In an interview to CNBC-TV18's Anuj Singhal and Surabhi Upadhyay, SP Tulsian of sptulsian.com shared his views and outlook on the market and specific stocks.
Below is the verbatim transcript of the interview.
Surabhi: What is your view on Fortis Healthcare if you look at the company in light of the current developments with IHH Healthcare pretty much walking away?
A: In fact when this question was asked to me 2-3 days back, I said that I have my caution firstly, on the valuations and secondly, on likelihood of the deal going through. But at that time again media and people have all been very gung ho, IHH is coming at a very good valuation and all that. And in fact, these are the situations where one has to be very careful in fact.
Maybe the analysts and media as well as the investors while taking a call that there is no point in taking a call because when the proceedings of the Daiichi has all been going on and the kind of valuations and on that day, I have specifically said that even if you take a call on Apollo Hospitals, which is much better in terms of network and the profitability and the kind of comparative valuations which you take, Apollo is not seen expensive more than 2x of what we have been talking of. That is on the maximum higher side.
So this kind of things are seen quite loss making moves seen happening with the retail investors because they go gung ho and they start boarding the bus thinking that something will happen and the things will result into a very high valuations and giving them good profits. This is the right move. The court has taken the right decision. If you have some litigations going on, you cannot keep on depleting your investment arm by shedding the investments or by monetising those investments or by divesting the stakes in your other companies.
So this was apprehended. I would not say this was confirmed when I said those things 2-3 days back on the stock to take a cautious view and my view continues to remain there and in case, in fact if you see in case of Fortis Healthcare, probably the fundamentals does not speak so well but the institutional interests and the kind of bullishness is seen to be much more than what the fundamentalists speak.
Sometimes, I compare this company with Jubilant Foodworks on which again I have been keeping the negative view or cautious view for last 4-5 years, but people have all been very bullish and nothing has seen happening on that front. So it is identical case of the fundamentals. I am not going by the technicals and by the news flows and all that. So fundamentals were never demanding for making investments into Fortis even then and even now.
Anuj: The stock I wanted to discuss with you is Can Fin Homes. How do you see the news of them raising money via rights issue and of course, stock split is technical in nature, but fund raising?
A: Fund is in fact the lifeline for any of the lenders, whether it is housing finance company, microfinance or maybe non-banking finance company (NBFC), so definitely a positive move. In fact Can Fin Homes has been the best in terms of the growth. I am not bearish on the stocks like HDFC, LIC Housing Finance, GIC Housing Finance, I have been keeping the positive stance on that as well.
And sometimes, I know slightly will go into the favour of stock split also. When these stocks all starts running too high, take the case of Bajaj Finance, when they have gone for the stock split, thereafter, you have seen the share price started moving up as well because probably that can happen in case of MRF also though the same argument may not be accepted by the management and all that. I am not saying that split is giving any kind of value accretion to the shareholders.
But sentimentally and from the liquidity perspective when it gets reduced to the lower value, then it starts evincing some interest as well. So yes, positive on both the fronts, but keep a positive stance, but not at the current level, maybe Rs 3,000-3,050 could be the level where fresh investments can be looked into in Can Fin Homes.
Anuj: ICICI Bank, clearly the market giving thumbs up to the deal happening now. Do you think it can go back to its previous highs?
A: If you take the call on this first before giving a reply to your answer, let me take a ballpark figure of about maybe Rs 50,000-60,000 crore debt exposure. Obviously all this will flow to the banks like ICICI Bank and others. It is difficult for me to say that how much has been provided apart from the change of or the group exposure which Essar have a group exposure of more than Rs 1 lakh crore plus. Apart from that, the amount of the recovery which will be or it will come into the good and I hope that Rosneft will not avail any kind of debt from the Indian banks.
So entire amount will come and flow to the Rs 50,000-60,000 crore to these banks. That will be extremely positive. And in fact, I take this as a prelude, the consent having issued by 23 lenders as a prelude to the settlement of Essar Steel as well. In fact three days back in your same afternoon show I have said that can Essar afford to delay the Rosneft deal, no way. And I have said that on that day very specifically that if they will not come on the table for settlement of Essar Steel, on definite terms, Essar-Rosneft deal consent will come and today we have seen that coming in.
So in fact, I am seeing that extremely positive and probably I will not be surprised to see Essar Steel not getting a haircut of more than 10-20 percent while the banks have all provided for 30 percent. So why to take a call only of the Rosneft deal for ICICI Bank or maybe bankers like SBI and Punjab National Bank (PNB).
In fact this will be all clubbed with Essar Steel as well which also will become good assets from here on whether by change of promoter, I am not expecting the change of promoter to take place in Essar Steel because I have said that the value of the assets are Rs 60,000 crore, 10 million tonne cement plant though your channel have projected or highlighted 6.5 million tonne which is wrong. It is a 10 million tonne plant. So come on the value, Rs 60,000-65,000 crore, so take a combined exposure of closer to about Rs 1 lakh crore of the Essar Oil that is Rosneft deal or maybe ballpark Rs 80,000-90,000 crore along with Essar Steel. So Rs
50,000 crore from Rosneft deal, maybe Rs 40,000-45,000 crore from Essar Steel. That kind of money will flow in and I tell you, if these things will come in the public domain, I will not be surprised to see all these stocks flying. Why talk of new high. In fact this will be a big trigger for the share prices of ICICI Bank, SBI, PNB and all sort of banks to really move up from there.
Surabhi: Looking at the way midcaps have corrected, have you seen for instance today over the last couple of sessions any of your favourites where you think the prices are looking attractive? Simple question, would you recommend buying anything in the midcap market in the current fall?
A: There are many stocks which are looking quite, which are in fact many of them are favourite to us and in fact we have recommended them on your channel also. Today morning we gave a buy call on sugar stocks that is Dwarikesh Sugar Industries, but these are just the example. Apart from that, we have been giving buy call on Century Textiles and Industries, Jayant Agro-Organics and none of them have seen corrected even in this carnage. My point is that yes, if you chase the momentum in the midcap and smallcap you are bound to see this kind of corrections.
Take the case of Escorts, the kind of valuation run up which we have seen and we have been seen going gung ho on a very high level where we have been throwing up caution. So these things are bound to happen, but you need to be very calculative and very analytical in taking the fundamental call also based on the valuation of the company and in which the growth is more important.
Unless and until you really know the growth, the kind of companies they will be projecting for FY18, I think it will be very risky to take a call vis-à-vis the valuation. I have in fact said maybe I think this morning or yesterday that unless and until we have the growth or if you are giving a price-earnings ratio (P/E) multiple of 30 to a company and if you do not have an earnings per share (EPS) growth of 30 percent, you are bound to see those investments carrying the risk. So yes, we have been giving positive call on many of the stocks which we keep recommending on your channel every alternate morning as well.
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