Exit Jindal Steel & Power around Rs 470- 475, says Tulsian

Tulsian told CNBC-TV18, “The call on Jindal Steel & Power (JSPL) is weak only because the fear which we had yesterday that probably government may think of capping the merchant power rate for the companies, those who are having their own coal mines and Jindal Steel and Power falls in that category. I don’t think that there are any other new significant companies in that space. One may talk of Lanco Infra or maybe KSK Energy , but I think they are too tinier players. Jindal Steel is going to be the worst affected party.”

He further added, “If one see this company for last 18 months had been trying to come out with the IPO of Jindal Power and at one point of time market was expecting that probably the IPO of about Rs 10,000-11,000-12,000 crore will come with effective market cap of Rs 70,000 crore in which this company was to held about 80-85% depends on the amount they wanted to mobilize. At that point of time the market cap of the company was at about Rs 70,000-75,000 crore which now has slipped to Rs 42,000 crore. So taking all in this into consideration and when you have such a big fear, you have fear on their Bolivia mines also they referred the matter to the arbitration. So from all sides the company is caught into the wrong end from all the angles and the EPS of close to about Rs 40 probably will remain stagnant or can fall further. So I don’t think that a PE multiple of 10 is justified for the stock.”

“This stock can correct further, but only point or the only saving grace is that whenever you see such a steep correction in the stocks they do bounce back and typically that is happening with Jindal Steel and Power and JSW Steel both. So maybe investors should look to a price of Rs 470-475. Whenever he see a technical bump or bounce back coming into the stock he should definitely look to exit from the stock at Rs 470-475 levels.”