More cos in queue to be slapped with CCI penalty: Tulsian

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On a day when competition watchdog CCI imposed a penalty of around Rs 600 crore on realty major DLF for abusing its dominant market position, SP Tulsian of sptulsian.com says such an action is not a one-off is likely to get extended or apply to many other companies.

"Cement companies like Ultratech , ACC and Ambuja Cement are in line for huge penalty of the similar kind," says Tulsian. He says on the street, there will be an effect on such companies as and when this liability gets announced.

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

Q: Why do you think the infrastructure stocks have been punished today?

A: With in respect to the Lanco Infra , the profits have all been come from mainly from the subsidiaries. However, it does not apply for all the companies because they have been performing badly. I have not been able to figure out any reason that can universally apply to all the infra stocks.

Q: What did you make of the news on DLF that the Competition Commission (CCI) is asking for a Rs 600 crore penalty for abuse of it's dominant position?

A: The Competition Commission issue is going to be bad for many of the other companies Cement companies like Ultratech, ACC and Ambuja Cement are in line for huge penalty of the similar kind. The government is strict on instances of the dominant position being misused.

One has to go into the nitty-gritty of each company because such penalty is obviously not going to go down well. Hence, this kind of action from the competition commission is not a one off and is likely to get extended or apply to many other companies. We will have an effect on such companies as and when this liability gets announced and crystallized by the commission.

Q: Stocks like KS Oils have got collapsed today. What is your take?

A: It was all expected. The management is indulging into the activity of structured finance from the investors and financers. Also, there are many other companies including Sterling Bio , Sterling International Enterprises and KS Oils where investors get scared with such things happening. Hence, even if you see the fundamentals or the financial performance, it is very difficult to accept then because sometimes one wonders if the results are presented by the management to enable them to maintain the share price.

However, until you have the inside information you cannot really take a call merely looking to the financial performance or product profile or the business cycle of all these companies. In fact this is what has been happening in KS Oils for the last one week or so. Sometimes you feel that probably the stocks may have been bottomed out but when you have these activities going on, it is very difficult to take a fundamental call on these stocks at any levels.

Q: Why are sugar stocks down 8-9% a piece today across the board?

A: I am unable to understand why domestic companies are dancing to the tunes of the global commodity price movement because except for Renuka Sugars , no companies stand to gain. With the five lakh tonnes of extra sugar exports been released, there are many companies who are not left with the inventories.

Bajaj Hindustan is left with no inventory, so their September quarter result is going to be flat. Renuka looks to be the gainer on all account because the management has confirmed that they will be entitled for 10,000 tonnes of sugar. They have that kind of commodity at their disposal plus and they are aggressive in trading as well. Buying the export entitlement and exporting them is very difficult to correlate such kind of fall in all the sugar stocks. It is across the board 5-10% in all the stocks.

Q: What did you make of Punj Lloyd 's numbers? Do you think the pullback rally is over?

A: Yes, the pullback rally is over. When we saw the Q4 results, I had my apprehensions that unless you see better results for the next two quarters, one cannot take a positive call on the stock. Hence, from here on again you will have the same kind of apprehension and fear and I won't be surprised to see stock correcting again below Rs 50.

Q: Reliance Capital is down 6%, do you think it's results led it there?

A: It is purely result led because their finance investment has been their main segments and has reported poor performance. The losses are of about Rs 25 crore against profit of Rs 65 crore and there is Rs 7,500 crore capital employed in that segment, paying an interest of Rs 500 crore per quarter.

There is a question on the core business of the company and one cannot really say that it could just be a one quarter phenomena. Hence, results are very bad, we try to see the overall PAT or maybe the EPS has fallen to about sub-Rs 2 but the main concern is in the core segment of the company where they have posted negative results.

Q: Does it appear too there could be some forced selling like a promoter pledge or margin call?

A: I won't attribute this purely of the funds selling but I am apprehensive or expecting more on account this structured finance happening in many of the stocks, where the promoters have been borrowing on a return of 18% to as high as 30%. In fact that kind of selling is all happening and there are many NBFCs, listed NBFCs which are involved.

Many of them have been giving the finances without even going by the due compliance or the process of the compliance. Hence, I worried on account of those liquidations rather than pure fund selling because this is not only in confined to the infrastructure space. The kind of fall witnessed today in the midcap and smallcap, it is scary.

Q: Do you think Suzlon 's pullback is over?

A: No, I don't think the pullback is over. The two positive moves of - Hansen's stake of about 26% and acquisition of 100% stake gave the company a liquidity of about Rs 2000 crore, which would have helped deleveraging their balance sheet. They are sitting on a debt of about Rs 11,000 crore then the improvement in their working then the order inflow, then apart from enabling resolution by the management of raising Rs 5000 crore.

Hence, there has been serious attempt by the management to come out of all these problems. I don't know the reason for such a big fall, but the stock must get bottomed out at around Rs 35 and from there we may see again the renewed buying interest coming into the stock.

Q: A lot of the L&T Finance investors must be wondering what to do with the stock at Rs 49 now. Should they just exit or do you think it will hold out?

A: Those who have made the application in the IPO were expecting a gain of about Rs 4-5 because it has never given an indication that one can really make money of more than Rs 4-5. It has not really disappointed on the lines, which we have seen in case of PTC Financials. You need to have a longer view of maybe between three to six months, in spite of the book having discovered at a lower level of Rs 52, in view of the anchor investor having invested at Rs 55. Hence, those who have been looking for shorter term gain or the listing gain will definitely get disappointed. However, if somebody can keep a view of three to six months, I don't think it is really going to be a bad investment.