Tulsian reviews ADAG stocks, JP Associates, HCC

Below is the edited transcript of Tulsian’s interview with CNBC-TV18. Also watch the accompanying video.

Q: Would you expect to see a cool off on some of those ADAG stocks either today or on Monday?

A: That is right; I see them cooling off today. I don’t think there is any reason for Reliance Infra and Reliance Capital to move up. I have been maintaining my view that I have been holding quite positive move on Reliance Communication . Yesterday, we have seen huge frenzy on all the stocks on the back of that joint press conference by RIL and ADAG scheduled in the evening.

Suppose for some reason even if that meeting were to happen or if it happens at a later date, I don’t think it will expand beyond tower lease hiring or the best case scenario could be RComm acquisitions. Except that, I don’t think that benefit can accrue to the other companies like Reliance Infra, Reliance Capital or Reliance Power.

But yesterday all the four stocks even smaller ones like Reliance Broadcast and Reliance Media have seen irrational exuberance and huge frenzy. Reliance Infra and Reliance Capital have lot of F&O trading interest definitely they are likely to remain soft even today in the brief session of 90 minutes. But on Monday, we are going to see both of them getting corrected including Reliance Power. Reliance Communications continues to remain the favourite or positive view can be maintained on that stock.

Q: What about JP Associates, that corrected quite a bit on all those insider trading bits of news which came in? How would you approach it now?

A: Yesterday, we thought that because of reduction in price of Rs 25 per bag in the Himachal Pradesh and since this company has presence of about 2-2.5 million tones, the stock has corrected to Rs 53. But SEBI's orders of imposing penalty on six individuals is definitely a serious corporate governance issue.

The amount of penalty which has been narrated by SEBI in order of purchase of 1,000 shares, may look too small with respect to 2008-2009, but I don’t think market is really comfortable to take this kind of news positively. Especially, the domestic institutional investor or foreign institutional investors would be wary of all these kinds of news.

For last 1.5 months December F&O series has been very poor for the stock. It used to rule at a level of Rs 64-70 but that level has been broken. I won't be surprised to see the share falling to may be about Rs 45-46 in next couple of days. This is because we are going to see the liquidations of long positions, fresh shorts getting created coupled with delivery based selling by institutional investors. So, this unfortunate for the company, it is bad for the company because it reflects on the corporate governance issues whether it pertains on small level or to past events.

Q: What do you do with Hindustan Construction? All that news of them approaching banks for renegotiations, CDR sell, etc. They have denied it but is it possible in your eyes?

A: This type of denial came from Vijay Mallya also in case of Kingfisher a month back. We know their positions, the information that has been coming for HCC that they are not even able to make a payment of Rs 50,000. Suppliers’ payments have been piled up for last six months. It is a known fact that they are in a severe financial crunch. The worst part is that they have lost their focus from their main business. That is the whole problem with them and they have not been able to generate any cash flow from their main business also.

Lavasa seems to have gripped the company in this financial crunch. It is just a matter of time when CDR is going to happen. Generally, whenever it is formally announced that the company is referring to CDR, the stock of that company and banks which have exposure in that company start getting corrected. In this case Axis Bank is the larger player, but is already being correcting. Once HCC formally approaches for CDR it should settle at a bottom of Rs 15-16 where further fall is not likely. As of now, I won't be taking a plunge in that stock even at the current level.