What should you do now in stocks like GVK Power, Bhushan Steel and Lanco Infratech?


After a great rally in PSU banks this week, few of them have now faced some selling pressure which pulled them down from their highs. Maybe, stocks may consolidate at current levels to show again a fresh buying interest. But, few stocks like PNB, Union Bank really looks attractive even at present levels to buy for short-term. But one who is going to make a fresh buy position in PSU banks for short-term should keep a stop loss to avoid high losses.

However, i am now going to discuss on few Debt-ridden companies which is the main reason behind decreasing credibility of banks and pressure on stocks.

GVK

GVK is an Indian conglomerate with diversified interests across various sectors of economy. Company has been a well know player in project works of Infrastructure and Power. In recent quarters, company has tried to cut some debt by selling their stakes in their subsidiaries. It has not seen any profit from last many quarters due to increased pressure of interest on its books.

Therefore, GVK stock had faced some high selling pressure in past. However, from few months, stock has seen some buying interest. Stock is now on the regular upper circuits from last few days.

GVK is going to make Navi Mumbai Airport soon. Recently, Cabinet has also approved road projects of Rs7 lakh crore. Maybe, these two could be the reason for the sharp buying in stock. However, I believe infrastructure companies can be a great pick for long term. Many companies who were reeling under some debt issues may see a turnaround soon. GVK could also see some turnaround as heavy expenditure on road projects and navi Mumbai airport could have a great positive impact on its fundamentals. Although, i think who have bought GVK at lower levels should try to hold it for a period of 3-5 years. It could be a multibagger choice if things go in favour of company.

Bhushan Steel

Bhushan steel is the largest auto-grade steel manufacturer in india. This company has also faced debt issues in last few months. Earlier, company was directed for insolvency proceedings. After which it faced some selling pressure in its stock. However, stock doesn’t break any major levels  after this news as stock was already quoting at lower valuations.

But now, a recent news which seems to be very positive for shareholders is that Lakshmi mittal, a steel giant may buy a stake in company. Media reports are saying that Lakshmi mittal have showed interest in buying a stake. I think if Mr.Mittal really bought any stake in company, then we may see some large gains in stock. But there is nothing that has gone final.

Most importantly why Mr.Mittal may buy stake in company is that company has a good production volume which seems potentially great. Therefore, i think one who can take risk may try Bhushan steel as a bet on debt companies. If deal really happens, they we may see buying interest due to both Debt solution and lower valuations to its peers.

Lanco Infratech

Lanco Infratech is also an infrastructure conglomerate. In 2010, it was listed out among the top fastest growing companies in the world. But the RBI list of NPA came earlier this year creates a highly selling pressure on stock.

Insolvency proceeds have been started and soon there will be some outcome. But the number which looks not suitable to me in balance sheet of company is that book value stands around Rs2.5. In case of Insolvency, this number really matters very important.

Although, i think one should carry a avoid call on this stock. I don’t expect any price appreciation in stock unless any unexpected action been taken by company.

Have any question related to this post? Feel free to ask through comment box given below.


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