Deven R Choksey, Managing Director, KR Choksey Investment Managers, says the O2C demerger transaction will make quite a high value proposition for the Reliance stock.
We have seen a massive run up in pharma but it is continuing to look incredibly strong. Within the pharma majors, Dr Reddy’s is very much in the news. Which of the pharma heavyweights are looking more attractive to you and are good to buy on dips?
The companies have been focussing significantly on building a very strong API base pipeline and that is what is more important to understand in the current context with many of the pharma companies. Divi’s has been leading the show in this particular segment and each and every other pharma company has been trying to register its bit with the higher amount of API contribution coming in. This is where the larger part of the success story should be seen.
In my view, the larger the company, the better it would be for an API bet and that is where companies like Divi’s are ahead of others. I would prefer to stay with some of the large companies like Divi’s,
and in this particular space.
Reliance has announced the OTC business demerger ahead of the Armaco deal. Given that this was well known for the market, it is only the timeline which is out. Do you think this will spark optimism in the stock which fell 4% yesterday?
A few things have come out very clearly from this particular announcement. One important aspect is that Reliance as a parent company would basically transfer the assets to its subsidiary against a loan of $25 billion. Reliance is going to earn out of this particular loan. That will answer questions in the minds of the shareholders of the Reliance holding company about its earnings.
Reliance has categorically stated that the Armaco deal is moving in a direction of getting monetised at some point of time. Considering the fact that $25 million worth of loan has been there in the books, in my view, $15-20 billion kind of monetisation in the books of O2C money will ultimately come into the books of the parent company —
Another important point is the company is sitting on cash and financials is one main area of concentration or focus along with new material. That is what the company has said in the presentation. My take is that Reliance could possibly start a separate vertical for financials and that is where an interesting play will emerge. All put together, clarity should emerge that this demerger transaction is making quite a high value proposition as far as the Reliance stock is concerned.