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Talking Stock: Hold CDSL, CIL; add Karur Vysya Bank

By G Chokkalingam
Founder & CIO, Equinomics Research & Advisory

I have 70,000 shares of TTML bought at an average price of Rs 5.50. What is your outlook on this company and what is the maximum price that can I getRs I can hold for long term. – TAPAN MUKERJEA

Unfortunately, the chances of losing the entire invested amount is very high as Tata Teleservices has a debt of Rs 11,938 crore, which is nearly 7 times its total assets. It is most unlikely that any possible resolution will leave any significant stake for the shareholders after meeting the debt obligations. As interest cost is more than its current revenues, it is very difficult to revive the company in my view.

I purchased IRB at Rs 180, Karur Vysya Bank at Rs 134 and CDSL at Rs 264. Please advise whether I should sell or hold them. — G SUNIL

Having lost over 60% of your capital in IRB Infra, you may hold the stock for the longterm. Its net debt of around Rs 15,000 crore gives some fear in the slowing economy. However, recent proposal of GIC infusing over Rs 4,000 crore gives some hope on the recovery of this stock in the longterm. You may add some quantity of Karur Vysya Bank to reduce your average cost as this stock trades at around just one time current year’s adjusted book value. Historically, Karur Vysya traded around 1.5 to 2 times its adjusted book value and hence, conservatively, you may keep Rs 100 as the target price for the next 12 to 18 months. You may continue to hold CDSL for one or two more years with a target price of around Rs 280 as it is engaged in almost perennially growing business and hence, around 19 PE on current year’s expected earning is quite reasonable.

I am holding 500 Coal India shares that were bought at Rs 275. Please suggest whether I should hold or sell at present rate? —MUKUND RAO

Hold Coal India with a target price of around Rs 240. It is possible for the stock price to spike in the short term itself as the fiscal stress of the central government may possibly induce this PSU, which is sitting on cash pile of close to Rs 50 per share, to declare attractive special dividend. Recent expansion of mines and also transport infrastructure would increase both its revenues and profits from FY2021 onwards.

I have 10,000 shares of Tata Power, which I had bought at Rs 60 in 2013. Now it’s at Rs 56. Please advise me what to do. – SRICHAND TOLANI

You may hold it for the long term; although, in the short term, it is unlikely to reward significantly. Expansion of solar energy capacities and foray into charging stations for electric mobility would reward the investors in the long term.

I had purchased 30 shares of Aurobindo Pharma at Rs 674 apiece, 40 of Sun Pharma at Rs 574 and 30 Motherson Sumi shares at Rs 200. Should I hold or sell? — SUHAS MEHTA

You may hold Aurobindo Pharma with a target price of around Rs 530 for one year and then monitor whether the company is able to fulfil the requirements of US FDA for its major plant. In case it comes out successfully on these regulatory hurdles over the next one year, then you may hold it till you recover your cost. You may hold Sun Pharma with a target price of around Rs 470, which is a fair value based on 22 times expected FY2021 earnings. Motherson Sumi trades around 23 PE on one year forward earnings, which is a fair valuation in my view considering the possible further slowdown in the global automotive sector. Hence, you may sell the stock if it moves beyond 5% from the current level.

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Source: Economic Times