In an interview to CNBC-TV18 SP Tulsian of sptulsian.com tells you why he is positive on large PSU banks like SBI, Punjab National Bank (PNB), Bank of Baroda, Bank of India, Canara Bank , as well as private banks ICICI Bank and Axis Bank.
From the midcap space, he suggests looking at CG Power and Jayant Agro.
Below is the transcript of SP Tulsian's interview to Anuj Singhal and Reema Tendulkar on CNBC-TV18.
Anuj: First on this PSU bank rally. How much more because we have seen in the past that when these stocks enter momentum phase, it can last for a couple of days and of course, most of these stocks on price-to-book value can be extremely cheap. Do you get a sense that stocks like Canara Bank, Union Bank can move on from here?
A: This time it is not looking for a couple of days kind of stocks because you have to corroborate the rally with the statement of Finance Minister which was given yesterday evening where he has categorically said that the rules for the stressed loans will be out soon. In fact, when Shereen asked him, he said in a couple of hours, then he said that may be wait. So, that is likely to be seen very soon, number one.
Number two, his second remark was that the major problem of non-performing assets (NPA) is revolving around 30, 40 or 50 accounts. So, even if the government is able to take a call on maybe 15, 20 or 25 accounts which is most likely, that is likely to happen, number two.
Number three, if you take the situation, whatever information which we have been gathering, government is very insistent on first handling the sector that is the steel sector. If you take two companies Essar Steel and Bhushan Steel, both have an exposure of Rs 45,000 crore that is on account of stressed loan, Rs 45,000 crore plus. If I add the working capital then probably it will be Rs 50,000 crore plus for both.
So, definitely government will be looking now in view of the revival, this is just an example I am giving you, I am not giving you any kind of recommendation that if you just see the two accounts in respect to one sector, two accounts, you can tackle the NPA of about Rs 1 lakh crore and you have the prospective buyer standing to acquire this.
Obviously the haircut will be there, the banks will have to take a haircut of anywhere between 30 percent and 60 percent. It all depends, needs to see the regulations coming in or the rules to be made by the banks coming in in that sector. So, apart from that, you have about Rs 50,000-75,000 crore having exposure to other steel makers also like Monnet Ispat or there are many other electro steel steels.
So, I think that this time, government is very serious. The aspirations or maybe the acquisition intention or the acquisition appetite is seen in few of the stocks, few of the sectors. So, this time, government will definitely be taking the concrete steps. The only problem is that because of IDBI, United Breweries Group matter where this ex-CMD was imprisoned, there was some kind of reluctancy on part of the banks to take any kind of action in respect to the loan settlement.
But once the rules are out and all the people are working on this job, I am quite hopeful. And in that scenario, definitely, all the PSU banks because if you see this large exposure there have always been consortium of about 15-18 banks or maybe 12-18 banks and majority of them have been in the public sector maybe some private sector banks like Axis Bank and ICICI Bank will also stand to gain.
So, I am keeping a positive stance that yes, maybe all PSU banks and more specially the larger ones which in fact, I have said earlier in the last week also that maybe the larger ones like SBI, Punjab National Bank (PNB), Bank of Baroda, Bank of India, Canara Bank because rest all are comes in the mid-sized banks.
So I am keeping a positive stance on this large-sized PSU Bank, plus the private sector banks like ICICI Bank and Axis Bank, they should also look to gain from this expeditious recovery or maybe the settlement of the stressed loan which government has now taken up very seriously.
Anuj: Any midcap idea that you are working with right now for our viewers that you can tell them anything that may have corrected or that looks good even at current price?
A: One stock comes to my mind that has not corrected. In fact, it has risen maybe by about 8-10 percent in this last 3-4 days. One is CG Power and the business to business (B2B) automation deal, the company has already informed to the exchanges that the deal has been sealed and signed on March 6. And now, it is from the informed sources, it has been gathered that the consideration of about Rs 850 crore will be received in this next or in this financial year onward before March 31.
Thought the stock has risen, in fact, we have been giving continuously a buy call for the last couple of months in anticipation of this news flow. But if that amount comes in, the stock can still go up maybe by about 6-8 percent in this financial year, that means in the next one week because financial year is expiring on Friday. So, one needs to keep an eye on that.
Second is on Jayant Agro. Renewed buying has come in that stock because of the hopes of the bumper Q4 numbers to be seen from the company. The Company in fact has already shown more than 100 percent growth in nine months of FY17 and every quarter, Q1, Q21, Q3 has been continuously showing an improvement. But Q4 is seen to be the best amongst all these three quarterly numbers which the company has already posted with outlook positive continuously remaining for FY18 or so. So, these are the two midcap ideas which comes to our minds as of now.
Reema: Yes BankYes Bank has moved up after the big rally that it had put in yesterday. So now firmly above that Rs 1,500 mark and it has held that level through the trading session. What would you recommend on Yes Bank today?
A: This QIP, since it is over now maybe some kind of profit will be seen in the stock. Probably, maybe till expiry because of the technical reasons and all that, the stock may hold on, but I will not be surprised to see the stock again correcting back to a level of Rs 1,450. I am not seeing much weakness into the stock because some kind of market making has also seen having taken place in the stock ahead of the QIP issue. So, maybe till Thursday-Friday you may see the momentum or the positive bias remain continuing but again in the first week of April, I will not be surprised to see the share correcting. But I am not keeping much upside potential seen the stock from now, from the near-term point of view.