RIL result may disappoint, negative on Praj: Tulsian

Below is the edited transcript of his interview to CNBC-TV18.

Q: You track Praj . Are the results in line with expectations?

A: I am not impressed with the results. In fact if you see my call for the last eight quarters, it has been neutral-to-negative because I don’t see any reason for the investors to remain invested in Praj.

The kind of innovation and aggression that was visible in the management earlier is missing. The kind of investments cycle in which the company is operating has not revived or rekindled the enthusiasm of the entrepreneurs also. So, I don't think that investors can expect growth even in the next four quarters.

Any sporadic move upwards is due to large investors and acts as a trap at the higher levels. My advice is to maintain a negative stance on the stock. If you are an investor, look to exit whenever a rally happens. It is obvious that the results will not be the trigger for the stock to move up.

Q: What did you make of Karnataka Bank's results?

A: Karnataka Bank has a different trigger altogether. The stock has been moving up in the last couple of months on the hopes of being a takeover target. But as the results seem quite good, the stock may move further, boosted with hopes of a takeover, to Rs 108-110.

Q: What is your view on Tata Communications ? What is your view on solution that’s been worked out in terms of VSNL land sell. Do you think that’s the way the company will go try to do some kind of non-debt money raising?

A: If we take the value of this land, major chunk is in Pune, about 70 acres in Greater Kailash in Delhi. The entire parcel is valued at Rs 7,000-10,000 crore and if I divided the value by 28.5 crore shares then it gives a gross value of Rs 300 per share. But generally the realty stocks are ruling at 40% of the NPV. So I expect the element of Rs 120 in this value of shares at Rs 260, and if we knock that off Rs 120 I don’t think that it deserves a valuation of more than Rs 140 of the core business.

Any valuation beyond Rs 260 will really be risky. 52% of the stake will now be vested with the government, 26% to Tata’s via open offer and 26% present stake. The government intends to sell the entire parcel of land and they can mobilize an amount of Rs 3,000-4,000 crore by divesting their 52% stake. So overall this is a big relief for old shareholders and the government, but I don't see value going beyond Rs 260 and it will be very risky for those who will be buying the stock now. I advise the people who hold share to go for profit booking. The share may settle between Rs 245-250 in near term.

Q: Despite 21% import duty news, BHEL is down more than 2%. How do you approach the stock from here?

A: Firstly, people are not aware that what will be the date of application, which all projects will really be getting affected and the statement given by the BHEL chairman that still there is arbitrage or differential of 10%. The Chinese equipments are still cheaper by 10%. So, I think lot of confusion prevails. I don’t think that things are confusing because the additional duty of 5% basic duty has been imposed on the power plant above 1,000 megawatts capacity which should get applied to all the projects which have not seen a substantial progress.

Now, substantial progress needs to get defined whether in terms of the placement of the orders with the foreign suppliers or in respect to the financial closure with the bank because these two criteria’s could very well be taken.

This is definitely going to be positive as it will help them improve the financial in next two years. The market is giving new credence to the order inflow as well. So, I think the order inflow will start happening maybe to all the power equipment makers like BHEL, BGR Energy or L&T . I expect things will start, we will be seeing beneficial for these capital good makers, even other capital good makers like ABB , Siemens also. So, overall I am seeing it positive but because of the confusion in respect to the clarity on its application, the projects which are all likely to get impacted, we are not seeing any kind of enthusiasm in these stocks.

Q: What is your reaction on Asian Paints results?

A: I am not worried about the rich valuations. All paint industries like Asian Paints, Nerolac and Berger Paints are ruling at a PE multiple of 20-26 on the historic earnings.  The market has been taking a very positive call on these paint stocks, as this is the only industry which is showing double digit growth on both top-line and bottom-lines for the last two decades and this kind of performance is definitely seen maintained.

This stock moving 5-6% just 15 minutes before the release of the results and suddenly correcting 3-4%, such a high price stock sometimes creates a huge amount of volatility because people go gung-ho and they create long positions. The liquidation of the short term traders those who have recently entered maybe on an intraday basis are going to exit from the stock which may see the stock getting corrected. So the disappointment is largely on account of the lower top-line by Rs 150 crore.

Q: Do you expect Reliance Industries to move the needle on the markets too much or are likely to be disregarded?

A: I think it is likely to be disregarded and in fact I am little cautious or apprehensive on the results. Generally, Q4 results and the expectations which we have build up on Q1 with a bottom-line of Rs 4400 crore. I estimate Rs 4415 crore in bottom line. We may see some weakness in stock from Monday.