Once the Goods & Services Tax (GST) is implemented, there will be some hiccups in first three months. But it will be positive for many sectors like tile and leather products, said SP Tulsian of sptulsian.com.

However, he added that it will be difficult to ascertain how much of unorganised sector will get flown into the listed companies.

Below is the verbatim transcript of SP Tulsian’s interview to Anuj Singhal and Surabhi Upadhyay on CNBC-TV18.

Anuj: The space to focus on today has been the midcap private sector banks led by Karnataka Bank, that is up about 7.5 percent. Do you think it is a price to book valuation playing out here or anything else?

A: Apart from price to book, even if you take a P/E ratio also and the asset quality, I think everything is working in favour of Karnataka Bank. Post rights issue, the stock seems to have accumulated to a great extent by the strong hands in this last maybe two to three months. Rights issue I think has closed about three months back and since then it has been nicely accumulated by the strong hands. In fact on all parameters, I don’t think that one has any complaint on the Karnataka Bank.

Anuj: If GST is a reality from July 1, of course after that maybe we will start to see some numbers changing as well, would you look at any of the logistics, leather stocks, anything?

A: This introduction of GST which looks maybe 90 percent certain from July 1 will be a big game changer. Now it is a matter of taking a call that what proportion of each sector is controlled by the unorganised sector which all have to necessarily come into the organised channel because once you have the GST implementation, it will be a seamless tax pass through and nobody will be buying from the unorganised sector.

Maybe there will be hiccup for first three months, the things will continue for one quarter starting from July 1, but these things will really be seen quite positive for many of the sectors like tile or maybe the leather products or maybe the ply board kind of things because a lot of cash work and maybe one can add textile also in that category because if you see the pockets in Gujarat and Rajasthan, the way they have all been operating, they will all be seen huge beneficiary.

However, it is a difficult call that how much of that unorganised sector will get flown into each listed company. However, if you want to take an overall general call, it will be seen quite positive for these sectors where the presence of unorganised sector is prevailing on a very large scale.

Anuj: Is the Jaiprakash Associates trade now getting a bit stretched, from Rs 7 to Rs 16.5, it has really been relentless on way journey?

A: Definitely the things are looking stretched now. We have discussed on the stock couple of weeks back when I said that one private equity investor is seen to be interested in taking the residual block of the assets of the company.

However, If I need to take a call, then probably I will take a call on Jaypee Infratech because on a standalone basis if you take a call on all these three companies, Jaiprakash Associates which is more a consolidated or maybe the holding company play, or JP Power where already the assets have got monetised, Jaypee Infratech is the only space where you have that Yamuna Expressway of about 165 kilometers with some residual land parcels still existing in Aligarh, Agra, and maybe in the pocket of Greater Noida.

So, there may be some kind of interest that can get revived purely on the valuation basis. However, on JP Associates it has become risky now to intake a fresh call at the current level.

Anuj: What could be the story here in BHEL, it is just in the last 10 minutes we have seen this surge, but do you think that at Rs 163 it is a reasonable risk reward?

A: Generally I don’t advice chasing the momentum unless and until you the know the story and honestly if you really ask me, maybe I can guess that there could be some kind of induction of the strategic investor or maybe the divestment of the stake by the government on the lines of BEML could be the point but honestly apart from that I won’t be taking a call because generally what has seen in case of BHEL that whenever we have seen these kind of price rise coming in, they have not been able to sustain at those upper levels. So, I won’t be taking an investment call in the stock at the current level.

Anuj: The market is getting nervous that Grasim will infuse money into Idea Cellular. Would that be the right way to interpret what has happened today?

A: That is right, in fact market is fearing that because if you see the cash cow of the group has been Grasim because now their standalone business, VSF and caustic soda, both are doing quite well. However, the management has denied maybe about a week back or about a fortnight back that there is no proposal of this kind of things that Grasim will be infusing any kind of money. However, if that happens, because what will happen in Idea and Vodafone, you will be requiring a significant amount of investment which could run in the form of USD 1 billion plus being the share of Aditya Birla Group, AB Birla Group company.

So, if that kind of money is required to be infused by Grasim, Grasim will become again a debt ridden company though they are now seen as a holding company of Ultratech with 60 percent and as I said that VSF and caustic soda business are doing well, but I think that if that happens, which market is fearing, then that will be really very sad for Grasim shareholders.

Surabhi: Just looking at what is happening to an Reliance Communication today or a Tata Tele today, we have been talking about Idea Cellular as well, would you pick anything afresh? Bharti Airtel is continuing to run up despite what Sunil Mittal said from Barcelona, is there something that one can still buy within telecom?

A: In fact I am scared of all the telecom stocks and this is what I have been saying for last three months. If you see now situation, first take on the healthier one, like Bharti Airtel, they are standing in front of Reliance Jio by offering all type of free services or maybe concessional things to the users. However, that will be seen quite negative for the shareholder of the company because take it from me that the margins will definitely be seen under pressure.

Now, come on Idea-Vodafone, because people have now started taking a combined view on both of them, so, Idea we have seen the kind of deterioration in the financial performance; we don’t have the Vodafone financials in front of us to analyse the things, even their situation is looking quite bad.

Now, take the situation of third one that is Tata Tele. Market is unable to take a call on the huge debt which is sitting on the books of Tata Tele that what will be the broad contours even if they think of joining the hands with Reliance Communication and Aircel and again Aircel Supreme Court proceedings going on the merger with Aircel is seen in limbo.

So, I don’t think that this weak combination of Reliance Communication, Aircel, and Tata Tele will really be working from here on though we have seen a positive view on the Tata Tele frozen 20 percent upper circuit, Reliance Communication is also seen ruling in a positive bias, but I am as such taking a cautious view on all the telecom stocks going forward.

Surabhi: BPCL in particular down almost 5.5-6 percent, HPCL is also bearing the brunt today. What would you advice people to do now, there would be people as Anuj was mentioning sitting on a huge amount of profit as well looking at the last couple of months, is it best to get out before there is some clarity on what the government is intending to do, what do you do with these stocks?

A: Generally what happens in both these stocks -- I agree that the trigger for this weakness is the expectation of ONGC taking over HPCL and non-clarity on that account. However, what I generally see in case of HPCL and BPCL that they correct for some reason or the other, if you plot the chart for maybe last one year, you will always find this intermediate correction haven taken place.

So, I think that now BPCL and HPCL seem to have bottomed out. In fact the long term and the quality investors, those who have invested into the stocks are not worried with these kind of news flows and I don’t think that government will be able to come out with this any kind of proposal of acquiring HPCL by ONGC in the near term.

So, my point is that those who are brave investors can look to enter into and those who have been holding it, there is no point in exiting now even as a part of profit booking. Maybe wait for both the shares to bounce back and you can expect a rally of about 4-5 percent in this month itself. Both the stocks seem to have bottomed out in spite of considering this news flow of ONGC acquiring HPCL.

Surabhi: On Bosch or generally on auto is there something that you would advice, looking at afresh right now?

A: I am in fact keeping the positive stance on all the auto ancillary stocks because if you see the situation, in fact tomorrow will be the crucial day to see the monthly sales numbers of all the companies, but this BS IV migration, will be playing a very big role. We have been seeing the kind of fight going on between Bajaj Auto and the other auto manufactures which wants the cut-off date to be the RTO registration date as April 1.

Once that gets sorted out because you may see some kind of dip coming in, in the month of March as well, because of this BS IV migration because companies will not be producing the BS III vehicles maybe till March 5 or March 10. However, thereafter and if you take a call on Bosch, they will be seen the larger beneficiary. In fact now the share at the level at least they have been ruling in are making it a good buy as well. So, keeping positive stance on all the auto ancillary stocks and positive on Bosch as well.

Anuj: What are your thoughts on Bajaj Finserv and the way it is surging right now?

A: You are right, you have said that the market cap of Bajaj Finserv has moved to about Rs 63,000 crore now against Bajaj Finance or Rs 61,000 crore. However, I think that maybe some kind of development must be happening on the alliance front in respect to the stake sale or stake buy. However, what I feel now that maybe beyond now from here on, Bajaj Finserv will get the valuation only from Bajaj Finance because that is the subsidiary of Bajaj Finserv.

I don’t think that insurance valuations will be seen creeping in further from here on, maybe the momentum has made the stock to move coupled with the news which maybe insiders maybe privy to that information. However, I will be playing on Bajaj Finance from here on going forward even to have the valuation seen getting increased in Bajaj Finserv as well.