VSNL spurts

VSNL spurts

VSNL surged 7.25% to Rs 475.50 at 15:28 IST on BSE on reports that the telecom commission has approved sale of Rs 10,000 crore worth surplus land owned by the company.

On BSE, 4.73 lakh shares were traded on the scrip. The stock had an average daily volume of 2.07 lakh shares on BSE in the past one quarter. Videsh Sanchar Nigam (VSNL), about to be renamed as Tata Communications from 13 February 2008, had touched a high of Rs 496.50 and a low of Rs 450 so far during the day. The stock had hit a 52-week high of Rs 783 on 1 January 2007 and a 52-week low of Rs 342.20 on 5 March 2007.

The scrip of India's eighth largest telecommunication services provider terms of sales underperformed the market over the past one month till 8 February 2008, declining 35.07% as compared to the Sensex’s decline of 15.15%. It had also underperformed the market in the past one quarter, declining 9.74% as compared to the Sensex’s fall of 7.63%.

The company’s equity capital is Rs 285 crore. Face value per share is Rs 10. At the current price of Rs 475.50, the scrip trades at a PE multiple of 55.16 based on Q2 September 2007 annualised EPS of Rs 8.62.

As per reports, the Tatas are eligible to participate in the auction involving the sale of 773 acres of prime land in four cities, owned by VSNL when it was controlled by the Government. Earlier when the state-run VSNL was privatised in 2002, the Tata group took control of the company, but the surplus land was kept out of the deal.

The government will get 51.12% of the sale proceeds in line with its shareholding of the land bank. VSNL employees, in the form of employee stock option plans (Esops), hold 1.85% while another 21% which is held by foreign companies. Other shareholders include foreign financial institutions (10.86%), Indian public financial institutions & mutual funds (7.9%), general public (4.92%) and other Indian corporates (3.09%). The proposal to sell the land has been pending since 2002. In December 2005, the Cabinet Committee on Economic Affairs (CCEA) decided that the land bank be demerged and hived off into a separate company. In September 2007, after conducting a verification of the land bank, Department of Telecom (DoT) had presented three options. The first being to hive off the surplus land into a realty company set up specially for the sale. The second being to allow VSNL to retain the land at a ‘fair' consideration.’ The third option was to auction the land.

VSNL provides international voice and data services and offers a range of hosting and co-location services from its data centres in Mumbai, Delhi, Chennai and Bangalore.

VSNL reported 42.60% fall in net profit to Rs 61.42 crore on 1.90% decline in net sales to 947.74 crore in Q2 September 2007 over Q2 September 2006.