HDFC Warrants likely to give 60% return, says SP Tulsian

SP Tulsian, sptulsian.com feels that HDFC Warrants is likely to give a return of at least 60% in the next one year or 10 months.

Tulsian told CNBC-TV18, "HDFC Warrants is a very interesting story. I have been taking positive view on HDFC and the relative performance of this warrant will be better. HDFC Bank issued warrants 26 months back at Rs 55 per share to all the existing shareholders of the company. On August 23, 2012 one warrant will give an entitlement to each warrant holder to go for share subscription of HDFC at Rs 600 per share."
He further added, "The warrant is currently ruling at Rs 105 with that the effective cost works out to Rs 705. Even if we take a dividend loss of about Rs 10 expecting that 500% dividend will be get declared, after adding that the effective cost works out to about Rs 715."
"We are paying a premium of about Rs 35-40 and in lieu of that one is having funding facility or savings of about Rs 560. Alternatively, if I have bought HDFC share and would have kept it for one year, I would have invested Rs 670 and that much amount would have blocked. The effective interest cost to me works out at about 8% p.a. which looks very interesting."
"I am expecting HDFC to move to Rs 770-775 by August 2012. Taking the differentials, at that point of time warrant holders entitled to subscribe one share at Rs 600. If share rules at that point of time is at Rs 770 it will have a difference of about Rs 170-175 per warrant which is now ruling at Rs 105. So this effectively can give 60% return on the amount invested now."
"I don