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Last Updated : Jun 26, 2012 06:28 PM IST | Source: CNBC-TV18

Hindustan Motors may settle around Rs 20: SP Tulsian

Hindustan Motors may settle around Rs 20, says SP Tulsian, sptulsian.com.

Hindustan Motors may settle around Rs 20, says SP Tulsian, sptulsian.com.

Tulsian told CNBC-TV18, “If you want to take a fundamental call- if I just narrate the total fundamentals of Hindustan Motors present market cap of about Rs 180-190 crore and if you add the debt which is not more than Rs 100 crore. I am not including the sales tax before a loan which has to be paid over a period of 8 to 10 years to the extent of about Rs 40-45 crore. Even if you include that ,it works out to be less than Rs 300 crore as the enterprise value.”

He further added, “If you take a call on the assets held by the company alone the Chennai car making plants where they are making the Lancer car is estimated at a present value of about Rs 400-500 crore. In fact the company indicated in the past or there was some kind of rumor that the company is looking to exit from this car plant and it will get sold outright. Apart from that they had land of 600 acre at Uttarpara, the suburbs of Kolkata where they have sold 300 acre. I am talking of the surplus land, I am not talking the 500 acre of land which has been used by the company for making the ambassador car and the auto castings and forging and all that. Apart from that they have 49% stake in Evitech Limited which is a transmission company making very rich assets. If you make the total valuations of all these the net present value works out to about Rs 1200-1500 crore. I think this is a classic case of wealth destruction where we have seen the assets getting sold and the payments are realized over a staggered period of 2-3 years and every year they realize about Rs 50 to 100 crore on sale of these assets. Those amounts get use for financing the losses by the company. Even in FY12 if you see the performance they had a very meager profit of about Rs 30 crroe which has come from the operational performance.”

“As a fundamental analyst you really get excited that the share should rule at a valuation of maybe Rs 30-40 but the kind of erosion which we have seen in the share price and now promoters issuing warrants to themselves clearly cast a shadow on the intention and management style of the promoters. In fact this stock has been languishing and created wealth destruction in the last 4-5 years. Yes, at the current value face of Rs 5 and current price of Rs 10-11 definitely warrants good value upside. I won’t be able to attribute the reason for such a steep rise today but if really things are managed in a proper manner whether in terms of the disposable of assets or running the affairs of the company share should technically or fundamentally should rule at a level of at least Rs 20 plus.”

First Published on Jun 26, 2012 05:51 pm