Hold or exit? Tulsian tips on Bharti, HCC, JP Associates

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Hold or exit? Tulsian tips on Bharti, HCC, JP Associates

SP Tulsian in an interview to CNBC-TV18 shared outlook on stocks across various sectors while answering investor queries.

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Excerpts from Bazaar 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 in an interview to CNBC-TV18 shared outlook on stocks across various sectors while answering investor queries.

Below is the edited transcript of Tulsian's interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying videos.

Q: I hold 40 Bharti Airtel shares bought at Rs 388. Should I hold it, average it or drop it out?

A: I am not very positive on the stock. I won't advice the caller to exit at these levels. The stock has been correcting because of problems in African operations. Apart from this, there is question mark on the Q3 results. I don't think forex losses will be a concern because it all depends on the policy each company adapts with respect to provisioning because relaxation on AS-11 has been given. But on an overall basis, I don't think the stock has the comfort to remain invested in.

On a relative basis, one can see many value buys in other spaces. My advice to the caller is that he should remain invested till a level of about Rs 345-350 which may take about one to one and a half months time. Whenever renewed interest comes back or problems developed on the stock come to rest, the stock shows that movement on the upside. He should look for a level of Rs 345 to 350 and should look to exit at that point of time.

I don't think that it can fall below Rs 300. That is the reason I have not advised him exit at immediately at this level. It will be difficult for the stock to breach Rs 300. The moment we see value coming back, renewed buying interest also comes into the stock. Difficult to take a call, but I don't think that that kind of fall is seen and even from here on the further downside is likely.

Q: I hold 1,000 shares or HCC bought at Rs 30. What's the call for one and a half year? Should I average it?

A: Overall call in HCC is quite negative. For any company which is going for debt restructuring is always seen as positive for the company because they get respite in terms of repayment. They get a moratorium on due interest and installments. Apart from existing loan in their books, the focus on their main business is going haywire. There are reports saying that for the last six months they are unable to make even petty payments like professional fees, suppliers bill of Rs 50,000.

This means it is certain that the company is unable to hold even their existing business. The load of Lavasa has made the whole company quite vulnerable. Apart from that, Axis Bank has taken an equity investment of Rs 250 crore at a valuation of Rs 10,000 crore in Lavasa. In these kinds of investments, there are always put and call options and conditions of coming out with an IPO. But I don't think that the valuations of Rs 2,500-3,000 can be talked for the Lavasa in which the company is holding 64%.

Apart from that, no cash flows, cash accruals are seen from the core operations of the company. Even if the debt restructuring happens, I sometimes wonder what will be the view of the lenders where they will be falling back? Can they really take a call that the assets held by the company are tangible to the extent of the overdue amount? Can they really take a call that the existing business of the company is capable to generate that kind of cash flow or profitability?

Couple of month's back the stock was ruling at Rs 29-30 and see the kind of erosion having taken place. We have not seen matching erosion having happened in IVRCL, GMR, GVK and Lanco which fall in the same category. My advice to the caller is that he has to be courageous to cut his losses.

I will advice him to exit from the stock. I don't see any respite for the stock happening even in next 12 to 18 months. Even if the loans get reschedule, I don't think that the company will be able to bounce back for the next 12 to 18 months. On a relative basis, one loses the opportunity in some other sectors like health, pharma etc. My advice is there is no question of averaging. He should think of exiting from the stock now by booking losses of Rs 11-12 which he is incurring on the stock as of now.

Q: I hold 2,000 shares of JP Associates at Rs 72. What is the call on JP Associates?

A: There are bunch of problems coming in for JP Associates. On Friday, Himachal Pradesh Government asked cement makers to reduce the prices by Rs 25 per bag and JP Associates falls in that category. You said that it has been moved out of Sensex which had an effect. Also, SEBI has slapped a penalty of Rs 60 lakh on them. Apart from that, UP election is likely to have a direct bearing on the performance of this stock.

This is because promoters of the company are seen to be very close with the ruling party that is Bahujan Samaj Party of Mayawati. Suppose anything negative happens, they are going to take a hit. On a long term, maybe couple of years, I am positive inspite of debt burden of Rs 35,000 crore on the company because of the multi division. The retail investors are not comfortable in taking such a long call.

Sometimes question that why I should not exit now at Rs 52 and look to re-enter at Rs 42-45, if you envisage that kind of price coming in back and they are right in asking that question. I do see a price of Rs 45 at least coming into the stock price in the next month.

Even Q3 results will not be very soothing for the stock to move up. All the events which have happened or which are lined up are not giving any comfort. The stock can fall to Rs 45, so he can look to trade. Exit now at Rs 52, maybe look to re-enter again at those levels if one feels that the renewed calls are coming back in the stock. But as of now, for the next couple of months my view is negative on the stock.