Tata Communications our top pick, going ahead: Dipan Mehta
"Tata Communications our top pick, going ahead."
ET Now: It is new year. Leave us with one stock to look out for on the midcap end of the market.
Dipan Mehta: We have spoken about pharma, we have spoken about IT. One company which comes to mind, which is in neither of these sectors, but is quite interesting and which we are tracking quite closely is Tata Communications, which was earlier known as VSNL.
If you look at the last quarter numbers, they were quite stunning. A lot of their businesses are turning around big time. The capex also is coming around to more or less a steady state and free cash flows have improved significantly. The company clearly benefits from the large trends in IT, which are cloud computing and big data.
The company is steadily improving the productivity of all its assets and after years of underperformance, debt issues and low utilisation of assets, the last quarter could be termed as a breakout quarter for the company and towards the next two-three years or so, if the management does not take any major expansions or acquisitions, which dilute the ROCE or ROI, this company is poised for much higher levels. Investors will get benefit from earnings improvement as well as the the PE getting re-rated upwards.