Mayuresh Joshi optimistic on Reliance's core & non-core biz

In an interview to CNBC-TV18, Mayuresh Joshi, Fund Manager at Angel Broking shared his readings and outlook on specific stocks and sectors.Below is the verbatim transcript of Mayuresh Joshi's interview to Latha Venkatesh & Sonia Shenoy. Sonia: A word on the telecom because that is the space of the moment. Idea Cellular is up and Bharti Airtel has just acquired Telenor's operations. Would you buy any of these stocks?

A: I continue to remain optimistic about Reliance within the pack with certainty happening in terms of telecom revenues coming through for the coming fiscal, the plans that they have announced, there is certainty in terms of the subscriber base retain to a large extent and add to that almost USD 40 billion of asset which were in capital work in progress, will be in the productive value chain over the next few quarters and include that along with its core businesses, which were getting on stream - the off gas cracker over the next few months, the petcoke gasification coming over the next two-three quarters and the polymer and polyester margin expected to get maintained, gross refinery margins (GRMs) expected to remain extremely robust because of the middle distillates portfolio. Therefore, on the core and on the telecom business there is certainty happening in terms of cash flows improving on the core part. However, cash flow probably stabilising by the first half of FY18 for the telecom business.

On Bharti and Idea part of the business, the subscriber market share and the revenue market share is something that you need to look at apart from the dynamics of the deal that they will probably go through. So at this point of time 24 percent SMS market share for Bharti and around 32 percent revenue market share (RMS) market share. Idea has got 18 percent RMS market share even if the Idea-Vodafone deal goes through, they become a substantial player with 35-36 percent subscriber market share and around 37-38 percent revenue market share but the core dynamics are not improving, the data revenues have declined significantly; For Bharti it has come down to 17.5 paise per megabyte, for Idea it is around 16 paise per megabyte and that is not getting compensated by the volumes we are seeing in data traffic. So largely the solace is that the consolidation is happening and there are expectations that there will be only three-four players being left within the fray and pricing power at some time will come back but a lot of cash flows will get expanded in this space.

Latha: Are you a buyer in either Reliance or in Bharti?

A: I will go with Reliance story on expectation of its core business performing exceedingly well and on the telecom part the revenue start trickling on the EBITDA front at least at a breakeven point from the first half of FY18. So Reliance is something that can be looked at from the core as well as the non-core businesses.