In an interview to CNBC-TV18, SP Tulsian of sptulsian.com discusses why he believes Indiabulls Real Estate can see a gain of 20-25 percent in 2017.
The goods and services tax (GST) council has not reached a consensus on the dual control issue and after the meet on day two, it has become clear the roll-out of GST will miss the deadline of April 1. Tulsian says GST missing the April 1 deadline will not disturb the market very much.
Below is the verbatim transcript of SP Tulsian's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18. Sonia: The dual control issue has been a messy one and now there is no consensus on that issue. But from a market’s perspective, do you think that this news has been digested, the fact that we will not be able to meet the April 1 deadline? A: If you see, two issues on which the things have all got stuck up. One on compensation. I do not think that market and council had any kind of differences or that is seen such a serious thing because for sake of raising the differences, you have raised it. But yes, dual control has seen to be an issue and I think this has now become more a prestigious issue or maybe a political trade off. And that has all been factored in and realised by the market, and more specially, when the two MP arrest of Trinamool Congress (TMC) having seen that. So, I do not think that wisdom is now prevailing at the goods and services tax (GST) council meet. So, that is the situation which was known and that has all been factored in by the market. And I do not think that even there was 25 percent of the market participants or market experts or those who have been expecting it to get implemented from April 1 because that was the foregone conclusion having accepted that it will get implemented only from July 1. But now, let us see the situation how it pans out, but I do not think that the April 1 deadline of not getting met, which now got sealed today that yes, it seems 100 percent impossible will not disturb the market very much.
Anuj: Jaiprakash Associates is up 15 percent today after a long time I have seen this kind of move. Even GVK Power & Infrastructure is showing some traction. Do you think it is one of those trading moves which will fizzle out? A: Sometimes you feel that probably market is not acting in its full wisdom. Take the case of Jaiprakash Associates where the debt is closer to about Rs 70,000 crore on a consolidated basis and you seeing Jaiprakash Associates moving up by about 15-18 percent. When the company has decided or the parent that is Jaiprakash Associates has decided to monetise all the assets, whatever they have been able to, whether it is thermal power or hydro power or maybe the cement plant, I am unable to understand what difference will it make to them of this falling interest rate; number one. Number two, if you want to take a call probably Jaypee Infratech which is a BOT, Yamuna Expressway with 36 years concession agreement, that is a standalone company in which Jaiprakash Associates is a promoter holding 70-72 percent. If you see that company on a standalone basis, any sound group or sound company can come forward and acquire that company because having the land bank, having a very nicely built Yamuna Expressway, so, sometimes I am unable to buy this argument coming on the GMR, GVK kind of stocks. Again, the interest reduction will definitely be helping all the debt ridden companies, but can they show significant improvement where the EBITDA is seen to be much lower than the interest burden also. Hypothetically if I say that EBITDA is Rs 1,000 crore and interest is Rs 1,100 crore, then what you may see that EBITDA will be equal to the interest cost so will that be really cheering the market? I don’t know. So, these are things which need to be factored in and consider while taking a call on these debt ridden companies.
Anuj: Fundamentally, Divis Laboratories having corrected 40-45 percent now, what is your view? A: I don’t see more weakness because if you see last week when this issue got raised, at that time it was seen not such a serious issue. Today some again report came that this seen to be a very serious issue. However, I think that stock has been corrected because with every new report coming in and giving serious concerns on the US FDA issue, that is making the stock to correct a bit. However, I have not bearish on the stock from here as an investor point of view. I am not saying that I will advise buying in the stock now because as such I have been keeping away from all the pharmaceutical stocks for last couple of months but I don’t see much weakness seen from here on. Maybe after certain time, maybe after a couple of days or week, you may see good amount of short covering also which can make the stock to move up by 5 percent as well. Sonia: Just a quick comment on this, I remember you used to be bullish on this a while back and I don’t know your stance on it now but on the back of this water treatment order, how would you be positioned? A: Now for last maybe one year I have been keeping a neutral stance for two reasons. One, the demise of the CMD of the company that is BGR and secondly if you see the balance sheet of the company, a lot of stress because of their foray into Rajasthan on the contracts, on the power project contracts, a lot of working capital has got stuck. So I think that maybe I am not sure about this contract of Rs 650 crore that what kind of working capital will be require but nearly having order in flow will not serve the purpose if you are not able to manage your working capital properly. So, maybe this kind of order may see the share moving up by 8-10 percent but I will use that as an exit opportunity those who are holding the stock.
Anuj: One of your favourite stocks, Indiabulls Real Estate, what a remarkable rally. In fact as we speak this stock is now back to the pre-demonetisation level. I was just reading a report that property registrations in Mumbai have actually picked up. Do you get a sense that some of these stocks could rally more from here? A: Two things go in favour of the Indiabulls Real Estate. Firstly, if you see, they don’t have any cash dealing because largely they are into the development of the NTC properties which they have acquired in the auction, number one. Number two, this fact when I stated that no fall is seen in the Mumbai region, many of the people have not believed that. Maybe one can say that there is poor off take but I have not seen any kind of price reduction having taken place in the Mumbai city and same maybe with the case of Indiabulls Real Estate. Thirdly, they are on the verge of completing many of their projects and the possession is being handed over by them and that will continue for next one year. So, these were the main reasons for taking a positive call on the stock and I continue to have the same positive view. I am not saying that this stock may give you a return of maybe 30-35 percent in next one year or so but I won’t be surprised to see a gain of 20-25 percent as well in the year 2017, so, yes, keeping a positive view on the stock.
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