SP Tulsian's views on Zee Learn & Jyothy Labs

In an interview to CNBC-TV18, SP Tulsian of sptulsian.com spoke about Zee Learn, Tree House and Jyothy Labs.Below is the verbatim transcript of SP Tulsian's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: We have two-three stocks to ask for your advice on. First one is Zee Learn. Now Zee Learn is finding that valuation too tall for Tree House especially with the cash going away and the promoters pledging their entire stake. How do you approach this entire problem, how should Zee Learn investor and a Tree House investor behave?A: This need a thorough investigation on part of both the companies. Let me give you a background. Tree House was always a price rigged stock and when it was ruling at Rs 350-400, many of the fundamental analysts were taking a bullish call. That is number one.Secondly, Zee Learn has announced a board meeting hurriedly and promoters have sold their stake with a name not disclosed and one morning -- I recall if I am not mistaken -- premarket opening they announced the merger and have gone ahead with the swap ratio of 5.3 shares for one share of Tree House. That means Zee Learn will be giving 5.3 shares for one share held in Tree House.At that time, the Tree House share was ruling at closer to Rs 150-160 or maybe at Rs 180. Does it mean that swap ratio has only been fixed on the basis of the share price? Have they not carried out any kind of due diligence? Does it mean that the business model, which was presented by Tree House that they have pre-school of about 650 centres are all fake and vague?Now if Zee Learn says that we need to revisit. Suppose tomorrow price of Tree House falls to Rs 10 -- today they fix the swap ratio on the basis of market price -- again after two months they will come and will revise the swap ratio. I don’t think these kind of things are fitting on the corporate governance for both companies. This is a very fitting model for Zee Learn also because they are into the school, K+2 kind of thing while the Tree House is in the preschool. So combined entity can have the presence of about more than 2,000 outlets in India.I would say that a lot of beyond the books have happened. If the deal must not have gone through or complied with, the things are falling now because if you see maybe for the last three months, the arbitrage play was 50 percent or more than that. That means inside circles has all this information and now maybe some kind of a deal must have asked for because creating the entire play, sudden reduction of 10 percent by the Bhatias, promoters of Tree House -- a lot of things are required to be investigated by Securities Exchange Board of India (SEBI) on part of both Zee Learn and Tree House.It should not be just taken as a religion of the old offer. It is a case of cheating with the shareholders and a fit case of investigation of playing with the corporate governance by both the companies.Latha: The more important stock for the moment is Jyothy Labs. There was always a buzz that once the window opened for Henkel, they would exercise the options since this is such an attractive market. The window opens in March 2016 and they can buy any time up until March 2017. What is your sense, is Jyothy Labs fundamentally something people should buy in anticipation that a stronger hand will come in in anticipation that open offer will come? How should an investor approach Jyothy Labs?A: I won't be taking a call on fundamental basis, I don’t see any upside. But yes, if the strong hand comes in maybe on the corporate announcement or the corporate development, that is a different story but even for that, the time period is quite long.If these people take such a long call, I don’t think that people have those kind of patience or maybe these kind of things keeps coming in but purely on fundamentals, I won't be taking a buy call on Jyothy Labs.