Investment Advisor SP Tulsian expects that Hindustan Motors should touch three digits maybe in the next 12 months.

Tulsian told CNBC-TV18, “Firstly Hindustan Motors people have been taking the fundamental and operational the working call of the company, infact in my view that is a wrong call because everybody knows in the automobiles they are not making money and they are not going to make money by making Lancer and Ambassador. But if you really take a call on the assets which the company is owning first and foremost they own 49% in AVTECH Ltd. which was the division of Hindustan Motors which has been hived off making engines and all that, 30% is held by the Actis private equity investors and sooner or later even this 49% stake will get divested mainly ultimately to Actis or to a company which will be taking over the entire unit and valuation in that situation should not be less than Rs 800-1000 crore for that AVTEC Ltd. If I take a 49% valuation that alone gives me a valuation of about Rs 400-500 crore this is definitely not a strategic or a promoter contribution kind of investments which can get realized over a period of time.”

“Secondly coming on to their Uttarpara land, they have about 750 acres of land, which is in the suburb of Calcutta and 310 acres is getting developed for which they have received the permission from the State government. The HDFC has been appointed as a consultant to advise the company for the development plans of the land and probably they will be helping them out to suggest the kind of development which they should go for, the kind of partners they will be requiring, the financing pattern whether the development should be in their own account or joint venture and ultimately it should be whether sold on ownership basis or on an annuity basis.”

“Even if you take the entire call the valuations of this 300 acres works out to atleast Rs 1000 crore then once they develop 310 acres in the second phase they have another 300 acres surplus land which also will get developed again a valuation of about Rs 1000 crore. So if you take this surplus land at Uttarpara the valuation works out to Rs 2000 crore for the 600 acres land and still they will be left with 150 acres of land which they will be utilizing for making the auto ancillaries casting and forging. So primarily the two properties or the two divisions which the company is owning gives the valuation of close to Rs 2500 crore. Now if I take the operational activity that is making car at Chennai and at Uttarpara the plant valuation could be anything between Rs 500-700 crore, so if I take the total asset call of the company it is over Rs 3000 crore against that the debt in the books of the company is about Rs 100-120 crore with a equity of Rs 160 crore, so the valuation per share works out to about Rs 150-180 per share. I agree that the realization of this entire portion will be accruing to the company over a period of time maybe next 2-3 years. Discounting that cash flow I am taking a valuation call of Rs 100 and which I expect that share price should touch three digits maybe in the next 12 months.”