In an interview to CNBC-TV18, SP Tulsian of sptulsian.com shared his readings and outlook on specific stocks and sectors.
Below is the transcript of SP Tulsian’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.
Anuj: We had discussed this in the morning as well, but just for our viewers, we would want to reiterate. Do you get a sense that the rally in United Spirits is now overdone? It has come off intraday highs.
A: I have said this in the morning also that a lot of hype seems to have been created. I do not understand that what is the point even if the Diageo increased the stake from 55 percent to 67-68 percent.Let me just revisit the whole thing that if you see 55 percent stake by Diageo, 5 percent stake by the Vijay Mallya, that is United Spirits benefit trust and maybe individual, just ballpark 5-6 percent, makes about 60-61 percent. 23 percent is held by the foreign investors which in fact, you can say that, I am not saying that they are all the front or benamis of the Diageo, but I do not see any difference happening.If you see, 61 and 23, that makes about 84-85 percent, then you are left with about 12-15 percent with the high net worth individuals (HNI) and retail investors, half-half, about 7 percent held by both of them. Whether this is an exit or whether this is just what you call a conviction of Diageo on the company.
Now if you go by the, actually my point of concern has been that nothing substantial has been seen on the fundamentals or fundamental improvement of the company. Even today the share is ruling at a price-earnings ratio (P/E) multiple of 70.Even if you take an expected earnings per share (EPS), I do not see any kind of growth coming in. So, this cannot be the sole trigger and I have seen the story having analysed by the channel that this stock is ruling 15 percent below the previous offer price. Previous offer price is not a binding commitment on Diageo that it has to come previous offer plus. Maybe interest part or maybe plus.
Honestly, I think this is just a hype and if you see the consumption or maybe the perception building up on the breweries stock, the kind of ban which we see in the states, Bihar, Gujarat, Kerala and if you see the situation continuing going forward, I do not think that the things are really comforting. I remember a lot of hype having built on United Spirits maybe about one year back at Rs 3,000-3,300 plus when a lot of HNI names were given. And at that point of time or since then I have been advising that please exit from the stock. These things are looking quite expensive. So I reiterate my view which I have given in the morning that I see this more as a hype. Even if this happens, this will be seen more as a trap for the traders.
Sonia: There are a lot of listed players already in the general insurance space, names like ICICI Prudential, Bajaj Finance, etc. now there will be more activity as many of these PSUs get listed. Any thoughts on how to approach this space and whether there is any further potential here for investors?
A: I tell you that this is an excellent move by the government because if you see in the life insurance there is only one PSU, LIC. And when you talk to the people, people are talking a ballpark valuation of about Rs 15 lakh crore for LIC, but that is not getting listed.
There are five general insurance companies in the PSU space that is General Insurance, Oriental Insurance, United India Insurance, National Insurance and New India Assurance. It is difficult to take a call because of the closely held companies. I have not been able to work out the profitability and the valuations.
But I tell you that this will really be an excellent move and actually then the private general insurance companies, there are many private insurance companies in this space. And the benchmark valuations will get discovered for those private general insurance companies, once these PSUs general insurance companies get listed. I have heard Finance Minister saying there could be a combination of offer for sale (OFS) and the fresh issue. But looking to the balance sheet of all these general insurance companies, again they are sitting on the huge investments and I do not think they have the capital requirement.
They are not on the situations like PSU banks. They are cash rich and holding huge chunk of investments having made in the other companies. So probably, it will be more as an OFS which indicates that the government is determined to dilute their control on these insurance sector also. Maybe if 75 percent is the SEBI mandate if they want to get listed, but government will not hesitate over a longer period of time to bring it down to maybe 51 percent as well which we all will see quite positive from the policy initiative point of view. So, I am extremely positive and I think market will take in its stride and it will be seen as a very big positive move of these five PSU general insurance companies going public.
Sonia: Expensive, this one, but the good news just refuses to stop. At Rs 1,300, how would you be positioned on PVR?
A: Definitely looks expensive, but if you see, actually I do not know the news which has been floating, of its takeover by the Chinese Wanda Group, whether that is still continuing or not. But if I need to take a call, there are two multiplex stocks available. One is PVR and second is Inox Leisure and if you take a comparative valuation, Inox Leisure also having corrected, PVR is now ruling at 52-week high while Inox Leisure is ruling, it had a 52-week high of about Rs 290 and now ruling at Rs 230. And even there, some kind of stake sale by the promoters are all being talked of.
If you want to play on that story, definitely, the valuations of both the companies are rich, but I will go with more with Inox Leisure because the volatility which we are seeing in PVR is seen to be very high which I do not think that can really get faced by retail investors. So, I will not prefer PVR at this stage and maybe, if I need to take a call in the multiplexes space, rather Inox Leisure looks good at the current valuations.
Anuj: We will have three bank numbers tomorrow, YES Bank, also Axis Bank and Federal Bank. I know you like YES Bank, but any other stock that you would want to take a punt on or you would want to bet on in the banking space?
A: Keeping positive stance on the Federal Bank also and two interesting results which I will be keen to watch tomorrow, one is of Ujjivan Financial Services, second is of Hester Biosciences because if you see, Hester Bio has been showing that they are into animal healthcare and pharmaceutical business. So, these two things also will be quite of interest to me. And as regards the other banking stocks, probably I will keep an eye on Kotak Mahindra Bank because there also I am expecting good numbers to be seen from the bank for Q3.
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