TN sugar cos, RComm IPO & dumping duty excite mkt: Tulsian

In his analysis of the day's stocks, market analyst SP Tulsian of sptulsian.com explains to CNBC-TV18 that the Tamil Nadu-based sugar stocks look most promising on the commencement of the second crushing season.

Reliance Communication's proposed listing of under-sea cable company Flag Telecom and the planned monetisation of its mobile-telephony towers could ease the company's debt burden and send the stock to to Rs 75-76.
Tulsian also adds that the anti-dumping duty imposed in caustic soda and soda ash has made key stocks from both segments very attractive. Below is an edited transcript of the analysis on CNBC-TV18. Also watch the accompanying video. Q: Do you think the lifting of the ceiling on minimum export price (MEP) is a big positive for rice stocks? Which one would you buy and what is the kind of upside one can expect?
A: The positive seems to be more sentimental for rice stocks because this allows them much-needed leeway. Not all rice companies are posting high exports and the reason may be due to the hurdles caused by the MEP.
But considering the upside in the stocks, probably the exuberance of the market has played its hand.  But I still feel that an upside can be seen in KRBL after it moved up today. Q: How should investors approach Kingfisher Airlines and UB Holdings now when the time has come to sell the family silver? Is there any trading move that you would want to initiate, recommend on either KFA or UB Holdings or do you recommend investors to stay away?
A: It depends on how you view it - as a forced sale by the lenders or based on statements issued by the Kingfisher Airlines explaining that the sale of non-core assets was not forced by the bankers.
In fact, my estimate, for last maybe three-to-four months, is that there is no escape for the UB Group from repaying the entire the liability all the banks put together as on March 31 which is about Rs 8,000 crore.
Of this, about Rs 5,500 crore are adequately secured in the form of pledge of shares of United Breweries and United Spirits apart from the non-core assets like the Kingfisher house at Santacruz or maybe the villas at Goa.
I think the process has already started. The biggest trigger will not be the sale of 30% stake by Vijay Mallya in Mangalore Chemicals, but the sale of the promoters' stake either in United Breweries or in United Spirits because, in my estimate, that will enable a realisation of Rs 7,000-8,000 crore.
One should not mistake Kingfisher Airlines' Q4 losses of Rs 1,700 crore, with a net loss of about Rs 1150 crore because deferred tax reduced to those levels. Once Kingfisher Airlines' total debt is discharged by the UB Group, then Kingfisher Airlines can resume operations and be sold to a willing buyer for Rs 3,000-4,000 crore.
So I still maintain there is nothing to fear. A brave trader or short-term investor can look to enter on dips of maybe Rs 10-11-12 and book profit at Rs 16-18 in the next couple of months. Q: What is happening in Texmo Pipes?
A: No, I don't know. For the last two-to-three days, the stock was weak maybe on news that some of the large investors are selling their stake. A similar situation occurred in Varun Industries which corrected by about 75% in a couple of months. This is an alarming situation and I advise investors to stay away from the stock. Q: Where do you see ITC move?
A: I forecast that it will probably not fall below Rs 240-242 when renewed buying will come in and it has happened at about the level of Rs 245. But with the focus having shifted from defence to the other sectors offering good returns, I don’t think that there is a significant upside from hereon. I see very low trading opportunities and there is no point in taking a positive call to a great extent from hereon.
_PAGEBREAK_ Q: What have you made on the news on Deccan Chronicle? It seems to have defaulted on its short-term NCD despite being a cash-surplus company...
A: That's very strange and some of the most strange news surrounds this stock. Over the last six months, the news included the company was looking to acquire a stake in Future Capital, plans to monetise their stake in the Deccan Chargers or make a completely exit. Based on contradictory news, the share could swing in a range of Rs 30-40. Q: The Rs 7,500-crore IPO is supposed to rake in quite a bit of moolah for Reliance Communication. How would you react to the stock if developments play out as expected?
A: I am definitely positive. Flag Tele is an undersea cable company owned by Reliance Communication and it will be difficult to quantify the amount.
The market is speculating an IPO of about Rs 5,000 crore. To go through with the listing, RComm has to divest stake of at least 51% and go as high as 74%. So it is certain that the IPO of Flag Telecom has to be between 51% and 74 % for dilution to enable the company to mobilisae Rs 5,000 crore.
I don't know if Rs 7,500 crore is the IPO size of the valuation given for Flag Tele. The quantum of divestment or dilution is the key factor which remains uncertain for last few years.
The monetisation of the the towers and the Flag Tele IPO have been on the shelf for the last 18-24 months. If it occurs now, it will definitely be a positive as it will ease the burden of the Rs 34,000-crore debt in the books of the company.
An upside can take the share to Rs 75-76 and if the initiatives progress fast enough, it is likely to be in this series itself. Q: Sugar has made another big move up today. Triveni is up 12%, Renuka and Bajaj Hindusthan are up 5%.
A: Overall, it has been good for sugar. In Europe, white sugar moved to about USD 630 and according to news reports from Uttar Pradesh, sugar companies like Balrampur Chini sold sugar at Rs 31 per kg ex-mill and stopped selling on hopes of further hardening in commodity prices.
The increase in white sugar prices to about USD 630 is seen quite positive for the export companies like EID-Parry, Shakti Sugar and Renuka Sugar.
I am negative on UP-based sugar mills because their only advantage is the inventory they are holding onto. But the sugar mills in Tamil Nadu have already started their second crushing season a week ago. I'm optimistic about Renuka Sugar which is to start crushing in Brazil. I don't advise traders to take a call on any of the UP-based sugar mills. Q: Which stocks would benefit from the five-year anti-dumping duty on caustic soda and to what extent?
A: The beneficiaries in the caustic soda segment are Gujarat Alkali with a capacity of 1200-1300 tonne per day followed by Aditya Birla Chemical which makes about 450-500 tonne.
According to a news-flash, the anti-dumping duty has been imposed on soda ash also. The  beneficiaries in the soda-ash market are Tata Chemical and DCW.