GTL shares in free fall

Hunch 62%, the second-highest fall in a single day in over a decade for BSE-500 shares after the Satyam crash.

World Telesystems Restricted (GTL) and World Telesystems Infrastructure (GTL Infra), two sister issues with massive holdings by international buyers, crashed on Monday after reviews that Mauritius could begin taxing capital positive aspects.

GTL closed at Rs 127.80, down 62.40 per cent, whereas GTL Infra fell 43.27 per cent to shut at Rs 12.85 even because the Bombay Inventory Change Delicate Index, or Sensex, fell over 350 factors or 2 per cent.

GTL’s fall was the second highest in a single day in over a decade for BSE-500 shares, after Satyam Pc fell 77 per cent on January 7, 2009, in keeping with Bloomberg.

Each GTL and GTL Infra had slipped 15 per cent and 7 per cent on Friday, respectively. In two days, GTL and GTL Infra have misplaced market capitalisations of Rs 2,063 crore and Rs 1,232 crore, respectively.

Full 12 months ended Mar-10 Mar-11 % chg
Internet gross sales 347.95 490.12 40.90
PBIDT 224.17 322.78 44.00
Curiosity 28.43 254.41 794.90
Reported PAT -2.58 -139.29

Internet value 1865.37 1870.10 0.25
Mortgage funds 4470.51 5039.35 12.72
(Rs crore)          Compiled by BS Analysis Bureau             Knowledge Supply: Capitaline

In line with shareholding particulars filed with the exchanges, FIIs maintain shut to fifteen per cent in GTL. One international entity, Know-how Infrastructure, holds 23 per cent in GTL Infrastructure as on March 31. Most of those investments are via the Mauritius route, in keeping with brokers.

The corporate went in harm management mode, with Manoj Tirodkar, CMD, GTL, clarifying to a tv channel that Know-how Infrastructure is a long-term associate and wouldn’t have offered shares within the firm.

Although the corporate issued a press release to each the exchanges that promoters continued to carry 52.71 per cent stake and had pledged solely 12.85 per cent of the fairness capital, the share value continued to tumble. “The corporate wish to verify that neither the promoters nor entities associated to the promoters have offered any shares, together with shares which have been pledged,” mentioned the assertion. Nevertheless, market observers mentioned there have been critical issues, together with the scrapping of its $300-million fund-raising plan by GTL Infra.

Many market observers have been fairly stunned. Deepak Mohoni, CEO,, mentioned, “I might describe the crash unexplained. It was neither elementary nor technical.”

In line with him, the crash within the inventory value snowballed as there was a scarcity of patrons. “When somebody is determined to promote and other people refuse to purchase, it creates panic and the inventory crashes. Usually, if all the pieces is true with the corporate and inventory crashes like this, the promoters would come and purchase the inventory. That may be a sign that issues are positive.” Mohoni mentioned.

Nevertheless, there are issues, as properly. Stated S P Tulsian, an unbiased market analyst, “There are some critical issues concerning the firm. For a number of years, the corporate has had money reserves nevertheless it has borrowed closely as properly, which isn’t a terrific signal.”

Stated an individual who offers in these shares, “International institutional buyers maintain practically 15 per cent of GTL. Many of those buyers come through the Mauritius route. These buyers might have dumped the shares after reviews concerning the Mauritius authorities agreeing to capital positive aspects being taxed right here.”

GTL Restricted is a community providers participant, providing providers and options to telecom carriers and know-how suppliers with operations in additional than 40 nations. On a standalone foundation, it reported a 54.5 per cent rise in complete revenues of Rs 2,404 crore for the 12 months ending March 2011. Nevertheless, the web revenue at Rs 139.75 crore (after seeing a 62.5 per cent rise in curiosity prices to Rs 130.92 crore) was down 11.8 per cent. Even analysts have turned underweight on GTL Infrastructure, the one listed entity within the telecom tower enterprise.

Although the corporate gained market share (to 10 per cent) after the acquisition of Aircel towers, the important thing concern in keeping with analysts at HSBC Securities and Capital Market is its weak stability sheet. To place some numbers in perspective, the corporate noticed curiosity prices rise ninefold to Rs 254.41 crore in 2010-11 as in comparison with Rs 28.43 crore within the earlier 12 months. This ate away a lot of the Rs 322.78 crore working income made by the corporate final monetary 12 months. Working income fell 65 per cent year-on-year to Rs 68.37 crore. Because of over Rs 207 crore depreciation, the corporate posted a lack of Rs 139.29 crore on the internet stage in 2010-11. As on March 2011, the corporate’s complete debt was Rs 5,039 crore with a debt:fairness ratio of two.7 instances.

HSBC Securities has estimated a internet curiosity outgo of Rs 1,000 crore and Ebitda of Rs 950 crore in 2011-12, implying the corporate is predicted to publish an working loss within the present 12 months. The brokerage agency estimates the corporate is more likely to finish the present monetary 12 months with a internet debt of Rs 9,700 crore and a debt to fairness ratio of thrice. Although Ebitda margins within the tower enterprise are excessive (FY12 estimated margins at 58 per cent), excessive debt and subsequent curiosity outgo imply the corporate has barely sufficient to pay its curiosity prices.

Whereas the valuations look enticing at present, the important thing set off for the inventory could be a fund infusion/strategic associate which is able to assist deleverage the stability sheet. This, coupled with an enchancment in tenancy via orders from new Broadband Wi-fi Entry gamers akin to Reliance Industries and 3G firms, is a optimistic for the inventory.

Brokers limit small merchants as margins chew

Numerous inventory brokers didn’t enable small merchants to create any contemporary positions, particularly on the lengthy facet as they got here below margin strain on Monday. This was on the again of a pointy plunge within the share value of World Tele Ltd (GTL) and GTL Infra, coupled with a crash within the CNX S&P Nifty, the largely tracked by-product index.

Final Friday itself, the GTL inventory fell 17 per cent from Rs 408 to Rs 338 on the inventory exchanges. Monday once more on opening, GTL was down Rs 30 from Rs 338 within the money phase and Rs 15 within the futures and choices (F&O) phase on NSE. Whereas a lot of merchants available in the market have been nonetheless attempting to determine what was fallacious with the counter, GTL continued its free fall and touched a low of Rs 124 within the F&O phase — a virtually 60 per cent fall. One other group firm GTL Infra, which can also be in F&O, too slipped 43 per cent and touched a low of Rs 15.25 from its earlier shut of Rs 29.6.

Notional positions within the F&O phase value over Rs 223 crore stood in GTL and over Rs 140 have been famous in GTL Infra’s counters final Friday. Such a brazen fall within the share costs of those two firms eroded a considerable chunk of brokers’ margin cash deposited with the exchanges, which might be 30-50 per cent.

The scenario was unhealthy because the Nifty index fell 3.1 per cent or 170 factors in intra-day commerce. Earlier than the closing, Nifty recovered solely 62 factors from the day’s low, which made brokers cautious as small merchants are sometimes the primary casualty of such a sudden market crash. Nifty fell as Reliance Industries, realty and know-how shares have been the worst hit.

“Brokers will likely be cautious within the coming days too in permitting retail purchasers to create positions within the by-product phase. They’ll ask for full margin from purchasers. No less than for the brand new few days, brokers is not going to take any threat when it comes to margin assortment because the scenario is extraordinarily dicey,” mentioned a Mumbai-based seller with a big brokerage home. In case of a significant fall, the exchanges are recognized to lift the Worth at Danger (VaR) and SPAN margin relevant on inventory and index futures, that are between 30-50 per cent when volatility is much less. VaR margin is the utmost loss {that a} dealer is more likely to incur in a inventory throughout a sure interval.

Primarily based on this, the alternate imposes the margin and the cash is collected from inventory brokers. It’s relevant for all securities in rolling settlement, that are categorised into three teams. SPAN margin, which has similarities to VaR margin, is relevant for Nifty futures. Brokers increase these funds from their purchasers or ask them to sq. off positions in case of failure. Excnges didn’t increase the boundaries of those margins on Monday however brokers have been accumulating cash from purchasers to fill the gaps in present margins after a pointy fall.

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