Tulsian's take on IndusInd results, Quess Corp IPO & Nifty

In an interview to CNBC-TV18 in its Closing Bell segment, SP Tulsian of sptulsian.com shares his view on IndusInd Bank's quarterly result, why he expects no more than 10-12 percent growth in earnings in FY17 and what makes the stock look expensive. He also discusses other stocks like Jindal Steel and United Spirits and his view on Quess Corp's initial public offering.     Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Sonia: How do you like the IndusInd Bank’s numbers and at this point I agree that the stock has become quite expensive, but Rs 1,130 do you think that there could be a rerating or there could be more upsides in the stocks purely because of the quality of the earnings?A: I don’t think that there is any complaint with the numbers, but if you really see the growth which can be expected from the bank for FY17, I don’t think that it will be more than 10-12 percent because the earnings per share (EPS) expectation can be closer to Rs 47-48. I have no complaint on the asset quality, no complaint in the increase the net interest margin (NIM) also, because if you see on the absolute number, NIM has increased by about Rs 90 crore and profit after tax (PAT) has increased by about Rs 40 crore for the quarter, but if you go by the PE multiple it is ruling at 23, I am taking it on the current year’s estimated earning of about Rs 48 EPS.On price to book as you have already stated it is at 3.4 for the FY17 estimated book of maybe about Rs 340 or so or maybe Rs 335, which we will be seeing after paying the dividend, so I think that if you have a growth of 11, 12-15 percent kind of thing there is no justification of giving a PE multiple of 23-24 times to the stock number one. Number two you have to hunt for the ideas now in the other spaces in the private sector bank with other banks, so that will be on a comparative basis definitely things are looking expensive. I have been taking a positive call on Yes Bank and Kotak Mahindra Bank, but even Yes Bank has risen quite a lot if you really see the kind of run up which you have seen probably Yes Bank has given the highest gain in the private sector bank in this last six months on a relative basis, so yes going forward maybe my focus will shift on the smaller size of banks like Federal Bank, maybe Karnataka Bank or maybe Kotak Bank if I need to take a comparative equal or maybe a bigger size of banks as compare to Indusind, but yes no complaint with results but share is definitely looking expensive.Anuj: First a word on either Jindal Steel or United Spirits and your reaction on the news, if you have gone through any of them?A: This JSPL news is definitely very negative because if a chartered accountant, the Singhal who is a ex-chartered accountant, if he is turning approver he can spill all the beans, because if you really see the kind of financial, irregularities and all that and that falls within the purview of the chartered accountant or maybe the financial person and if the court has allowed him to turn as an approver, they must have gone through the kind of evidence or maybe the information which he must be holding, because any accused is not allowed to turn as an approver unless until you see that case can get sorted out against the big people, that’s Naveen Jindal and all sort of things, so I see this as a big negative in fact the fresh problem. It is something like when the charge sheet was filed it is equal to the same magnitude if one of the accused is turning as an approver.Coming on United Spirits, I don’t think that this is the old, the same record which is being played when the Diageo have acquired they knew all kind of irregularities or maybe the financial mess which was existing, but they were desperate buyers, so maybe as a compliance or just to have the investigations carried out they are doing it, I don’t think that there will be any kind of action against the Vijay Mallya or any kind of money demand to be made by Diageo against the Vijay Mallya, because if that would have been the case all these irregularities were in the public domain for the last couple of years since the Diageo has acquired, so I am not too perturbed by the United Spirits news, but yes JSPL is seen as a big negative.Anuj: What’s next, I remember you had 8,700 for this series, do you stand by that or are you tempted to increase the target even further?A: I will stick to that and in fact that was confirmed by me on Friday also, where the buying call was given but for the time being I will stick to the same level, because there is no point in rushing just seeing the up move of today, but I am keeping the positive bias for the July series.Sonia: I wanted to ask you about the trigger for tomorrow, we have Quess Corp that will be listing tomorrow and looking at the way it was oversubscribed 145 times, HNI portion almost 400 times, do you expect a strong listing from that one?A: Maybe the listing can come at around Rs 520-525, but I am expecting the profit booking to come in, because the same repeat of the things we will be seeing, the HNIs those who have applied have all gone or having acquired the shares at the leveraging cost. The cost to them is closer to about Rs 245-250, they won’t be making any money. All those allotments having given to them has to get liquidated tomorrow by end of the day, so again we will be seeing the stock maybe giving a listing at Rs 525, but I won’t be seeing the stock correcting to a level of Rs 500 or below that.Anuj: Do you agree with that bit of a generalisation?A: I fully agree, the more particular statement which Mehraboon has given about the results which we see from these companies coming in and apart from that the market making, coupled with the results shown by those companies, coupled with that the market making which is done by the company sources or maybe the circles connected to that that is seen very risky, because if you come on the business model, if you see the business model I don’t think that is too exciting because even if you see for the Teamlease also, I don’t know how far in such a wafer thin margin you can really exist, in fact the margin is better seen for Quess Corp. So I will be more comfortable with L&T Infotech again as Mehraboon has said from the listing gain, but I won’t be hesitating in giving even a time call also those who can hold it for 6-8 months they can do well, because now the managements have pulled up the stocks and they know that they have to perform in the IT industry to prove themselves, so maybe I am not too positive on Quess Corp because so many risks are involved because of the movement which we may see tomorrow whether that really exist for the near term or not.