Analysts’ call: 'Abstain' on Tourism Fin open offer

Analysts have recommended investors to abstain from the ongoing open offer of Tourism Finance Corporation of India (TFCI), on expectations of a rally in its stock after completion of the offer period.

The stock, currently trading at a 17 per cent discount to the open offer price of ~157.20 on the National Stock Exchange (NSE), has declined sharply over the last few weeks. It closed at ~130.25 on Friday.

“We expect the stock price to witness a rally, once the open offer gets over, and the company gets expertise and advice from the new management, and focuses towards value-added services. The firm has paid out steady dividends of 20 per cent for the last eight years,” said Dinkar Shanbaug, head, institutional equities, Lotus Global Equities.

The experts see TFCI as a value stock for long-term investors, and advise them to abstain from the open offer on account of various fundamental strengths of the company, which are likely be reinforced once the new management takes charge.

TFCI shareholders have been invited to participate in the offer by three existing marquee shareholders — Redkite Capital, SSG Capital’s India Opportunities-III, and Koppara Sajeeve Thomas. The offer is at ~157.20, plus an interest payment of ~4.18 to acquire an additional 26 per cent stake in TFCI. It opened on February 5, and will close on February 18.

“The TFCI stock can be a value stock for long-term players for reasons — organisational transformation on account of new promoters resulting into re-rating of the stock, pick-up in lending activity, diversification of asset book, and likely asset quality improvement on account of upgradation,” said Atul Karwa, senior analyst, HDFC Securities.

TFCI is a financial institution that contributes to the creation of tourism infrastructure. The firm’s strengths lies in their positive asset liability management (ALM), and robust capital adequacy ratio (CAR) of 40 per cent compared to the threshold of 15 per cent. As of date, the non-performing assets (NPAs) at 2.9 per cent are expected to be brought down to below 1 per cent by financial year 2019-20.

TFCI’s team of 28 personnel have cumulatively sanctioned a sum of ~10, 887 crore, with a majority exposure to the tourism sector. Amid the turmoil in the nonbanking finance company (NBFC) sector, TFCI seems to be a rising star for investors looking at value for their investment. The stock is available at 1.6 times its book value, which is a huge discount to the sector price to book value.