Today's top midcaps: Aventis Pharma, ING Vysya, Geometric

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Mkts to stay volatile in run up to Budget: Experts Midcaps, smallcaps shave off nearly 40% from recent highs Sentiment appears bearish for midcaps, smallcaps: P N Vijay 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 Aventis Pharma BSE | NSE 29/05/12 Are Mutual Funds betting on Aventis Pharma? Other Stocks in this news Geometric | ING Vysya Bank |

In an exclusive interview with CNBC-TV18, IV Subramanium of Quantum Advisors said that Aventis Pharma , ING Vysya Bank and Geometric Software are his top three midcap picks. On a valuation basis, Aventis Pharma looks reasonably cheap and on a long-term basis, the story looks pretty okay, he said adding that ING Vysya, while it's got a lot of competition, structurally they are doing a lot of things which will bring down their costs. He is bullish on Geometric Software as it has a fairly good financial structure and it's still able to retain a good amount of its employees.

 

Excerpts of CNBC-TV18's exclusive interview with IV Subramanium:

Q: Could you start off with Aventis Pharma and what's the call on the stock as well as the target on it?

 

A: I don't have a target on this stock, but basically, if I look at the underlying stories, it's a subsidiary of a well-known MNC and therefore, its product pipeline is quite strong. Many of them could be launched in India over a period of time.

 

Secondly, they also could be used as an export hub at a later date by its MNC parent. That again could be a positive story for the company. The third call is of course, if I look at the product profile, I think they are in the right kind of products, particularly in the Indian space with their dominance in the diabetes related medicines. I think they have enough products there that will help them in the long run within India.

 

The last call, on a valuation basis it does look reasonably cheap. So, I would say that on a long-term basis, the story over there looks pretty okay for me.

 

Q: Give us an idea of where you stack ING Vysya Bank up versus its peers. The banking sector has seen a fair amount of interest. From hereon, what kind of returns on a conservative basis can viewers expect?

 

A: I think on ING, I would like to say that while it has got a lot of competition and its peers are far more efficient, but in terms of the story over there, structurally they are doing a lot of things, which will bring down their costs. They've pretty much brought down their liabilities to a situation where their CASA ratios are improving. That again should give them access to a lot of cheap funds. Their asset quality again has dramatically seen some good improvement over the last few years and I think they will continue to focus on the asset quality. Fee and other income again is growing fairly aggressively.

 

In terms of clientele, while they are right now focused on the midsize companies, I think over a period of time, given their reputation internationally, they should be able to access some well-known MNCs. So, advances growth should never be a problem for this bank. Capital again I don't see it as being too much of a constraint for them.

 

I don't know where to stack it. In terms of efficiency, I think they still have a long way to go, and I am convinced that that will happen. That is probably the reason why I feel more positive on this because if they actually deliver the cost structure as they envisaged, I think this stock should do quite well over a long period of time.

 

Q: Your third stock- Geometric Software?

 

A: In the software space, in the last few months one has seen that because of the currency related pressure, most of the software stocks haven't been doing quite.

 

Geometric Software is a midsize company. It's in a niche segment called PLM (Product Lifecycle Management) and they recently made an acquisition called Modern Engineering. So, the benefits of these acquisition are yet to flow.

 

Right now it's more like in a concept stage, but over a period of time, as they do more off-shoring work in the engineering space, they should be able to generate much better margins then they are doing right now. It has a fairly good financial structure and it's still able to retain a good amount of its employees.

 

So net-net, that's again a midsize company and I am quite positive on it over a long period of time.

 

Disclosure:

 

I have personal holdings in Geometric.