Deven Choksey bets on Jain Irrigation, Tata Motors DVR

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Deven Choksey bets on Jain Irrigation, Tata Motors DVR

Deven Choksey, managing director of KR Choksey Shares and Securities bets on Jain Irrigation and Tata Motors DVR with a two year time frame.

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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 Tata Motors (D) BSE | NSE 29/05/12 Are Mutual Funds betting on Tata Motors (D)? Other Stocks in this news Jain Irrigation Systems |

Deven Choksey, managing director of KR Choksey Shares and Securities, tells CNBC-TV18 that Jain Irrigation is a good bet in the current falling market scenario. He explains that "the current valuation is quite comforting, so the company is an interesting investment with a two year time frame."

Choksey's second pick is Tata Motors DVR. "This is an interesting investment opportunity and can probably give 100% return over a two year period," he said.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Your first pick today is Jain Irrigation ?

A: Jain Irrigation is an interesting investment opportunity. In a falling market scenario, I think this company becomes even more attractive for investment portfolios. The entire micro irrigation business is being transferred to its non-banking finance company (NBFC), so future sales would take place from the NBFC and the company would not have as much of a problem on the working capital side.

Their foreign currency convertible bond (FCCB) repayment abilities have increased because the company has about Rs 400 crore worth of overseas investment in its subsidiary which will be brought back into country this year. That will have a neutral effect on the FCCB repayment cost. The third aspect is about their increase focused on exports, particularly to the African countries. This could help them meet the repayment liabilities of foreign loans.

This company is available at a valuation which is quite comforting at this point of time. I would think that any fall in the market price, with a given growth of around 18-20% year over year for next two-three years, makes this company an interesting investment opportunity with a 100% kind of an appreciation over the next two years. So the company is remaining a favorite play from investment point of view, particularly to add to the portfolio when the market falls.

Q: You prefer Tata Motors DVR ?

A: Tata Motor's differential voting rights (DVR) offers an interesting investment opportunity for next 12-24 months. The first important advantage is that the DVR is quoting at a substantial discount of 50% to its current market price, which translates to a valuation of three times price to earnings ratio on its FY13 expected earnings of around Rs 32 per share. So to a greater extent, I think it offers a margin of safety.

When the market improves, the discounting gap between the main stock and the DVR is expected to come down to 30% from 50%, so it naturally offers a margin of safety once again. Apart from that, the business condition Tata Motors is probably passing through has relatively better prospects at this point of time. The falling interest rate scenario in the coming quarters will augur well for the commercial vehicle segment in the domestic portfolio and the car segment too is registering steady volume in the domestic markets. Most importantly, Tata Motors' Jaguar-Land Rover (JLR) portfolio is registering a handsome amount of growth with new launches giving them a good amount of volume push even from the emerging markets, which contributes about 40% of the business.

So all in all put together I find Tata Motors' DVR an interesting investment opportunity for investors and probably would give almost 100% kind of return over two year period when they are held in the portfolio.

Disclosure: It is safe to assume that the stocks discussed have been recommended to clients.