MTNL sprang forth 4.77% to Rs 117.55 on BSE on Thursday after FIIs and punters found the scrip worth picking on optimism that future revenues will be boosted.
In fact, the scrip came back after recording an early morning low of Rs 107.70. Huge buying also saw volumes burgeoning to 3.17 million shares on BSE by 12:05 IST.
The scrip has now surged 45% from Rs 81.05 on 24 January 2003.
Institutions, in particular, are hounding the counter. As per market talk buying is being carried out by CL Securities on behalf of some unknown sources. Rumours have been abounding over the last few days that institutions like Prudential ICICI and Capital International have gone upbeat on MTNL.
Perhaps, the appointment of Arun Shourie taking over as India's new communications and IT minister has lent added strength to the counter. Dealers say the market is punting on MTNL following hopes that, with the change in ministership, the divestment of MTNL will catch pace and will be undertaken before the stipulated time. Earlier, the government had said that MTNL's divestment was not likely before FY 2003-04. The Government of India holds 56.25% of the total equity capital of Rs 630 crore (Rs 6.3 billion) in MTNL, while institutions and the public hold 40% and 2%, respectively.
Buying was also attributed to news that Arun Shourie will study the controversial proposal to merge state-run telecom giants MTNL and Bharat Sanchar Nigam. Shourie, who is also divestment minister, replaced Pramod Mahajan as communications and information technology minister, this week. Mahajan was said to have favoured a merger between listed MTNL and unlisted BSNL.
Dealers say the new minister wants competition in the telecom sector and is, therefore, not likely to approve the merger of the two state-run telecommunications service providers .
MTNL has also been on the move ever since Trai increased monthly rentals. The step is expected to boost MTNL's revenues. Latest media reports suggest that the company's operating profit should rise 30% with the Trai directive. MTNL is engaged in basic telephony services in the two metros of Mumbai and Delhi. It also offers Internet and cellular services.
On 25 January 2003, the Telecom Regulatory Authority of India announced that monthly rentals for fixed line telephones would be hiked 11 to 12%. Trai also reduced call size (pulse rate) to two minutes from three minutes besides slashing free calls by half to 30. Also, the number of cheap calls was reduced 40%. In effect, urban users making 500 calls a month, will now pay Rs 784 a month as compared to Rs 690 earlier. Hiked rentals will be effective from 1 April 2003.
On 23 January 2003, MTNL announced dismal Q3 ended 31 December 2002 results - a drop in net profit of 33.8% to Rs 217.06 crore (Rs 2.17 billion) compared to Rs 328.01 crore (Rs 3.28 billion) in the corresponding period of the previous year. Net sales decreased by 11.33% to Rs 1,463.15 crore (Rs 14.63 billion) from Rs 1,650.11 crore (Rs 16.5 billion) in DQ 2001. The company was expected to, according to a capitalmarket.com poll of six telecom analysts, come up with a net profit of Rs 265.5 crore (Rs 2.65 billion) to Rs 301 crore (Rs 3.01 billion) and net sales of between Rs 1,476.5 crore (Rs 14.76 billion) and Rs 1,525 crore (Rs 15.25 billion).
BSE Code: 500108
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