Stake sale by promoters to provide no aid to Pipavav's balance sheet: Mayuresh Joshi, Angel Broking

In a chat with ET Now,Mayuresh Joshi, VP, Institution, Angel Broking, shares his view on Reliance Infra-Pipavav deal.

ET Now: The 18 per cent stake sale by Pipavav seems to be a mere exchange of promoter. How the market may read into the move, considering that the stock has already run up so much?

Mayuresh Joshi: Clearly there should be a negative reaction on both the stocks. It is not going to aid the balance sheet of Pipavav with the kind of fund that is probably coming through.

So equity infusion was one part that the market was probably looking at.

Secondly, if you look at the core balance sheet, even though it has got a strong order book, the debt is pretty high. The working capital constraints still crunch it up.

The argument in favour of Pipavav is that it is into a very difficult industry where the entry barriers are pretty high.

Having said this, the balance sheet and the run up in the stock has clearly disappointed the way the deal has probably gone through.

Even for Reliance Infra, the electricity division's subdued numbers in the December quarter, the EPC division’s falling order book, and time which the cement capacity expansion plans would take to execute could hurt the company. Leverage will go up. We expect that one would see negative reaction on both the stocks.