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VSNL scrip set to rise, say analysts

NetScribes/Rajiv Banerjee

There will be an upswing in the Videsh Sanchar Nigam (VSNL) scrip over the medium to long term, predict analysts. The speed with which the divestment process is completed before VSNL loses its monopoly over international telephony, will prove to be a critical factor in this rise.

"At this juncture, however, the scrip definitely looks attractive and our recommendation is a buy," said Mahesh Patil, telecom analyst with Motilal Oswal Securities.

Priya Rohira, an analyst with Pranav Securities, believes that the divestment talks being held for VSNL presently, will complete faster than those for Mahanagar Telephone Nigam Ltd. This augurs well for VSNL.

"We are very bullish on the scrip as divestment talks have gained momentum. One can see an upside to the Rs 600 level in the next three-four months," said Rohira.

She added that VSNL's plans to enter the cellular market, domestic long distance telephony and DTH (direct-to-home) services will benefit the company.

On the BSE, the scrip was trading at Rs 334 on January 23 at 1500 IST, from the previous close of Rs 311.45. A total of almost a million shares had been traded on the counter.

For the quarter ended December 2000, VSNL posted 17.34 per cent growth in sales over the year ago quarter, to Rs 19.5 billion The profits saw a growth of 34.12 per cent over the year ago quarter, to Rs 4 billion.

"Operating margins have risen to 30.88 per cent compared to 26.38 per cent in the year ago period. This was possible due to increasing volumes in international telephony even as total accounting rates (TAR) fell," said Rohira.

Traffic during the quarter has registered a growth of 30.13 per cent over the year ago quarter. The spurt in the traffic is mainly due to the reduction and rationalisation of TAR. Revenue from international telephony has jumped from Rs 14.8 billion in the quarter ending December 1999 to Rs 16.7 billion in the corresponding quarter this year. Revenues from Internet services rose to Rs 844 million from Rs 500 million in the year ago quarter.

"The rise in Internet services revenues have been led mainly by the rise in the subscriber base even as the tariff rates have been slashed," said Nayan Mehta, analyst with Emkay Shares and Stock Brokers Pvt Ltd.

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