Tulsian picks OnMobile, drops HMT and Punj Lloyd

SP Tulsian of sptulsian.com, says that government's move to infuse Rs 993 crore in HMT is not a wise decision on the part of the government, as this PSU has not been able to make profits in the last 4-5 years, despite getting revival package at regular intervals. On OnMobile, he has a positive stance and feels that the stock can touch Rs 42-43 level. He, however, has a cautious view on Punj Lloyd and think that today's rally is unsustainable.

Below is the edited transcript of his interview. Also watch the accompanying videos. 

Q: What is the right way to approach HMT stock after Rs 993 crore package?

A: The government is holding close to 99% stake in two PSUs namely FACT and HMT and the government has infused huge amount of money into these units since last 4-5 years, but these units never gave good returns. On one hand, the government is trying to make much noise on divestment issue and till date they have not been able to mobilize Rs 1,000 crore from disinvestment, and on the other hand, they are infusing Rs 1,000 crore every couple of years without any returns. The traders and investors are only holding 1% of the entire holding and I don't think there is any commercial wisdom to keep this stock. I think it is a foolish and painful move initiated by the government to infuse money in HMT.

Q: What is your view on OnMobile?

A: The market has taken the issue of corporate governance in a positive manner. I have been keeping a positive view on the stock when it corrected to Rs 30. The market has taken that something may not come out of this corporate governance issue where it has been projected to be. So, short covering is seen coming back or renewed buying interest which has build up at Rs 30 level is continuing now in the stock. The stock can move to Rs 42-43 in this rally at a stretch continuously.

Q: How would you approach Punj Lloyd now, its up almost 9%?

A: The stock is not showing any improvement in its quarterly results. Many traders and investors get trapped whenever there is any sporadic move, which is unsustainable. I have a cautious view on this stock. I don't know what triggered the stock today; we have not seen similar trend in other infra stocks.

Q: Reliance Communications stock is up 6.5% at Rs 72. How have you absorbed the news of valuation that is being talked about in Flag IPO?

A: This news have pushed the stock beyond Rs 72, which is quite positive. The dilution is likely to be close to 65-70% which can rake in close to an average of USD 850 million for the company. Any fund mobilization move will definitely be a positive factor.

RComm was very aggressively looking at two areas in last 18 months, one was tower mobilization and Flag Tele IPO, but nothing concrete happened on any front.

Post Veritas report, many traders were not keen on taking any positive call in the stock. So, a combination of all these factors can make the stock move further from hereon. I have a positive view on this stock and this stock can touch Rs 76-78 in this series itself.

Q: Apart from big names like L&T, Reliance Infra and more actively traded counters, which stocks in infrastructure space would you pick up with highest conviction?

A: I will pick stock like IVRCL, Nagarjuna Construction and Lanco Infra.

Q: What do you think is the end game for Kingfisher, United Spirits saga? Everyday we get conflicting news on what they will sell, how they will raise money. Even today the stocks don’t appear particularly convinced?

A: I think there is no escape for the UB Group. The process of debt payment has to be initiated by the UB Group. Considering the operations, I don't think that UB Group is too keen to continue with the operations of aviation and they are waiting for FDI clearance. There are informal talks that there is a potential acquirer of the company. And, if they can bring it on a clean slate Kingfisher Airlines can easily fetch Rs 3,500-4,000 crore.

It also depends on the regulatory investable limits permissible in the sector. So, the intention would be make the company debt free as quickly possible otherwise there is no escape for Vijay Mallya to make this arrangement with any of the acquirers.

In this event, Mallya needs to discharge his entire debt by offloading his holding either in United Breweries or in United Spirits. There is news that Mallya may exit from Royal Challengers IPL team, but this mobilization will not fetch him more than Rs 2000-2500 crore. The main issue is that he has to make the company debt free and look for a partner. Which is likely to happen in next 30-45 days.

Q: Would you fundamentally buy Globus Spirits?

A: No, post denial by the management we have seen a steep correction in the stock. I expect the stock to correct back to Rs 110 in next one week.

Q: Apart from RComm, in ADAG bag which stocks would you pick up as a trading opportunity now?

A: Reliance Infra looks to be the better stock in ADAG camp.

Q: What is your view on Uflex with results expected tomorrow?

A: Packaging film results has not been very good.  The only trigger is for this stock was news of stake sell by the promoters, which is not been happening. I don't think that results will really be the trigger considering the results posted by the other packaging film makers in recent past.