Dec 26, 2012, 09.37 AM | Source: CNBC-TV18

Here's how one should play RIL, DLF, Balrampur Chini

In an interview to CNBC-TV18, SP Tulsian of shared his views on stocks across various sectors. He is not much positive on Reliance Industries and DLF. Among the sugar stocks, he believes that Balrampur Chini makes a value buy now.

In an interview to CNBC-TV18, SP Tulsian of shared his views on stocks across various sectors. He is not much positive on Reliance Industries and DLF . Among the sugar stocks, he believes that Balrampur Chini makes a value buy now.

Below is the edited transcript of his interview to CNBC-TV18

Also read: Houseviews: 4 stocks that you can trade before Christmas

Q: What have you made of the FDC? How would you approach that stock now?

A: The management has denied the stake sale. However, one cannot rule out that possibility. If there is smoke, there has to be fire. We may see the stake sale. The kind of run-up seen in the stock price is that it moved to Rs 103-104. Thereafter, post that statement it is bound to come. If one take’s a scenario the stake sale does take longer time. One has due diligence process. These are things seen in West Coast Paper for last three to four months, but no progress has happened.

So, I don’t think that traders can really take a call beyond a point. May be Rs 100 seems to be the cap, beyond that, stock may not move up. However, those who have high conviction and a longer time horizon of three to four months can definitely take a call. However it can only be if the stake sale happens and the chances are 50-50 in my view.

Q:  What are your comments on Mr. Rangarajan submitting a report with regards to the new gas price formula and as of December 2012 it stands at USD 8.1 per mmbtu?

A: I don’t know about the sanctity of this report because there was Dr. Rangarajan’s report on sugar also which was submitted a month back suggesting scrapping of levy. These are reports which are just submitted to the offices. Now, this time it has been submitted to the Prime Minister Offices. The ministry has been very clear that there will be no price revision in the gas price which is at USD 4.2 per mmbtu. That is unlikely to happen on or before 31st March 2014.

After the kind of allegations seen, ministry will not have the courage to do the revision before 31st March 2014. Take the scenario that you have the elections in May 2014. The new government’s term is coming to an end. So, obviously one will have the code of conduct in the month of February.

If elections happen on the schedule and the code of conduct, things will start getting implemented from February 2014. So, I don’t think that anything is really possible. Whether the same government or the new government I don’t think that will be a priority. One cannot put the things of the price revision of the gas from the retrospective effect. They cannot say that even if we have taken the decision in the end of December 2014 the prices will be applicable from 1st April 2014.

So, definitely the things have gone into the cold storage. We should not remain wishful that things are going to get revised upward from 31st of March 2014. So, these are just the recommendations for sake of recommendations. Since committee has been appointed and everybody knows that when the global prices are ruling between USD 12-14 per mmbtu there is no justification for selling the gas at USD 4.2. However, there are a lot of multifold ramifications of any move which government will definitely be very cautious in taking any steps in that direction. So, I am not too positive or excited by this report. I won’t be taking my positive call on Reliance Industries just because of this report.

Q: What is your view with regards to DLF post selling the Aman Resorts for USD 300 million back to the promoters etc. Do you think there is more upside in terms of possible fundamentals for DLF going forward?

A: I am not excited at all by that news. They have removed the Lodhi Hotel, the Delhi property from this transaction. Even if you presume that transaction or property would have remained they were expecting a price of about USD 400 million. May be about 18 months back they were expecting it to be USD 500 million. They have made an acquisition about four to five years back and are now exiting at a loss.

The Lodhi property which has 207 rooms can not be valued for more than Rs 400 crore. So, if you really take the entire consideration, it works out to quite less, may be less than USD 350 million. So, definitely that is a loss making proposition. Same thing has happened in respect to the Mumbai property also NTC Mill plot of 17 acres which they have sold to Lodha Developer. There also nothing substantial which we have seen happening. Rs 1500 crore debt has been assumed by Lodha’s and they have got Rs 1200 crore in cash.

So, this substantial debt reduction will not be there in this financial year which they have otherwise been very confident of, by March 2013. Definitely that is a move. However, the kind of realisations they are making in spite of such a long delay where the value destruction is seen happening in these stocks. Now the third item which is pending is wind turbine business. Again they are finding it very difficult for any takers because those assets are more of tax incentive strategies. So, I am not very confident that they will be able to pair down their debt substantially, even in the whole of 2013. So, unless and until that happens and the process of development and the sale of their premises in their and project really happens fast, until then you cannot really change your views or take a very positive stance on the stock.

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