Going forward, Sun Pharmas words of reassurance can be counted but the details have to be seen, Deven Choksey, MD, KR Choksey Investment Managers, tells ET Now.
Edited excerpts:
Would you buy Sun Pharma or do you think the corporate governance concerns are going to create problems? All of us thought Sun Pharma is like this holy grail, their management could not do anything wrong. But in the conference call yesterday they have admitted that there were some interparty loans and I do not think the explanation was very convincing.
The tone was quite okay as far as the explanation part is concerned in a concall and they are admitting to the fact that the loan was given but they want to reconsider part of it. I think it gives you reassurance. However, I am not trying to suggest what is the nature of the loan given and how exactly it has benefited the company. We will have to wait and see how much more detail comes out because the management also ended up saying that they would like to bring more detail at some point of time and probably put that before the investors.
Admittedly they have said that they do value the concerns of the investors and that is where I think they would correct some of the past practices. These are the words of reassurance. Going forward, only these words of reassurance can be counted. Even if there has been some kind of mistake in the past, the words of reassurance are what one would like to look at.
As to whether one would buy the company, answer should be yes. Are things getting better for the company? Answer should be yes. These points are turning out to be relatively more reassuring and more positive in nature.
One would like to see the actions taking place going forward and consider buying the stock. As of now, the overhang continues. Till the time a detailed clarification comes out including the Sebi related clarifications, the stock should be trading in a range.
What is leading to this bounce in the entire power space?
The Gujarat government has ordered revision of the power tariff for all the ultra mega power plants of Adani, Essar and Tatas. With this, the viability of the entire power plant as well as transmission and distribution of power would probably be seen on the higher side. REC, PFC are the largest lenders to this particular sector and any recovery of fundamental nature would mean that the recovery of their assets would also be more predictable going forward.
As the asset value starts rising, it would lead to a better possibility of monetising those assets. Companies like REC and PFC have NPAs in both the generation as well as T&D segments. This has been a structural move. The direction is sounding very positive. The government of Gujarat definitely is considering better tariff for the producers of the power.
It will turn into a better situation going forward and that is where you are seeing the buying taking place. Would this result in higher earnings in next 1-2 quarters? The answer is no, but the prospects are certainly improving. With the asset prices going up, chances of monetising those assets would remain relatively on the higher side.
A mega telecom JV between Airtel and Vodafone for a common fibre network may be in the works. Would this push the telecom stocks up?
The infrastructure business in the telecommunication has to be seen separately because it assumes a very separate IIR for the investors. If I recall correctly, at one point of time, while Jio was laying down their fibre to tower infrastructure, there was a proposal that BSNL along with other telecos come together and use the complete infrastructure to create the entire ecosystem for every operator to travel on to that infrastructure.
Unfortunately, that proposal never materialised and as a result, Jio had to go alone and create their own infrastructure. They created the tower to fibre infrastructure along with the mobile spectrum infrastructure.
I would think that it will make more sense for Vodafone and Airtel to come together and create a separate vehicle for building the infrastructure for running their telecommunication services because that is the way forward.
If you are looking at the data as a growth driver for the business, you would require this kind of a strong fibre backbone which is connected to tower.. I would wish that to happen because in that case, probably the competition would be very fair with Jio. Both the companies co-exist and then consumers will ultimately benefit.
So yes that is a welcome move. In the absence of any commercials or what kind of investment they are putting across, I am unable to make any comment but my take is that there would be sufficient amount of investors coming forward to put money into tower to fibre infrastructure, which these two companies are talking about investing into.
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