Ranbaxy, BGR Energy & Educomp top performers: Tulsian

Tulsian affirms that the CCI will soften the penalty of 8% imposed on cement companies guilty of cartelisation. He also points out the Veritas report to have little effect on Reliance Communications .

Below is an edited transcript of the analysis on CNBC-TV18. Also watch the accompanying video.

Q: Euducomp made that big move after the hangover on the stock due the July deadline on FCCB repayments. With the issue of FCCB repayments resolved, do you see anymore upside or do you think it will just be restricted to the move that seen today?

A: I am quite upbeat on the stock on the combination used to raise funds by the company to the extent of USD 155 million. The mix largely comprises of the preferential issue to IFC or USD 55 million preferential allotment to the promoters in the form of the equity and warrants and this USD 155 million includes only the upfront payment of 25% for the warrant of USD 40 million, apart from that ECB with a tenure of 8-8.5 years and the fresh FCCB.

So that means it is not a simple vanilla fundraiser of about USD 155 million of FCCB whereby the existing USD 110 million of FCCB liability can retired as in the case of many other companies. The combination of raised this fresh capital by the company with a premium of 10% - 40% gives a lot of confidence into the stock.

The FCCB liability of USD 80 million along with the interest accrued thereon of about USD 25-27 million has been acting as a big hangover on the stock. So once this USD 110 million of FCCB liability is paid and an additional USD 40-45 million will be provided for the existing capex of the company along with other kinds of monetisation of the subsidiaries’ interests are lined up.

I am taking a call of about Rs 180, if not in this series maybe over the next one month because a lot of short-positions have also been built up into the system.

So, that short covering coupled with fresh buying, could take the stock to move to about Rs 180 in this series if possible. A swift upside can be seen in the stock for at least over the next one month time. I expect the stock to move up further by about 20% from hereon.

Q: It's a wait-and-watch mode regarding the cement sector. Ambuja and ACC are firmly now trading in the green. Any expectations from CCI?

A: The upside or the price behaviour of the cement stocks is really very strange. Ultratech and Madras Cements are ruling negative. The fall in India Cements was due to huge short selling and short-covering.

But it is very strange to see ACC and Ambuja Cements moving up. Ambuja Cement has been into strong trading grid for last one week or so and its very strange to see the share ruling at Rs 175. There are rumours of a merger of Ambuja Cements and ACC.  I don't know how far one can really rely on this news.

The CCI penalty is definitely a hangover presuming that the 8% penalty is going to be levied  which will result in the payment of a a penalty of Rs 600 crore on ACC and Ambuja Cement. The penalty of 8% also works out to about Rs 240 per tonne of capacity become both the companies have not created any significant capacity in last three years.

So, the penalty definitely takes away 55-60% of a year's PAT. I don't think the market will be kind to both stocks if the 8% penalty is imposed. With both stocks moving up after 11 o'clock, there are indications that the penalty might have been lower than expected at 2-3% of the average annual turnover. Another reason maybe the initiatives taken by both companies.