in erosion in the share price by about Rs 8-10 per share from here on.

Q: Have you made up your mind on whether to buy JSW Energy or you want to give this is a pass as well?

A: If I just make the comparison of JSW Energy with Adani Power which has an enterprise value of 7.2 crore per MW while JSW Energy, because it is an integrated play, they are into power trading, power transmission, mining, capital equipment and are holding shares of Rs 700 crore of JSW Steel of which there is an unrealized gain of Rs 500 crore. If you just knock of all this unrelated projects, their enterprise value is slightly lower than Adani Power's 7.2 crore and if I just go on price to book as well, Adani Power is now ruling at 3.65 PBV while this stock should rule if I take Rs 110 as the issue price, the Rs 5 discount which is given to retail investor, honestly I am impressed with the issue.

Also, considering the capacity they have posted in case of JSW Steel, the way they have surpassed Tata Steel in terms of capacity creation, I think here also they will be able to do the same thing though they have not gone with substantial progress on 7,700 MW and for time being their focus is entirely on 3,650 MW of which about 3,200 MW should be operational by October 2010. So at least I am happy and considering the track record of Jindal Group who have always rewarded the shareholders and shareholders have always made money in all their group companies.

At least I am convinced with the issue and I don't see any problem for retail investors to go ahead with it.

Q: What about the one that opens tomorrow‑Godrej Properties?

A: I am not impressed at all with this issue. For example for the six months ending September 2009, the company has posted a profit after tax (PAT) of Rs 48 crore on topline of Rs 125 crore, which has come from the sale of long-term investments to the extent of Rs 58 crore. That means they have not earned a single rupee from their core business.

If you take the comparative performance of Peninsula Land or maybe Marathon Nextgen Realty , which have good presence in Mumbai for the quarter-ended September, have posted a PAT of Rs 85 crore and Rs 40 crore. So firstly for their core business you are not seeing these kind of profits, same bottomline has contributed largely by long-term investment sale in FY09 also.

And if you take their overall market capitalization which is likely to be at Rs 3,700 crore you have so many companies available and at a marketcap of Rs 1,000-2,200 crore in which I will include Peninsula Land, Brigade Enterprises , Mahindra Lifespace and Marathon Nextgen Realty‑all these companies have been posting very good profits, they have a very good presence in their respective filed because all these builders are termed as realty developers. They have been giving quality. So honestly I am not convinced when you have umpteen opportunities available in the secondary market and so many issues having lined up. Honestly I don't see how one can really get convinced with a valuation of Rs 490-530 price tag for this company.

Q: The big long trade these last few days has been oil marketing companies (OMCs)‑ HPCL , BPCL , IOC ‑they are all up between 5-7% in the past three days‑any merit to go down that road?

A: In fact we have seen this rise having started with BPCL when they had the oil discovery in Latin America and thereafter we saw maybe HP, IOC also catching up. But I don't think from here on there is any justification. We have seen crude prices softening which we see is giving a push to all these OMCs but beyond this point I don't think that there is any value lying in the stocks to go up from here.