VSNL stock tumbles

NetScribes/Ganesh Ramamoorthy

A day after the government announced its decision to end Videsh Sanchar Nigam Ltd (VSNL)'s monopoly over international telephony by April 2002, the VSNL scrip came in for severe punishment at the bourses. In early trades on Thursday, the scrip plummeted at both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Opening from its previous close of Rs 814.95 at the BSE, the scrip dipped by Rs 65.15 in early trades to hit the lower limit of Rs 749.80, off Rs 49.80 from the 52-week low of Rs 700. At the NSE, the scrip opened at Rs 790, Rs 17.05 lower than the previous close of Rs 807.05, and hit the lower limit of Rs 742.50, off Rs 42.50 from the 52-week low of Rs 700.

"At 10.05 IST, there were only sellers in the counter and no buyers as the scrip stayed locked at its initial 8 per cent lower limit," said a BSE broker. However, the scrip recovered a bit later. At noon, the scrip was trading at Rs 788, down Rs 26.95 from the previous close at the BSE. The counter witnessed 39,105 trades at the BSE. On the NSE, at noon, the scrip was trading Rs 783.25, down Rs 23.80 from the previous close, with 86,984 trades.

"There is a lot of selling pressure at the counter and the scrip is very weak," the broker said, adding, he expected the scrip to be under selling pressure for the rest of the day.

Marketmen attribute the fall in the scrip mainly to concerns over VSNL's compensation package of Rs 7 billion worth of sops. "Some issues regarding the compensation package are still very unclear. The government has not specified any timeframe by when VSNL would be compensated. Also, the market is not exactly convinced that the package would adequately compensate VSNL for the notional losses of about Rs 105 billion that it will incur for consenting to end its monopoly earlier than scheduled," the BSE broker said.

However, an analyst with a Mumbai-based securities firm said that the scrip still has an upside to it. "What we are witnessing today in the market is only a reaction to the news. But if you look at things from an overall point of view, it is quite clear that VSNL stands to gain in the long run. When the market is fully liberalised, VSNL will gain by virtue of being the most experienced player in the market," said Sandeep Shenoy, an analyst with Asit C. Mehta Brokerage.

The compensation package for VSNL includes licence to enter national long distance telephony (NLD) with an entry fee waiver of Rs 1 billion, no revenue-sharing with the government for five years of NLD service, a national Internet service provider licence and a share of the revenues collected as licence fee from private international telephony operators till April 2006.

Ninety per cent of VSNL's revenues comes from international telephony. VSNL is expecting its international telephony revenue to rise 5 per cent in the current fiscal due to reduced ISD call rates. The reduced rates notified by the Telecom Regulatory Authority of India are to take effect from October 1, 2002.

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