Tulsian on Educomp, KFA, Gati, HOEC and Tata Comm

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Tulsian on Educomp, KFA, Gati, HOEC and Tata Comm

SP Tulsian of sptulsian.com joins CNBC-TV18 to opine on certain stocks. Check out what he has to say....

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Excerpts from Closing Bell on CNBC-TV18 Watch the full show » 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

SP Tulsian of sptulsian.com joins CNBC-TV18 to opine on certain stocks. Check out what he has to say....

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Have you taken a look at the Educomp numbers - it is the forex loss again that marks the profits...

A: I don't think that the market has really become matured enough in accepting forex loss and non-cash items. To that extent, I don't think that this will really be disappointing the market. But yes, if you see on Educomp, the market view has been a little cautious or subdued because of the continuous pressure seen on the margin, and maybe some concerns from events in the past like IT raids. Maybe the stock can remain a bit subdued for some time. It can fall to about Rs 230, but at those levels again, you must see renewed buying. The broad range for the stock has been from Rs 230 to about Rs 275-280 and we have seen the stock trading or moving in that range on a larger scale for about one-two months.

Q: Kingfisher has fallen to levels below Rs 20 mark, what is the street pricing in? Are they factoring in perhaps bankruptcy or can it go lower from here?

A: I think from hereon this is an extreme case, but the reflection of that is going to come on the other companies. I do not think that much downside is seen in Kingfisher Airlines for the simple reason that the market cap of the company has fallen below Rs 1000 crore, now it is placed somewhere at about Rs 950 crore, and if you see, the promoter for the Kingfisher airlines is United Breweries Holdings Limited, which is the flagship investment company of the UB group. They hold stakes in United Breweries, Mangalore Chemical and Fertiliser , and even United Spirits . All the stakes to a greater extent are held by this investment company, and this United Breweries Holding has an exposure to the extent of about Rs 10,000 crore to Kingfisher Airline in the form of the fund base and non-fund base commitments through guaranteeing, pledge of loans and all that.

In my view two situations can emerge. One, United Breweries Group has to think of exiting from the airlines business where there will be distress sell in which the creditors also have to take a view, the hit of about 50%. Even the bankers who have lent financial assistance to the extent of Rs 7000 crore to the company, in the form of term loan and working capital, even they will have to take a hit. The promoters, whatever the amount they have invested, will go away.

So in this scenario, if you take a valuation call of Kingfisher Airlines, the infrastructure, the project set-up, that comes to about Rs 3500-4,000 crore. At those levels or at those valuations, you may see new promoters coming in. Again, the market has started talking that probably Reliance Industries or even the Sahara Group maybe interested in entering into this business because this is a big ticket size of the company available in the aviation sector. This is one scenario.

The second scenario I don't think it will be possible for United Breweries group unless and until they come out with a massive infusion of about Rs 4,000-5,000 crore in the company at one go, and they can really turn around.

So take any situation, I don't think that there is much downside seen in the share price of Kingfisher Airlines from hereon, but yes, the share price of United Breweries, United Spirits will keep deteriorating or falling from hereon.

Q: Just a word on Gati. I don't know what the reason is for the 20% downtick. But is this a stock that you track?

A: I don't think that there is any respite for Gati. In fact for last couple of years the management has been struggling, we have seen restructuring of the company having taken place.... Their logistic business, the overseas one is not doing quite well, but honestly, I don't know the reason for fall of 20% now. I don't know whether that has to do with the working of the company or any extraordinary negative news, but this stock has been struggling on account of the profitability for last six-eight quarters.

Q: Just one word on HOEC , that stock has had a great run for many days now and today its up 10%?

A: This stock as been there on the radar of the technical traders. In fact the results have been out. I am not too impressed with the results. I don't think that can really be the trigger but for last one week or so, these exploration and production company, Cairn India and Hindustan Oil Exploration, have been doing quite well. So, this has to do more with the trading interest and whenever we see this kind of trading interest coming into the stock especially in a stock like Hindustan Oil Exploration we see it moving by 25-30% in one straight go, so probably this could be an upmove on those lines.

Q: Just wanted to get a word in on Tata Communications. After many quarters it's come out with a good set of numbers. Operationally, there has been an improvement in margins. You had a look at the numbers?

A: Yes, they have been showing some improvement and the stock has been accumulated by value investors, largely on the improvement of working and the second trigger is more on account of the land demerger. Couple of months back, there was lot of noises from the ministry that they will be expeditiously moving for the demerger of the land which has been estimated at about Rs 6000-8000 crore. But again, things have gone a bit quiet on that front. Going forward, this land demerger move could be a big trigger.