Multibagger ideas: Mehraboon Irani on SmartLink, Cerebra

Excerpts from Bazaar 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 Smartlink Net BSE | NSE 01/06/12 Are Mutual Funds betting on Smartlink Net? Other Stocks in this news Cerebra Integrated Technologies |

Mehraboon Irani from Nirmal Bang Securities, in an interview with CNBC-TV18's Sonia Shenoy and Mitali Mukherjee, shared his view on SmartLink Network and Cerebra Integrated Technologies which have been active for quite some time.

Here is the verbatim transcript of Mehraboon Irani's view on his picked stocks. Also watch the accompanying video.

On SmartLink Network

We are very positive on SmartLink Network. When the company has sold off its main business Digilink, eyebrows were raised wondering as to why the company never demerged its business and never sold its whole entity and made an open offer to the shareholders.

At the end, the promoter Naik has not charged any non-compete fee. The brand of Digilink was in his name which he sold for Rs 1 to the company. The company has sold the entire Digilink business to Schneider for Rs 503 crore and on a post tax basis it works out to Rs 400 crore.

The company was already sitting on cash of Rs 50 crore. With not much of businesses, the company is sitting on Rs 450 crore cash, yet with five units there.

Now, the company has a Digisol and Digicare business. Right now, nothing is happening in the Digicare business, but the company intends to do certain things by tying up with certain vendors.

As far as Digisol business is concerned, the company will make it grow over the next one-two years. Coming back to the company's financials, its of Rs 3 crore shares, each share is of Rs 2, Rs 6 crore equity and cash of Rs 450 crore, that means the cash is of around Rs 150 per share.

The company is in such a business that it won't require much of capital. For Rs 150 per share cash, the company has declared a special interim dividend of Rs 30 per share. If one looks at the companies past track record, I am quite confident that this Rs 150 per share will ultimately be distributed to shareholders over the next one-three years. Rs 30 per share has already been distributed.

At a present price of Rs 100, you are getting Rs 30 dividend. If the share goes down on an ex-dividend basis which it will, then some further dividend will come in over the next three-six months. The company will distribute this Rs 150 per share ultimately in the form of dividends over the next one-three years because it doesn't require too much of capital.

From a pure taxation exercise, the stock gives you handsome returns. At an investment of Rs 85-100 per share, you are getting Rs 30 dividend today. This dividend of Rs 10-20 per share should continue at least for the next one-three years. This share has gone up a bit over the last two-three days after the dividend announcement of Rs 30.

Even at the present price of Rs 100, I won't stop the investors buying the share considering that it won't be easy to protect capital over the next one-three months. So, SmartLink scores on that particular aspect.

On Cerebra Integrated Technologies

My conviction for this stock is very high. The company's technical collaborators Cemelia is in Singapore. Cerebra is setting up the biggest plant in India for e-Waste processing. Around 8 lakh tonnes e-Waste is generated in India every year.

The company is setting up the plant in Bangalore where the plant generates over 1 lakh tonnes. The company is setting up a plant for 30,000 tonnes along with technical collaborators Cemelia which ultimately put in around 20-30% of the equity into this company with a three years lock in.

Cemelia is basically a good company in Singapore. It has its problem as far as e-Waste goes because e-Waste is not easily available in Singapore. It is setting up a unit along with Cerebra in Bangalore and 10 acres of land has been allocated by the Karnataka government to Cerebra.

They have already paid 25% of it. Private equity investors have invested in it in Cerebra. The company which was having a lot of problem in the balance sheet now has cleaned its balance sheet completely and has not debt in the books.

Now, e-Waste as a business has a very high profit margin of around 25-30%. This company will start its plant over the next six months' time. The company will be working in three shifts after six months.

For the time being, the company has already started sending e-Waste because it has tie ups with e-Waste collection centres. It is already sending e-Waste to Cemilia in Singapore. It will replicate its business in India.

Once this business sets up, Cerebra will be a very different story. A company which started with hardware had its own problems and the promoters had their own problems. They have come out of it completely.

The company has a LPO business with representative offices in UK and US right now, but the e-Waste processing is more important. Cemilia is a big name and Cerebra has tied up with it. Cemilia is providing the technical collaboration and taking equity with three year lock in.

Once this unit takes shape, this stock has the potential to become a multibagger over the next one-three years. We will have to watch the progress of its unit in Bangalore.