Rajen Shah’s Latest Stock Pick Tata Power Has 25% Upside

Rajen Shah’s track record speaks for itself. He recommended Britannia Industries in February 2013 when it was quoting at Rs. 498. Today, one year later, Britannia is at Rs. 892, giving gains of 88%.

Escorts is another of his stock picks. When Escorts was quoting between Rs. 48 and Rs. 54 in April 2013, Rajen Shah said the stock was “too cheap” and gave strong logic for investors to buy it. Today, Escorts is quoting at Rs. 115, giving gains of 118%. Even the great Rakesh Jhunjhunwala climbed aboard Escorts in August 2013.

South Indian Bank is yet another example where Rajen Shah promised a 25% gain and the stock delivered that promise.

Now, Rajen Shah’s latest stock pick is Tata Power. Here again, the logic is that there is very little downside and huge upside potential.

Tata Power has been battered out of shape owing to recent regulatory concerns. However, the stock is at the cusp of change, Rajen Shah said. He made his points in a succinct manner:

(i) Good things are happening for Tata Power. First the management has been aggressive to take this bold step of selling out its 30 percent stake in the Indonesian coal mine which will see USD 500 million coming into the balance sheet and with that Rs 3000 crore the company may retire debt which will bring down the interest cost by at least about Rs 300 crore per year;

(ii) Secondly, the CERC ruling has come in favour of Tata Power which means that the company is surely going to report bumper numbers for FY15;

(iii) Tata Power is headed for multiple growth over the next five years. The capacity currently is about 9000 MW. Probably, in the next five years, Tata Power could see capacity expanded beyond 25,000 MW;

(iv) The management is meeting for a rights issue or preferential issue. If it is a preferential issue which they did in Indian Hotels long time back and something similar on that lines could infuse Rs 2000 crore in the company and that again would go towards retirement of debt;

(v) So, Tata Power at about Rs 80 levels has at least 25 percent upside over the next 12 months and that too very safely.