Stock Review: Welspun Corp

The recent scam or the involvement of the company's name has given investors an opportunity— we have been maintaining that view since it has corrected to Rs 160. If we straightaway go onto the fundamentals of the company, may be some of the instances of the involvement of the promoters may have happened but the business model of the company is quite intact. You are going to see a topline of close to Rs 9,000 crore for FY11 with a cash profit in excess of or maybe close to about Rs 1,000 crore. That results into an EPS of Rs 40. We all know that the company is the largest pipe maker having global presence and even their order book is quite intact with order book of about maybe Rs 6,000-6,500 crore. Yesterday also we have seen company having received an order of about Rs 1,500 crore.

They have an order pipeline of about eight-10 months. They have the good presence in the developed market in US and all. So I don't think that there is any reason if you get a stock at a P/E multiple of close to about 4-4.5 times with a marketcap of just less than Rs 3,500 crore and even if you see on the debt front, the company has a net debt of about close to about Rs 700 crore. Even that can get paid off—in fact I see this SEBI move as a positive factor for the stock because right now there won't be any kind of dilution of the equity or any price movement. In fact, maybe the regulatory or the corporate governance at the company's level will improve.

So all these things maybe if we take a call that it can become a debt-free company in next one year or so with a P/E multiple of 4.5—this is the time where one should look to pick up this stock.