SENSEX NIFTY
Oct 10, 2012, 06.53 PM IST | Source: CNBC-TV18

Controversy will hit cos; bet on sugar, cement: Tulsian

Stock analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that allegations of scam will affect, and at times, force companies to lose focus on their core business activities. Tulsian advises investors to bet on sugar and cement stocks.

Stock analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that allegations of scam will affect, and at times, force companies to lose focus on their core business activities. Tulsian advises investors to bet on sugar and cement stocks.

Below is an edited transcript of the analysis on CNBC-TV18.

Q: Two stocks have seen significant damage today - the Indiabulls Group  and GMR Infra . Do you fear that these stocks may face the fate of DLF after the statements made by Arvind Kejriwal on Tuesday?

A: Yes. All the three stocks have been victims of allegations of scams which cannot be ruled out as all these companies have significant presence in real estate. GMR Infra has been in a mode of denial concerning allegations in respect to the Male airport.

GMR Infra has also faced flak because of the CAG allegations regarding Delhi airport. The allegations made by Arvind Kejriwal have turned into a double whammy for GMR Infra which is already plagued by impact of high levels of debt and no increase in revenues from its airport forays.

So the cloud of caution persists to hover fully over GMR Infra and partly continues to remain on Indiabulls Real Estate.

Public interest litigations (PILs) are bound to be filed in due course of time. The allegations and explanations will not subside and probably the courts will come in. So, definitely negative concerns remain on all three stocks.

Q: How much of a time and a price correction would you give all these stocks like a DLF , Indiabulls Real Estate and even a GMR Infrastructure on the back of this recent controversy?

A: Ultimately, the companies lose focus on the business activity in the attempt to stem the damage caused by the allegations in the form of loss of share-value, government investigation and lengthy litigation.

Overall, I remain cautious-to-negative on the stocks. In the initial or interim period, the stocks could correct by 10 percent to Rs 185-190.

Q: Do you think JP Associates unable to close the sale of stake in its cement business, would postpone its deleveraging plans further?

A: Not if you look at the glass half-full. With very few cement companies available for acquisition, their valuations have risen to very high levels. The company is in talks with Aditya Birla Group company Ultratech Cement who is keen to acquire the company. So the valuations are likely to be much better. This is a positive because according to the earlier contract, the buyer agreed to only acquire a 50-percent stake with an option to buy rest at a predetermined valuation.

If talks are initiated with the Aditya Birla Group, probably the Andhra and the Gujarat plants with a total capacity of around 9.5 million tonne could be considered for sale and that could, in fact, accelerate the deleveraging process. So I take the cancellation as a positive for the stock.

Q: Do you have any pre-earnings buys on your radar?

A: Not really. One can keep two sectors on the radar - cement and sugar. If you really to take a call on the pre-earning or the pre-results estimates, I will probably be bullish on all UP-based sugar stocks such as Triveni Engineering , Balrampur Chini , Dalmia Sugar and maybe Dhampur Sugar .

Except for stocks from both these sectors, I won't be really taking a call on any other stocks ahead of the results announcement.

1 2
Set email alert for
Indiabulls GMR Infra DLF
Indiabulls Real Jaiprakash Asso Aditya Birla
UltraTechCement Triveni Engg Balrampur Chini
Dalmia Sugar Dhampur Sugar Polaris Tech
Hexaware Tech Geometric Bajaj Auto
United Spirits M&M Financial Bajaj Finance
Sintex Ind BHEL

ADS BY GOOGLE

video of the day

See 8000 Nifty by Dec, bullish energy, cap goods: Religare

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.