Tulsian's power picks: Adani Power & Sterlite Industries

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Tulsian's power picks: Adani Power & Sterlite Industries

Ahead of the key meeting between power producers and the government tomorrow, SP Tulsian of sptulsian.com tells CNBC-TV18 that his top bets in the space are Adani Power and Sterlite Industries.

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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

Ahead of the key meeting between power producers and the government tomorrow, SP Tulsian of sptulsian.com tells CNBC-TV18 that his top bets in the space are Adani Power  and Sterlite Industries . "One has to be very selective in this space," he warned. He holds a negative view on Tata Power and Reliance Power .

Tulsian also gives his views on a few stocks that made news today.

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

Q: The only wrinkle in today's otherwise very good looking screen is those couple of UP based sugar mills, Balrampur Chini and Bajaj Hindusthan . How did you read the news on that and is the mild cut in these stocks deserved today?

A: It is very much deserved because if you see the judgement of the Supreme Court definitely that's a dampener that is like to see the cane arrears piling up for this season. The management has already been crying on the higher SAP price announced by the UP government and if you see the subsequent SAP announced by the Tamil Nadu or maybe the price prevailing in Karnataka are much lower, so the impact on the profitability or on the cash flow of all the UP based sugar mills are going to be negative for this season

Remember that last week we have seen a rise of close to about 15-20% happening and the kind of decontrol or the reliefs which we are talking for the sector are expected to happen on two fronts; dismantling of 10% levy and dismantling of the monthly release mechanism. But I don't think that both can come before the end of all the elections in the state which are due by 5th March. So by that time, I don't think that fresh trigger is seen in these stocks. In fact market was requiring or wanting some trigger to correct and if you see these two majors which are more or less taken as granted that they are likely to come in the moment the model code of conduct comes to an end that will be enjoyed by the mills across India.

So there is nothing specific or special relief expected to come to the UP sugar mills which are already reeling under the lower profitability and the strain cash flow system. So definitely the kind of corrections which we are seeing is deserved, justified and in fact they can correct further the kind of trading positions we have seen built-up in Bajaj Hindusthan, Balrampur Chini and Triveni are going to get liquidated maybe at the end or closer to the expiry and in fact I am seeing more weakness happening in the UP based sugar mill stocks.

Q: We have been discussing the problems of Maruti 's labor issues over the last few months. But we have seen some encouraging monthly numbers and today the stock has made a big move. Do you think the worst is over there?

A: I think that maybe the pessimism which was built in case of Maruti was overdone and definitely the price increase affected by the company and the better monthly sales number has definitely been encouraging. But if you see last couple of months, the total focus or the concentration has gone on Tata Motors and Mahindra and Mahindra and everyone had written-off Maruti due to which on the trading front it looked quite under-owned. I don't think that any positions were built in the counter. So that counter was very light

In such scenario, if you have any encouraging news coming in which is likely to sustain at least for the whole calendar year or for the next financial year, definitely that gives an ample opportunity for the shrewd traders or long traders to make an entry and that is what in fact we have seen in the stock yesterday also. It has moved up by 4-5%, today it has moved up by 9-10% and that is giving a strong grip to the bulls those who have created position in the stock.

Q: For a couple of days now a lot of these power makers have been seeing quite a bit of an up move. Even today stocks like Adani, Jaiprakash Power, NTPC etc. had a good move. There is that important meet scheduled tomorrow. What's your outlook on the sector and in terms of individual stocks which ones do you like?

A: Definitely the tomorrow's meeting holds big importance because all the chiefs are meeting with the government and their problems are going to get heard. But the broad contention or the demand made by these power manufacturers is that they should be allowed to make use of or divert the coal which is available to them from the mines already allotted to them. The case in point is Reliance Power; the Sasan Ultra Mega Power Project, they are asking for their Chitrangi Project which is again of 4,000 megawatts, similar is the case with other power producers.

But I think all these things cannot really be handled by the government alone. This matter is pending before the Attorney General of the country who has objected that this cannot get diverted. So probably there will be a sympathetic hearing to be given by the government on all this front and then thereafter the note will be routed to the Law Ministry for their approval. But all this whole process may take about six to eight months time, number one. Number two, thereafter many of the power projects did not see the financial closure. In case of RPower, their two other projects at Tilaiya and Krishnapatnam, the progress has been very slow. So one has to be very selective.

I am probably holding the positive view on Adani Power. They will be completing their power generation capacity of 6,000 megawatt plus. Second could be Sterlite Energy which is again a division of the Sterlite Industries. But I don't think that it will be futile to take the positive call on maybe R Power or for that matter even Tata Power. I am apprehensive even on Tata Power because Mundra Ultra Mega Power Project which they are starting or which they have commissioned is not based on the pithead coal mines. In fact it is based on the entire imported coal which itself is facing lot of problems. So one has to be very selective. I think that it will be too risky to take a general call across the board on all the power generating companies from hereon.