On Vedanta delisting
I do not belong to the camp that says that the delisting price will be somewhere around Rs 175-190. It is very clear even from the current book that has been built that the median price at which the shares have been tendered is around Rs 138 which was the price until yesterday. Today the stock collapsed and going forward we see Vedanta continuing to receive a promoter-led discount to its share price. A lot of people say that it is trading below book value. It is trading below the book value because the promoter-led discount is being offered on the stock.
So, one, the median price at which the bids have been coming in are at Rs 138 which was the price virtually as of yesterday. Two, it is unlikely that the management will accept this price because at Rs 138, they have to shell out close to Rs 2,0000 crore. In terms of the floor price being Rs 87, the amount required is far too less, just about Rs 12000-11000 odd crore. From what we are seeing right now, between the stock price in the market versus the bids that are being received, it appears that the delisting may fail.
Advice for those who bought Vedanta
Those who are holding the shares for long term please understand that they would be sitting under loss right now as is shown by the current market price because the stock has been coming down for a couple of years. It has not given any return to the long-term investors. There is no point holding the stock furthermore or for a longer duration because there are other better stocks available even within the same space.
So long-term investors, irrespective of whether the delisting existed or the offer came in or otherwise, it is time to switch over to a better stock. As far as the investors who have bought in anticipation of a quick gain because they assumed that the delisting or the exit price will be much higher, will probably not get that price simply because the offer may fail. I would guess that the general interest levels in this stock will be very limited and therefore it will be natural for the stock to fall.
On Bajaj Finance & other NBFCs
I do not want to look at per se Bajaj Finance let me just touch upon the fact that the NBFC sector as a whole is going through stress unlike the banking sector which is well supported through RBI’s forbearance and some degree of government support coming in. NBFCs have to swim against the tide and come up with better numbers and in the current pandemic situation, the tide is against them. In such a situation, I would reckon that most of the NBFCs will have to do a lot of things first but raise enough capital to see if there is enough liquidity and improve the collection efficiencies. Be very careful in terms of their lending activities at least for the next six to seven months by which time the Covid fury will lessen and we will be in a recovery mode. These six months will be difficult times for most of the NBFCs. There are a few good companies — Bajaj Finance being the largest one of them carries a natural advantage of size. It is better to stick to size when it comes to NBFCs but otherwise as a sector they will be in for difficult times as we go ahead.
On diagnostic space and Thyrocare specifically
In March, when the Covid was gathering pace, we along with the other market participants were advocating that these medical diagnostic companies would really do well. Thyrocare is one of them and Metropolis is another one. We were quite gung-ho about it and we had picked up Metropolis as one of our quality stock picks that we had identified way back in March.
It has done well so far after the dip in between but going forward, the uptick in business is not a surprise for many of these companies. As a result of the lockdown, a lot of people did not venture out to get various kinds of regular tests done. Now they are in a rush to get tested. A lot of people have lifestyle diseases which require frequent testing. Therefore, I reckon that these companies are seeing a rush in pent-up demand. I do not see that to be sustainable going forward as it is. Given the stock price runup it is really time to get out of some of these stocks as the valuations are too high. They are building in too high a growth for succeeding quarters and I do not see that happening in terms of growth.