Expect 20% upside in MphasiS: Rajen Shah

Rajen Shah, CIO of Angel Broking told CNBC-TV18, "There is a lot more in MphasiS. This is an underperformer. What has happened over the last four months in the market is that many of the stocks have run up a lot. Some have moved up 50 percent, some 100 percent, some have moved up 200 percent. So finding opportunities is becoming extremely difficult and some of the companies are offering very good value and growth story. So that is where we are focusing right now and MphasiS is one of those ideas, certainly there is a sell out on the cards by HP.”

“The marketcap is about Rs 9,000 crore, it has got cash of about Rs 3,000 crore on balance sheet. If you take out this Rs 3,000 crore from Rs 9,000 crore of marketcap, you are getting this company for Rs 6,000 crore, revenue this year will be Rs 6,000 crore, so it is available at one times the revenue,” he added.

“If you see other IT companies like Infosys, Wipro, TCS and Tech Mahindra, all these companies are trading at more than four times the revenue. So a catch up is on the cards plus HP holds 60 percent. So once the sell out which is likely probably in the next six-nine months, we could see open offer for 25 percent and the interesting thing here is that 66 shareholders are holding 95 percent of its equity, so the floating stock in the market is hardly 4.5 percent, which works out to hardly Rs 450 crore,” he said.

“The other interesting thing is that this company pays Rs 17 as dividend, so the dividend yield itself works out to 4 percent tax free. So it is a safe bet and could give you 20 percent upside over the next 12 months.”