Cairn India - what is wrong with this stock

aditya_ravipati@yahoo.co. · Mar 28, 2015

hi all ..can some one tell me why cairn india is at such low valuations. the stock is 5 trailing PE, .7 of book value, dividend yield is 5%.

row is 20% of so..no debt and total current assets are 18Cr and market cap is only twice current assets. that mean the rest of the business is only valued at 20cr.
even if the profits go down 50% which is how much the crude oil has fallen the stock is at 10PE..

i understand that crude oil is at all time low prices...but i am unable to see why such low valuations.
is it all the things that management does or is it just fear that's pulling this stock down.

does anyone follow this stock can you please let me know

Meenakshi Razdan · Mar 28, 2015

I think there are two reasons why the market is shunning Cairn. The first is the steep fall in the crude prices. The second is the act of corporate (mis) governance where they lent $1.25B to a subsidiary of its affiliate. It is feared that this will adversely affect Cairn's own capex plans.

However, some experts feel this is an opportunity to buy Cairn at depressed valuations. I covered the interview of Prakash Diwan of Altamount Capital a few days ago. He said:

I am of the belief that crude could start reversing itself now. This fall has been pretty sharp, pretty deep and if one were to look at that kind of an up swing which comes back you could probably look at going long on Cairn India because that is a direct proxy to this entire move. Cairn also has certain positive triggers that could fetch it up. However, I don’t know how many people believe that crude would continue falling down but my sense is that crude probably is bottoming out. You are not able to catch the bottom exactly but things could start looking up and crude could start moving up 15-20 percent from here in the next quarter or so.
Click to expand...

https://rakesh-jhunjhunwala.in/the-stock-picks-of-prakash-diwan-of-altamount-capital/

IndiaNivesh has same view:

On the overall oil and gas pack, we are very bullish. We believe that crude will not always remain at this level and therefore if you have the confidence that in the next one or one-and-a-half years it will be much higher than what it is today, probably Cairn India and ONGC are the best plays to take that advantage. Especially Cairn India because it has fallen off much more than other peers. First 15% fall was because of the corporate governance issues when the promoters took away some cash from this company to their promoter entity and then 35% fall due to the crude prices. So now, we believe that most of the negatives have been priced in. The stock is trading attractively 0.8 times of one-year forward book value whereas normally it trades at 1.2 times of one-year forward book value. So that gives a lot of comfort and it is also a secondary play on foreign exchange currency. So if the rupee remains around 62-63, it is good for Cairn India. We are very comfortable in buying Cairn India. We have a one-year target of 317.
Click to expand...

https://rakesh-jhunjhunwala.in/two-stock-picks-of-daljeet-kohli/

Dr. Vikas Gupta of Arth Veda has also cited Cairn India as a "value buy" as per Graham-Buffett formula.

https://rakesh-jhunjhunwala.in/top-10-value-stocks-based-on-graham-buffet-formula-give-29-cagr-gain-in-11-years/

However, the unknown variable is how long crude prices will remain depressed. Unless that cycle reverses itself, the prospects of gain from Cairn may be elusive.

devansh.goel · Mar 28, 2015

I think that $ is bound to come down sharply sooner or later. We havent seen the effect of huge Savings the GOI is making due to the steep crude fall. Theoretically,the imports should come drastically down as crude is a major part of India's imports, and as a result INR should strengthen considerably. We havent seen much of that. I wonder why.

I see USD stabilising in the 55INR range in less than a year's time.

So, I wouldn't bet too much on Cairn right now. But that's only me!!

aditya_ravipati@yahoo.co. · Mar 28, 2015

thank you...great analysis by all of you

anindyaswati · Jan 1, 2016

i will never invest in cairan as i do not rust the promoter

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Cairn India - what is wrong with this stock

aditya_ravipati@yahoo.co. New Member

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Cairn India - what is wrong with this stock

aditya_ravipati@yahoo.co. New Member

Meenakshi Razdan Administrator Staff Member Moderator

devansh.goel New Member

aditya_ravipati@yahoo.co. New Member

anindyaswati Member

Check out the latest portfolio of Prashant Jain’s 3P India Equity Fund

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Buy Coal India for 25% gain & 9% dividend yield

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