May 03, 2012, 07.55 PM | Source: CNBC-TV18

Nagarjuna, Sintex, IVRCL are good bets: Tulsian

Market analyst SP Tulsian of told CNBC-TV18 that the litigation to be initiated by the government against Reliance will not have a negative effect on the stock. He was also positive about IVRCL, Nagarjuna Constructions and Sintex which have begun to return to normal.

Q: What have you made of the news on the sugar sector? Do you see it as a precursor to at least eventual deregulation? Would you be a buyer?

A: After initiatives on the export front, what is really needed is the dismantling of the release mechanism on the domestic front and the 10% levy sugar. Only if these two are implemented there will be the deregulation of the sugar sector.

But the way the UP-based sugar mills are going up today, I don’t think that this is a good indication. Though the UP mills will not be able to take advantage of exports which have been put under the OGL (open general licence), it will ease the pressure on the domestic supply and result in improved realisation.

We have seen UP sugar prices moving up by about 50-60 paise per kg in last couple of days. So this is just a temporary relief and I don't think this can really be taken as a trigger for an entry into the sugar stocks.

If one wants to be very selective, there are a few players like Renuka Sugar or EID Parry . However, if one rides to this momentum, the chances of making losses are higher than making profits.

Q: What about United Phosphorus post results? There is also an expectation of a buyback which the company might announce on May 7. It's trading at extremely cheap valuations. Any call on United Phosphorous?

A: The Q4 results have been slightly dull if you compare it with Q3 and even on a y-o-y basis. But I think the penalty of Rs 252 crore imposed by the Competition Commission of India (CCI) has beaten the stock price to correct to as low as Rs 110-112.

But since then, the management has initiated the logical move of a share buyback and this has brought the quarterly profit of the company in the vicinity of about Rs 250 crore.

So even if you accept the liability of CCI, though the company has preferred to appeal against that order, that takes away one quarter of their profit.

So one cannot really be too concerned or too fussy about the penalty and from hereon I think things are starting to look quite positive. The share buyback is going to be a open market purchase as it not a tender share buyback.

So I don't think that will really be a big boost for the stock. But purely on a fundamental basis, renewed buying is coming back into the stock. On a consolidated basis, even the stake of 49% held in Advanta is quite valuable for the company. So overall, I hold a positive call on the stock from hereon.

Q: What about the big cuts in stocks like Nagarjuna Construction, Sintex or IVRCL Infra?

A: I think IVRCL has corrected largely on no news thanks to a pause in Essel’s initiative of a hostile takeover. Nagarjuna Construction is taking cues from the IVRCL valuation and has begun to move up.

With respect to Sintex, it is returning to its normal valuations thanks to weakness in the rupee which has reduced the effect of the foreign debt lying in the books of the company.

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