Moneycontrol
Last Updated : Jan 03, 2018 11:00 AM IST | Source: CNBC-TV18

Here's a fundamental view on market from SP Tulsian

Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18, in which he shared his readings and outlook on fundamentals of market and specific stocks.

CNBC TV18 @moneycontrolcom

Watch the interview of SP Tulsian of sptulsian.com with Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18, in which he shared his readings and outlook on fundamentals of market and specific stocks.

Below is the verbatim transcript of the interview.

Anuj: Let me first start with this whole space, Mahindra and Mahindra (M&M) clearly the tractor numbers looked good, maybe Escorts was slightly disappointing, now we have VST Tillers numbers as well. What would be your pecking order in this space, of course VST Tillers is much smaller, but how would you approach this space?

A: Looking to the monthly sales numbers, VST Tillers I agree that this is a smaller one, but I think in terms of the share price appreciation, VST Tillers can stand out on the top, followed by M&M. If you see the numbers for Escorts, they have seen flattish kind of things, and looking to the present valuation of the company or the share price, I don’t think that this justifies this kind of things. So, if I put the pecking order in terms of the share price growth, may not be in the absolute number, obviously M&M stands to be the leader and having shown a good growth for the tractor for the month of December, my pecking order would be VST Tillers, M&M, and Escorts.

Latha: We just got this release put out by the rural development ministry that they are going to ask for 20 percent more outlays on NREGS; from Rs 48,000 crore in the current year the outlay is expected to be Rs 60,000 crore. Now we don’t know if the Budget will grant it but is this something which the market should take notice of any stocks that would be excited by this?

A: If you really take a call, last year’s Budget there was not much increase seen on this head. Probably government thought that because the private investment and all will come, and again I don’t think that this should be seen beneficial to any particular sector or any particular stock, because this the general catalyst which will really be seeing the revival of the economy or maybe the industrial climate because the kind of rural income, because ultimately that gets distributed to the rural people and more on the government projects like road building and maybe dam or maybe canals and all sort of things.

So, overall this is seen positive and as market has been expecting after the Gujarat elections, that focus will be on the rural income, because government will be hell-bent on increasing the rural income or per capita income of the rural people and I don’t think that there is any harm in asking for an increase of 20 percent, obviously that will not get granted by the Budget, but even if it happens at 12-15 percent, the time warrants that and I think this should be seen as positive. Maybe some would call it as a populist measure, but I think that this is very much required in the current context when the focus is more of the government on infrastructure and even India Inc is asking for development of infrastructure.

Sonia: The other stock I also wanted to talk to you about was your own stock idea for the long term, so, if you can just take us through that, it is Videocon Industries – we have of course spoken about this in the past, but what makes you freshly positive on this name?

A: It is right that we have spoken that in the past but sometimes let me say that the media and experts including me we don’t know that what is the total NPA of all these cases. We keep discussing that but they have not been in the public domain. If I just specifically, in fact I keep talking for many of the accounts where there has been lot of variance, what has been said by experts and what has been reported by media while the ground picture is totally different. However, if I just take a call on this company particularly, whatever reported or whatever information I have gathered, they have an NPA of about Rs 46,000 crore.

Of Rs 46,000 crore Rs 23,000 crore, exactly 50 percent is from Indian banks and Rs 23,000 crore are from the foreign banks. While the foreign bank debts are all very well serviced, they are not NPA in anyway, and they are backed more by the Indonesian and the Brazilian oil and gas fields which are valued by the experts again, not by the company, anywhere between USD 10-12 billion. So if I rely on those figures and looking to the oil assets and in fact if I see the kind of amount which the company has monetised in 2013 by selling their minor stake in Mozambique oil blocks for about USD 2.5 billion in 2013 and they got reduced their debt in the overseas debt off their overall company, I am not worried on that Rs 23,000 crore. I knock of the assets held by the oil and gas blocks by the company.

Now if I come on the Indian operations, again it is very difficult to take a call, but I presume that all the monetisation which have been happening will ultimately flow for reduction of the Indian debt to the extent of Rs 23,000 crore. If I quickly take the last 12 months or maybe expected moves on monetisation, they monetised their spectrum in six circles by selling their entire spectrum of 60 MHz in 1800 MHz band to Bharti Airtel for Rs 4,400 crore. Recently they have sold their stake in the DTH business to Dish TV and getting of the shares, 88 crore shares of Dish TV valued at Rs 7,300 crore.

Even if I presume that Videocon has about 52-53 percent stake in that company, they will be getting about Rs 3,600 crore. Rs 4,400 crore having come from spectrum and Rs 3,600 crore come from DTH, that adds about Rs 8,000 crore. Again Ken Star brand is on the block which can fetch about Rs 2,000 crore i.e. Rs 10,000 crore. They have 51 percent stake in a general insurance company, market is valuing that company at about Rs 5,000 crore, but even if I presume that they fetch about Rs 3,000 crore for 100 percent, they should get Rs 1,500 crore. So it all makes Rs 11,500 crore which takes care of 50 percent of their business.

If you see this and leave aside their core business which has a huge value, in fact just to give the numbers for FY17, they had an income of Rs 11,700 crore only from consumer electronics on which the EBITDA was about Rs 192 crore. However, in FY16 this same division had a turnover of Rs 11,600 crore with EBITDA of Rs 1,300 crore; that means company is taking a big hit on their core business because of non-availability of finance. Looking at whatever inside information which have been gathering, that banks, the lenders to this company are not interested in pushing it to NCLT. They are seeking the approval from RBI to go for the out of court settlement, even the promoters are seen to be quite keen. They seem to have arranged a big amount of money from a reliable or maybe a big house whatever close sources which we have been gathering.

So, taking all this into consideration, if it turns out truly in this way that Rs 23,000 crore is their debt that is NPA and they have already monetised Rs 11,500 crore I don't see any reason for this company to rule at a level of about Rs 21-21.5. So we have been actually keeping very positive view because any kind of resolution will see a dramatic turnaround and the kind of valuations which the consumer electronic business is getting, I have not included their real estate, I have not included their other kind of business, the small ones in this overall monetisation program, so if this resolution happens I think that stock can just go in the new territory. I am not giving a high hopes but at least I won't be surprised to see a doubling or giving 100 percent return in 2018, but for the time being, kept a target of Rs 28 in next six months or so.

For full interview, watch accompanying videos...
First Published on Jan 3, 2018 10:47 am
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