Avoid Apollo Tyres, says Mehraboon Irani

Mehraboon Irani of Nirmal Bang Securities told CNBC-TV18, "We were positive on the tyre sector and Apollo Tyres was a stock which we liked. However, what has happened is something which we believe that looking at the past experience of the management of Apollo Tyres this will pan out to be a success in two-three years down the line. The fact is stress on the balance sheet is something the market has been very wary about. Should one use this sharp fall from Rs 90 to the present Rs 62-63 as an opportunity? Honestly no."

He further added, "The factors led this play itself out. We all know the past experience of corporate especially when they borrow heavily to make acquisitions. It has happened even in the case of Tata Motors, Hindalco Industries, Tata Steel or Sun Pharma in the past. The fact of the case is how the market has reacted, I think it was obvious. Market is little concerned, now the news comes up that Moody's is going to downgrade Cooper Tire, that is going to happen because of the fact that the company is taking stress on their balance sheet, so it is normal."
"At the end of it I feel it is a great acquisition from the longer term angle and I am quite confident that the management will ultimately make business sense out of it. For the time being looking at the stress in the balance sheet, I think this could be a dead investment at the present Rs 62-63 at least for the next two-three quarters. So we have been advising investors not to get tempted to add on to the positions right now," Irani said.