Look at Kwality: Prakash Diwan

Prakash Diwan of Altamount Capital Management told CNBC-TV18, "We have got an initial public offering (IPO), which is lined up from a well-known company called Prabhat Dairy. We realised that there are a lot of hidden stories which deserve some attention. Kwality is one of the finest dairies that you have in the northern belt. It has a presence through five chilling centres in the north which is Uttar Pradesh, Haryana and Rajasthan and in fact it is a very institutional B2B kind of a play, it supplies to Britannia Industries, ITC, to a lot of institutions, spiritual organisations like the SGPC, which is the Amritsar Shiromani Gurdwara Prabandhak Committee. All the milk that gets used in the Golden temple also comes from there and a lot of things in the south like the Tirumala Tirupati Devasthanams (TTD)."

"One of the reasons they have been in that space very successfully is the quality that they have maintained. In the last two years, they have started expanding to retail outlets creating a brand for themselves, people get mixed up with the Kwality Walls ice cream brand which is not what this is. So there they have something called Dairy Best as their own brand which they have come up with. They have innovated on certain products like ghee where they have made something called LivLite which is a lower cholesterol version of ghee to be proven as the best in the world. So you have a lot of product innovation that has gone into this company," he said.

"If you look at the financials, they are very impressive, they might see very average but if you see the kind of earnings that they have already clocked last year, it was about more than 7, full year EPS. We expect that this year it could probably be in the range of around 8 and FY16 could be around 10, so from that perspective, the stock is under 4 P/E whereas Prabhat Dairy if you see the draft red herring prospectus (DRHP), they are expecting much more of a premium. So this industry deserves much better premiums and I think Kwality is available at a mouth-wateringly lower P/E multiple."

He further added, "From a P/E multiple perspective it is quite reasonably priced. As I said it is under four times FY16 which is not much so even if you give it a multiple of about 6, it should be in the range of about Rs 55 from here."