Tulsian's take on cement cos, Claris Life & Titagarh Wagons

In an interview to CNBC-TV18 SP Tulsian of sptulsian.com shares his outlook on Claris Lifesciences stock after the company Thursday announced sale of its injectibles business. He also discussed his take on cement companies. He believes while near-term it may not be positive with a washout third quarter due to demonetisation impact, some stocks in the sector do look positive in the longer run.On another stock, Titagarh Wagons, Tulsian says there has already been good run-up so he would prefer to avoid buying into it in the immediate term.Sonia: The volatile stock of the day award goes to Claris Lifesciences it started off with a 20 percent gain post the sale of its injectable business and lost all of that through the day what did you make of the deal and how do you approach it now?A: The morning 20 percent upper circuit was just a frenzy because people have just gone wrong in the calculation because let me quickly recap the whole deal. The deal has happened for I am everything converting into the Indian rupee for about Rs 4,200 crore. If you knock off the data of that injectable unit of about Rs 600 crore you are left with Rs 3,600 crore. The cost to that company that is the parent company Claris Lifesciences has Rs 500 crore in the book, so the company will be making a gain of about Rs 3,100 crore because it is a slump sale. On that you take 22 percent as the long-term capital gain if I presume that the investments will get sold. So, you will be having a text liability of Rs 700 crore. Rs 700 crore and Rs 600 crore, Rs 1,300 crore minus Rs 4,200 crore you are left with sub Rs 3,000 crore or maybe Rs 2,800-2,900 crore. Now people have started factoring in that there will be huge dividend, they have not factored the long-term capital gain amount and thought that this share buyback will happen maybe at a level of Rs 480-485 thanks to few research report which has been released in hurriedly without applying all these calculations. That has probably made the stock to correct number one. Number two, if you see the past instances I don’t want to name those companies because I may not be able to recollect all those companies at least in this last four or five years where such stake sale has happened to the extent of 70-80 percent, I have not seen any Indian promoter having distributed the entire amount or maybe major chunk of that amount even in the form of either share buyback or may be in the form of the dividend distribution. So, yes we love to posses that cash and promoters start thinking that the entire cash belongs to me, may be you have that heat and power if you retain the cash with you as a promoter in the books of the company, so probably these two factors have made the stock to correct and I think the current price of Rs 375-380 makes it a realistic this one at the current price, the market cap is closer to about Rs 2,300-2,400 crore. As I said because if you see 80 percent of the business comes from injectable they have 20 percent stake in one overseas subsidiary which can fetch them about Rs 100-120 crore and may be some cash left in the books of the company. So, if you take the entire value of the company comes at around maybe Rs 3,200-3,300 crore and market is giving a market cap of closure to about Rs 2,200-2,300 crore which is fair enough. You just can’t give the last valuation to the last rupee which gets reflected in to the share price.Sonia: You have tracked some of the smaller cement companies very closely what is the sense you are getting about how this quarter could shape up for them and whether you should stay with them or avoid them?A: If your view is only for quarter three and waiting for the quarter three numbers definitely things are dull nobody is doubting on that. We know that there has been lower off take and everything but the kind of price erosion which we have seen in the cement prices I do not think that it justifies this kind of erosion which we have seen in this last maybe one week or so. So, maybe technically the all these stocks which are specially in the future and option they get oversold you will be seeing a bounce back also coming in. I am keeping a positive stance on the cement stocks going forward maybe because once you see the change in stances or maybe with the expiry of December series those all will come on clean slate when the renewed buying will come in. So, maybe for the next couple of weeks once we see the expiry happening because this is always the case whenever you see the bearish pattern getting established on certain sectors or certain stocks that comes to an end with the expiry of series so that will happen exactly after a couple of weeks. So, maybe I am not keeping a near-term positive on the stock, but keeping my positive stances on all the cement stocks going forward and nobody question that quarter three will be a wash out that is a known fact and that is why we are seeing the erosion or the shares available now at a valuation of lower by about 30-35 percent from its peak. Latha: You have a good word on Titagarh Wagons?A: The stock has risen quite a lot after the quarterly numbers which were definitely good and if you see in this last week it has risen by about maybe 10 percent plus. I won’t be giving a buy call now definitely the wagon segment has shown a good numbers. The defence foray of companies are all seen good but I don’t think that this is a right time to buy now that the stock having run up by about 8-10 percent.