Chennai, August 5: Commercial vehicle major Telco is witnessing a spurt in interest on the bourses even as Ashok Leyland (ALL) is seen to be riding piggy-back on the market leader. While Telco has been moving up since the announcement of its quarterly results (where it posted a loss of Rs 35.63 crore), Ashok Leyland has been moving up in the last couple of days. Marketmen say that UTI and Morgan Stanley are buying Telco in a big way. Telco has moved up from Rs 117.65 prior to the quarterly results to close at Rs 141.10 on Wednesday while ALL has moved up marginally to Rs 29.45 from Rs 27 levels on the NSE.Is the sudden interest a technical correction or informed buying? Some analysts attribute the sudden interest in Telco to its low valuations and on the premise that the slowdown in the commercial vehicle sector has seen the bottom. It is a case of looking ahead and at current valuations, Telco is a good bet for a three-to-five-year outlook.
Telco's decision to give domestic and FIIs a joyride in itssmall car seems to have paid off. An analyst with a domestic institution said that the feedback from those who drove the car was positive and that probably reflects the interest in the counter.
Moreover, the news of US auto major Chrysler taking part in the car project continues to do the rounds and reports of a Chrysler employee joining the company only added to the speculation. The company has also embarked on a massive cost cutting excercise. This, according to analysts, will help shed flab to take advantage in the post-recession scenario. The SC ruling limiting the life of CVs to 15 years in Delhi is seen as the begining and analysts feel that if extended to other metros, the demand for vehicles would go up significantly.
The recent RBI policy of classifying advances by banks to NBFCs who in turn lend to truck sector as priority sector lending is also interpreted as a positive move as it will definitely improve the credit delivery to the road transport sector. But many point out that it will not haveany immediate effect on the industry as no amount of subventions undertaken by the manufacturers earlier could improve the offtake. The positive impact of the policy will be felt only after the commercial vehicle industry comes out of the over-supply situation.
Another section of the analysts attribute the interest in these scrips to a mere technical correction and there has been no fundamental change in the fortunes of the sector. Vendors to companies like Telco see no revival in the fortunes of the industry and they do not expect to go back to 1996-97 levels till 2001-02. Moreover, it is estimated that 40 per cent of the trucks on the roads today are unutilised reflecting the extent of overcapacity. They say that it could take at least two years to absorb this oversupply provided the economy grows, they add.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
Printer-friendly page
