Prefer Jain Irrigation, says Sandeep Shah

Prefer Jain Irrigation, says Sandeep J Shah, CEO of Sampriti Capital.

Shah told CNBC-TV18, "Suzlon Energy still appears like a falling knife unless you see a change in the underlying fundamentals. I am a great believer in alternative energy, but companies that have created these have got into this quicksand, is not something you would look at. Jain Irrigation is in an attractive space, micro irrigation is certainly a business of the future. They seem to have a good business model as far as the company is concerned."
He further added, "Unfortunately they are dependent on State government for subsidies and that’s the killer in terms of receivables and the huge debt. But if one had a sense that we are likely to see quicker interest rate cuts than we have seen in the past and if the company continues to exercise its grip over its receivables then at this stage this could be an interesting stock."
"I do not think valuations are demanding at this stage. This is perhaps the only serious micro irrigation player. They have world size scale here in terms of the irrigation business. So it’s an interesting stock, there is no need to chase it. You could look to build a position slowly with the attendant risk being aware that if interest rates do not come down, this company does have serious debt issues."
"They do have cash flow issues. I do not think that by spinning off a subsidiary and spinning off the receivables into that company is something that could hold a lot of water with investors, Investors will look at the consolidated company and the consolidated business because the majority stake will continue to be with Jain Irrigation and then look at it."
"Between the two, Jain Irrigation certainly looks more interesting to me because fundamentals haven’t collapsed the way they have in Suzlon. Suzlon might be more suitable for vulture investors, people who think that in terms of asset breakup the company has some value there. If the current management doesn’t change and if things get worse then you just end up being stuck there. So Jain Irrigation would be something I would prefer."