SP Tulsian of sptulsian.com believes the Cobrapost expose provides a good buying opportunity in Axis Bank, HDFC Bank and ICICI Bank. He says although the Bank Nifty has been spoiled because of the bad performance, all the PSU bank stocks have been ruling reasonably well. "I am keeping a correction of these three stocks as an entry point for the investors", he told CNBC-TV18.
Also read: Exit ICICI Bank, Tata Motors: Kulkarni
Besides banks, he feels, Jubilant FoodWorks is an excellent stock for traders, but investors shouldn’t make an entry into it.
In the auto sector Tulsian picked Bajaj Auto. It seems to have bottomed out, but according to him, it is better compared to other two wheelers. In pharmaceutical space he suggested focus on the larger stocks. "I will rather be comfortable going for the stocks like Glenmark pharma, Wockhardt, Lupin or Ranbaxy", he added.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What did you make of the subscription that Nalco has got and now where do you see the price head?
A: They have really spoiled the way offer for sale (OFS) has been structured. I am not worried about the response to the subscription. Let us understand that 10 percent is the intent of the government to divest. We are only talking of the five percent. They have broken it in five percent.
So, we have received the response 74 percent of that five percent. I don’t understand the logic of divesting or reducing the stake at Rs 40, when the company is having cash balance. On December 31, company has cash equivalent of Rs 5000 crore, which translates into Rs 20 per share.
Since, government is holding 87 percent, they could have very well declared a dividend of at least Rs 10 or may be Rs 12 per share, if not Rs 20. It could have taken the money closer to about Rs 2500 crore in the form of dividend. This is a debt free company. I am not going into the product profile and the structuring of the company because as such for last three quarters or may be for last one year the companies Aluminum – that is the smelter business and the power division has not been doing too well.
That has been the general phenomenon. So, if once performance is so bad and poor one should not identified that company for reduction of stake. The company has Rs 5000 crore and one is struggling to mobilise Rs 500 crore, even if this OFS goes through, government will only be getting Rs 500 crore. What is the idea of reducing the stake from 87 percent to 82 percent? So, the structuring and the theme of this OFS was itself ill conceived and I don’t see any logic and rationale behind this.
Q: What happened to SREI Infrastructure? That stock was holding up fine and is now down 17 percent odd?
A: It may be something to do with the Kingfisher Airlines (KFA) or United Spirits shares. They have been holding this because the company was talking of divesting or selling the stake and realising their Rs 430 crore debt, which they have bought from ICICI Bank. So, may be some problem must have come there either in respect to the ownership or in respect to the security.
I am unable to connect the reason for this fall. However, a wild guess could be only because of that and I wish that other things should not get cropped up for the company. Sometimes this company does come into controversy and one has some kind of apprehensions starting to come in, in respect to this company frequently.
Q: On HDFC Bank, that brokerage Goldman Sachs which has come out with a target price of around Rs 550-570, would you give it any credence or do you expect the downtick that we have seen on HDFC Bank to be a buying opportunity?
A: I take this as a buying opportunity for all three stocks. After the expose, which we have seen in respect to three banks, Axis Bank, HDFC Bank and ICICI Bank, I do not think that the target of Rs 560 for HDFC Bank is likely as given by the Goldman Sachs. I will be using this as a buying opportunity for all three stocks.
The investigations have all started by the Reserve Bank of India (RBI) and government, but that is bound to happen. I am not saying that there will not be any finding in that respect, but it maybe a one or two cases happened at the officer’s level.
That cannot have any kind of apprehensions on the corporate governance or the working of these three banks. In fact the Bank Nifty has been spoiled because of the bad performance of all these private sector banks. All the PSU bank stocks have been ruling reasonably well. That could be with a mild positive bias of about 1-2 percent. So, I am keeping a correction of these three stocks as an entry point for the investors.
A: One always had the faith on these multinational companies (MNCs) companies that they will be resorting to fair means. However, I don’t think that kind of things have been seen happening in case of stocks like AstraZeneca Pharma or Kennametal India. There we have seen yesterday the OFS having completed.
However, if one comes on these two stocks in BOC, one has 87-88 percent of the promoters or closer to 89 percent. In case of Timken also the promoters have 80 percent stake. If they genuinely resort to the delisting move, which is likely because otherwise things cannot move up like that.
If they would have gone for OFS then the prices would have corrected. As one just sets any floor price and wants to go ahead with reduction of stake. So, if they genuinely go for delisting of these companies both the stocks have still very good upside potential. This can be maybe out 25 percent still from hereon in spite of having seen a run up of 20 and 15 percent respectively.
Q: Do you think this is an opportunity in adversity and would you buy any of the auto stocks now?
A: One stock comes to my mind is Bajaj Auto. It seems to have bottomed out. I agree that things are not very good, they are bad in terms of the off take. That is what we have been seeing in the monthly sales numbers also.
However things are likely not to be seen as severely bad for Bajaj Auto as may be seen for the other two wheelers like Hero Moto or TVS Motors. I will probably be picking up one stock that is Bajaj Auto at this stage.
Q: Anything you would pick up in pharmaceutical space?
A: It is very difficult to take a call on the mid cap or may be the small cap pharma stocks. There are new flows, for instance Plethico Pharma. In spite of having company posted an earning per share (EPS) of about Rs 50-55 for nine months, the stock has corrected because of margin pressure.
In spite of the high promoter stake it has corrected from Rs 350 to about Rs 125. Now it has been hitting upper circuit. So, one can’t really take a call. Take the case of Parenteral Drugs who have sold their Goa unit to Fresenius Kabi. Stock seems to be in the limelight.
So, it is better to focus on the larger stocks. I will rather be comfortable going for the stocks like Glenmark pharma, Wockhardt, Lupin or Ranbaxy. These seem to have settled after having seen a good weakness in the stock in last one month.
Q: Jubilant FoodWorks had a big run and Deutsche Bank has raised its target price to Rs 1300 on the stock. Do you think this is a good opportunity to buy it?
A: I have never found this stock convincing purely on the fundamental basis. However, this looks an excellent stock for the traders. I don’t think that the investors should look to make an entry into the stock. I wouldn’t advice traders also to enter into at current price. Maybe a range of Rs 1150-1300 seems to be an ideal range. This look to enter in a correction of about Rs 75-80, which I won’t be surprised to see that coming in the next one week.
Q: Punj Lloyd saw some amount of life in today's trade, would you see any upside on that one?
A: No, I will remain away from the stock. Generally, whenever one has this kind of a trading bump coming into the stock, they are not sustainable. In fact we see the stock quickly getting corrected.
The financial performance continues to remain a big concern. One cannot have the short-term news flow like the order inflow or maybe some short covering point to make entry into the stock.