Read: SP Tulsian's views on BHEL, APTEL order, Maruti & more

SP Tulsian of sptulsian.com in an interview to CNBC-TV18 shared his views on his expectations of a revival in capital good sectors and why he is upbeat on BHEL. He also spoke on the positives from the Appellate Tribunal For Electricity (APTEL) order.He also spoke on his outlook for Maruti and Equitas Holdings.Below is the transcript of SP Tulsian’s interview with CNBC-TV18's Sonia Shenoy and Anuj Singhal.Sonia: One of the stocks of the day clearly is BHEL. We didn't expect to see such a big surge in the order inflow for the quarter at about Rs 15,000 crore. Do you think this bonhomie on this stock is short-lived or do you think the worst is over for the company?A: In fact this stock was covered by me about 10 days back and when I said that you are probably going to see the highest order execution and the highest order inflow in Q4 and that is what has been seen today the 43 percent growth on a year-on-year (Y-o-Y) basis with a final order book of Rs 1,10,000 crore. Now if you really go by the targets having set by the government of India for BHEL 94 percent of the 12th five year plan has already been achieved by the company and one year still has to go, number one.Number two, if you see they have a market share of 74 percent. Number three, if you see the execution nobody had really expected this kind of order inflow growth of 43 percent and the order execution because we have not yet seen actually this problem of feedstock or maybe the mining problems have all got resolved just in last six months. So, maybe once you have this full year one can imagine that what kind of performance which we can be seeing from the company. And if you see the order inflow of Rs 1,10,000 crore probably this would have been closure to about Rs 1,18,000 to 1,20,000 crore but the completion of the projects in the last quarter i.e. Q4 amounts to closure to about Rs 17,000 crore. So, that has seen the order book lower at Rs 1,10,000 crore but actually the market was very much worried that probably BHEL may see order book slipping below Rs 1,00,000 crore which has not happened. So, on all parameters market share, execution achieving the five year plan target completion of projects in Q4 and on top of it if the company has posted the profit before tax (PBT) in Q4 of about Rs 396 crore, that is seen quite positive. So, overall one could draw a conclusion that yes, this is beginning for BHEL and I am keeping very positive view. I won't be surprised to see the share moving to about Rs 150 next three to four months but we should take this positive bias getting spilled over on the other capital goods stocks also which I am keeping a positive buy on. So, yes overall this is an indication of revival of capital goods sector going forward in FY17.Sonia: I wanted you to come in on this Appellate Tribunal For Electricity (APTEL) order and the eventual impact that it would have on names like Tata Power and Adani Power because now we have the final order which has come out and APTEL has directed the Central Electricity Regulatory Commission (CERC) to assess the extent of the impact of the force majeure of both Adani Power and Tata Power and directed the CERC to give relief under the respective PPAs but they have also observed that the CERC was not right in granting the compensatory tariff. When we spoke to Tata Power they said that it is a big win for the company but how did you read into the order?A: When the APTEL order came, market went too much into negative expecting CERC order is going to be upheld by APTEL in toto which was wrong expectation, number one.Number two, if you really recall when the CERC order came actually that was surprise to me of giving the compensatory tariff and Force Majeure clauses are always existing in any contract and if you go by the force majeure still I am calculating that if you see the losses or maybe the under recovery of the demand of the coal prices increase based on the import because the force majeure applies only for the power generation plant having set up on the imported coal which applies for Tata Power for their Mundra projects and as well as for Adani Power. If you see the under-recoveries anywhere to about Rs 0.20-0.25 per unit and still I am hopeful that force majeure when it will get calculated by CERC as directed by APTEL it will work out to those levels but I don't think there is any reason for getting upset or getting disappointed on this order.Secondly, the compensatory tariff as such which came by the lower order or maybe by CERC can be taken as shortly because if you go by the higher authority maybe even today even the PPAs or maybe the state government can always prefer an appeal to the Supreme Court but having granted any increase which I am expecting it to be above Rs 0.20 per unit for both Adani Power taking a ballpark maybe Rs 0.02-0.03 plus or minus I don't think that kind of increase is going to get denied by the apex court also if the state government or the discom move or prefer to move in the Supreme Court. So, this is an excellent order having come from the APTEL and now this has put all uncertainty. I am not trying to say that maybe sometimes the over exuberance or over demand or over emphasis having played by the legal team or maybe by the company at the CERC level have made them one at those levels but that was unwarranted. Compensatory tariff was not warranted or having any kind of substance at that point of time. This is what whatever little legal implications I understand. So, this is a very good order and this should put all uncertainty to an end. I don't see the litigations extending from here on. If you want to prefer an appeal one can always to the Supreme Court but I don't think any of the company, neither the power generation company in this case that is Adani Power, Tata Power or maybe the state government or maybe the discoms will prefer to move an appeal against this order to Supreme Court. So, yes, this is a very good order in the interest of the company because Force Majeure means the situation is beyond your control and in all the long term contracts you have this Force majeure clause which covers all these kind of uncertainty in natural calamity which has what has exactly happened. These companies cannot expect any kind of gain to be made out of Force Majeure clauses, they can only ask for the losses having incurred by having import of coal at a higher rate. So, this is an excellent order in the interest of all and this should bury the legal litigations here only at this level for all the companies.Anuj: Your take on Tata Steel. I know your favourite has been JSW Steel but do you get a sense that maybe some more upside is left in Tata Steel based on the news that we have?A: It is in interest of the company that they should sell to one buyer to cut short the process because if they bifurcate and sell it to a couple of buyers or maybe three buyers then the process can get spread over 6-12 months and again the value destruction and the interest burden both will be seen, number one.Number two, I have always been saying that the monetisation or divestment is not the only solution. You must see what price you are fetching because we have been repeatedly saying. In fact management has also said that this is already the stressed assets on which the impairment has happened but that is just the management point of view to console themselves. From a shareholder point of view, you just can't say that I have acquired it for USD 13.2 billion, I have written off the impairment losses off of USD 3.2 billion has already been booked. So, I am left with USD 10 billion. Suppose take for instance I am just going by a ballpark figure or maybe a rough calculation it is difficult to take that call but if it fetches less than USD 6 billion I will really be unhappy and honestly if you really ask me I don't think USD 6 billion can really get realised because I am taking a ballpark 17 million tonne capacity 10 million in UK and 7 million in Netherland. We are not talking of 7 million tonne of Netherland as of now. So, yes if you confine take a ballpark figure of maybe at about Rs 4,000 per tonne also it gives you a valuation of about Rs 40,000 crore. That translates into maybe USD 6 billion. Can they fetch USD 6 billion, if it happens then it will seen positive by the market. But anything below that will keep on seeing reflection on share price and as I said I have my doubts on the realisation of the UK assets fetching USD 6 billion. So, in fact if you ask me the over exuberance has made the stock to go in an overbought position and on a fundamental point of view because there is a dramatic shift in the fortunes of the - or maybe the working of steel makers in India because of the minimum import price (MIP) but if you have your global presence you are not stood to gain anything out of that because you have to compete with maybe South East Asia, maybe Japan or maybe with China where the situation is really looking grim. So, I won't be taking a positive call on the companies those who have a global presence and for the simple reason because JSW Steel is purely an Indian play they don't have any presence and they have been continuously increasing the production also month on month (M-o-M) with an eventual capacity of maybe 14-15 million tonne. Therefore, in the given situation you are only left with one choice of JSW Steel and if you really want to take a call on Tata Steel I have been repeatedly saying the consideration is very important, I won't go by the argument of the management that here the realisable value is not important because this is already an impaired asset, that is wrong. The impairment has not happened to the extent of 100 percent. That has only happened to the extent of 25 percent, still you have to salvage a valuation of 75 percent of what you have paid. So, I will just be looking for the realisation of the UK assets, at what it gets fetched to, let's wait for that results to come, set up benchmark or set up ballpark figure of USD 6 billion and take view accordingly if it is USD 4.5 billion very negative, USD 5 billion less negative, USD 5.5 billion neutral, USD 6 billion excellent.Anuj: What about you? Maruti has been one of your favourite stocks at lower levels. At Rs 3,476, is the risk reward again turning favourable?A: If you really take a negative call on the stock for the near-term, I do not think there is anything except for yen because yen has been ruling at 112-113 per dollar for the last about a couple of months, if you really take a long-term chart. But now, it has corrected sub-110 per dollar. So, yes, that should, I will not be taking 119 as a fall from 120-122. In fact it has corrected from 112 to 113 to 109 per dollar in this last one week which is in fact a broad range of maybe about five basis points. So, yes, if you want to take a negative call, yes, this is a negative. Except for this, I do not think there is any kind of negative.I am not too worried on the inventory buildup, in fact when I see the March sales numbers; they have all been quite good. Maybe on the April also things are looking quite positive. So, yes, if you are an investor, I will strongly recommend if you see the trading pattern of the stocks, when it corrects by a couple of percentage points for 2-4 days, it suddenly goes up also by about 5 percent in one day without currency showing any kind of weakness. I am referring in reference to yen. Yes, there are royalty payments. There are 15 percent of the raw material imported components still existing or the company. In spite of factoring all these things, the price at which it is now ruling gives a good buying opportunity for the investors.And mind it, if they get 5 percent appreciation from the current levels, they should develop the habit of booking the profits also in these frontline stocks if they get within a month’s time.Sonia: You have been recommending the sugar space for a while and I am sure a lot of traders have made quite a bit of money in this space, but do you think the run I done or is there more to go?A: Practically, we are discussing on this sector everyday and my reply is the same that if you are not having a view till December, the best is yet to come. Allow this FY16 to go and what will happen thereafter, that whatever inventory, because let me just give you a yardstick that whatever sugar gets produced by the UP based sugar mills, 75 percent of that remains as inventory with them as on March 31. Now, all this inventory will be having a costing of Rs 30 per kg. And that will get realised, maybe a price of Rs 36-37 for the next 7-8 months. So, you will be having a cool gain of Rs 6-7 per kg on sugar which will get reflected into the FY17 numbers. So, if you do not have that kind of conviction with a view till having a view till December, 2016 I do not think that one can really make money.Number two, secondly, whenever you see these type of price correction, use this as a buying opportunity with a view of about 4-6 months, because best is yet to come. The sweetness has not gone away from the sugar.Anuj: I was reading on your website. You had recommended a subscript on Equitas issue. A word on this one. It has seen decent subscriptions now?A: It is a good company because if you really see now the price to book is closer to about 2-2.1 and post issue the price to book will be about 1.8-1.83 and in fact if you see their business mix microfinance they have about 53 percent where the gross non-performing assets (NPA) is closer to maybe about 15 bps, the best as comparable to any other microfinance company and maybe you only have one company available in the listed space available in the listed space in microfinance that is SKS Micro. So you will be having a choice also. Yes, they are slightly struggling maybe in terms of commercial vehicle finance where Shriram Transport is having an edge but maybe in other areas like SME finances because that is a cross rollover because they don't have to put much efforts in giving loans to the SME because that compliments very well with the microfinance business.So, overall if you see again the foreign shareholding will reduce because the small banking license is a condition that foreign holding should come down to 49 percent which is falling to 35 percent. So, I like the growth that the excellent professional management company, the kind of growth they have projected and they have posted and if you just go on the parameters of price to book this seem to be quite cheap at maybe 1.8 or maybe 1.83 post this issue because even presuming that the book will get discovered at Rs 110 doesn't make any different because the band is very narrow at Rs 109-110 and I expect that this band will get discovered at Rs 110. So, enlarged equity of Rs 365 crore present book of Rs 5,500 crore AUM of which the 53 percent is in microfinance. So, overall I am quite impressed with this company and this will be a decent investment to have in your portfolio just like capital first and the best part is that they are now moving out of Tamil Nadu also, they have spread their wings in Karnataka, Maharashtra though they are planning to go into other states also but initially they have taken a shift in Karnataka and Maharashtra. So, overall positive for the stock.