Idea likely to give high returns, remain a good buy at current levels: Pankaj Pandey

In chat with ET Now, Pankaj Pandey, Head Research, ICICIdirect.com shares his views on the telecom space. Excerpts:

ET Now: What is the sense that you are getting about the telecom space and the way it has bled, with brokerages reacting negatively to the 2G auction? Now that Reliance Jio is going to join the race will only intensify the competition. How does one approach these dips? Is it a good buying opportunity into names like a Bharti, or an Idea, or do you think one should now completely steer clear from the telecom space?

Pankaj Pandey: Some nervousness is definitely expected in the space and largely in the two listed names, wherein we had seen a bit of a crack yesterday. Once we are done with the auction, we would see a fairly set of stable sort of growth for most of the telecom players.

Having said that, probably there will be some more competition, but at least we have seen some consolidation in the industry and pricing discipline is there, which should help most of the players.

So this is a good opportunity to buy, though the concern would be on the 900 megahertz space, where the quantum of auctions may not be so high, but in 100 megahertz space, the quantum of auctions would be quite high. In that sense, scarcity probably might be there in the 900 megahertz band, but not in 1800 megahertz band.

Therefore, we would not expect a very competitive pricing to happen and probably there will be some nervousness till the auctions get over. However we believe that this is a buying opportunity for the sector, because we would expect even a stock like Idea to deliver good profits over the next two years. They have a net-net EBITDA which is quite decent. So even if that were to happen at higher prices, they would still be quite well placed to actually play on this opportunity.