A month ago nobody was sure whether would survive or not but now promoters have indicated that they would bring in capital. The moratorium timeline has changed. Pricing power is coming back. What should one expect from the stock price of Bharti or Vodafone in the next 6 or 12 months?
Bharti is the biggest beneficiary of any of the reform measures or deferment and price hikes which are going to happen. So the story out there remains strong and the management focus is also good. So with the rights issue, the balance sheet will also become stronger. The Bharti story is clearer and obviously there will be volatility in the market but eventually over the next one year, the stock should be trending higher and from current levels, return expectation should be 15-20%.
For Vodafone Idea, the situation is very tough. I find it impossible to evaluate the company because of the sheer amount of debt they have. The overall enterprise value could move up but how much of that would translate into returns for equity shareholders has to be seen because the company surviving and generating returns for equity shareholders are two different things.
They can continue to linger on while losing high value consumers and not being able to make a profit and to that extent, what the shareholders will get is very tough to evaluate. The stock could go anywhere. I am not sure it could languish here. It could be down from this or it could be double of this in a year. Frankly it is very tough to evaluate that.
Does the commentary from Maruti challenge the reversal that Maruti and the likes of have seen from the lows in the last fortnight or so?
Both are different stories. Maruti moved up because there was some news flow that October production is going to be very strong. I am not sure where that came from but then the company seems to have clarified that nothing like that is happening and they missed the entire peak festival season for demand. That is not good.
So my guess is that given that valuations are not very expensive, we will see some correction and the stock will stabilise. It will be after maybe a few hundred bucks of fall. There would be further consolidation for Maruti. Tata Motors is more intriguing because the optimism out there is tough to understand. A large part of the profits of JLR come from overseas economies, especially China, which is a very important market for them. But the Chinese economy is slowing down substantially and with it China consumer demand.
Auto demand is actually down year on year. What investors are looking for in Tata Motors is very tough to evaluate for me. Right now I would think that there is downside in Tata Motors, given the negative surprises which will come in from JLR. So, domestic passenger vehicles might do well, CVs might stabilise. I do not think they will do as well also but JLR is a big challenge and eventually the stock price will reflect that. There is excessive optimism around Tata Motors which is not justified.
What about Aditya Birla Fashions? The stock is already at a 52-week high. What is aiding the optimism here?
It is a typical reopening trade. The stock did not move up at all with the rest of the midcap basket. There has been some catchup now. We are also looking to pick up some amount and the stock just zoomed up. It is a company where I am looking to buy on dips. The overall strategy is interesting and apparel demand should come back strongly over the next couple of years which is a big component of their total demand.
Reopening is more or less going to get entrenched going forward. It is a company that should be on the watch list and bought into at reasonable levels. Near Rs 200-220, it will be more interesting.