Avoid JSPL, says Phani Sekhar

Phani Sekhar, Fund Manager-PMS at Angel Broking told CNBC-TV18, "Avoid Jindal Steel & Power, because there is no doubt that coal ordinance will become law. Mining ordinance, I am yet to see the fineprint. However, one expects these things will happen in the next one and a half to two years, it is just a question of timing but the valuation gap is far too much to be able to cover in foreseeable time horizon. Even at Rs 155 the current price, it is trading at around 6 times EV/EBITDA which is not cheap. So I would strongly advise to get out of this space completely.”

He further added, “For Sesa Sterlite one needs to realise that a lot depends on what happens on the regulatory or policy front. So you have 8,000 megawatt of capacity being planned on captive coal block. So that is again dependent on the coal block auctions. You have 3,600 megawatt capacity that is awaiting approvals and clearances, again dependent on policy and large part of enthusiasm in Sesa is also because of its proposed stake sell in Balco and Hindustan Zinc Ltd, something that we have been hearing for the last one decade. That is again dependent on regulatory or policy initiatives. So if one is willing to take those kind of risks, you can bring Sesa Sterlite because if large part of them or all of them pan out the way one expects them to then you are looking at atleast a 40 percent upside in Sesa Sterlite. So that is the risk return trade off there.”

Disclosure: Analyst doesn’t have any personal investments in the above stocks but he hold some of them in their PMS portfolios.