Is Rakesh Jhunjhunwala Buying United Spirits?

Rakesh Jhunjhunwala is know to love his liquor. There is a strong rumor doing the rounds that some strong hands are buying United Spirits and that could very well be our own Badshah of Dalal Street.

United Spirits has been on a steady rise over the past several weeks. At the market price of Rs. 978, it has given investors an incredible 50% return over a 90 days period. The return in 1 month is a fantastic 35%. It had touched a 52 week low of Rs. 450 on 12.01.2012 and a 52 week high of Rs. 996 on 11.08.2012.

What is causing the frenzied buying in the United Spirits stock is the rumor that because of Vijay Mallya’s financial problems and the bankruptcy status of Kingfisher, he may be forced to sell his stock to Diageo, the second largest spirit maker.

A number of savvy stock pickers spotted the early opportunity in United Spirits. S. P. Tulsian was one of the first to spot it when the stock was quoting Rs. 600. He felt that the deal would take place at Rs. 1,200 per share and had advised a buy. Even at the current market price of Rs. 978, S. P. Tulsian is bullish about the stock. He explained that on a fundamental basis, United Spirits posted an EPS of about Rs 11 for Q1 and that the EPS for the entire year can be assumed to be Rs. 40. At the CMP of Rs. 978, the PE works out to 24. Even assuming that the PE multiple is about 30, that is still not unreasonable given that the other spirit and breweries companies are quoting at very high PE multiples. Tulsian feels that there is very chance that the market price of United Spirits can spurt to about Rs 1200 or so. The price could easily go up to Rs. 1,500 or 1,600 if there was a strategic sale of 25% coupled with a 26% open offer.

N. Jayakumar of Prime Securities is also bullish on United Spirits calling it a potential multibagger. Shardul Kulkarni of Angel Broking also recommended a buy on the United Spirits stock from a trading perspective.

It should come as no surprise if Rakesh Jhunjhunwala, the savviest of them all has already bought tons of United Spirits stock.