Mumbai, Sept. 2: Upset over communication minister Pramod Mahajan’s statement hinting at a possible merger of Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL), investors pounded the MTNL stock to an eight-month low.
The statement is largely being seen as another impediment to selloff in MTNL, and yet another instance of the growing dissidence within the government on disinvestment minister Arun Shourie’s effort to unlock the potential of public sector majors.
The MTNL stock opened at Rs 130 but plummeted to Rs 118.10, an eight-month low. It recovered slightly to finish at Rs 120.25, but had still lost Rs 10.50, or 8 per cent, over its previous finish. It saw 9353 deals, with 17.47 lakh shares changing hands on a turnover of Rs 21.42 crore.
Telecom analysts were quick to decry Mahajan's remarks, and some even flashed a sell call on the stock. Refco Sify Securities, for instance, assigned a long-term sell rating to the stock, saying the company faced severe competitive pressure. Now, there are other challenges, which includes lack of operational freedom.
Other analysts said a union with BSNL would be inimical to shareholders of MTNL even if the government decides to accomplish it through a reverse merger.
Market watchers point out that a series of statements coming from senior leaders within the government, signalling deep divisions on disinvestment are likely to halt a much-needed rally on bourses.
“First it was Ram Naik’s opposition to disinvestment in HPCL and BPCL. This was followed by Mahajan’s statement about the merger of MTNL. George Fernandes is yet another addition,” a broker said.
On Saturday, Mahajan confirmed moves to merge BSNL and MTNL and ruled out privatisation of these PSUs before it. The minister said he had asked the department of telecommunications to prepare a merger plan.
The growing dissonance in the government to disinvestment has clobbered PSU stocks like HPCL and BPCL. In today’s trading, HPCL ended 4 per cent lower at Rs 263.75 against its previous close of Rs 273.75. BPCL also lost around 5 per cent against its last finish. The markets are now awaiting a crucial Cabinet meeting on disinvestment to be held over the weekend.
Among public sector telecom majors, BSNL has a net worth of over Rs 60,000 crore, while MTNL is valued at over Rs 7,000 crore. The government holds 100 per cent in BSNL, and less than 52 per cent in MTNL, the operator which services Mumbai and Delhi.
MTNL’s share blues came on a day the BSE sensex surrendered initial gains to close with a modest six-point gain at 3181.23 against 3187.26 on Friday.
Investors, optimistic that sales by UTI would ease following announcement of a bailout, unloaded stocks in a bid to book profits The 30-share index opened on a strong note at 3206.81 and rallied to an intra-day high of 3227.62. The broad-based BSE-100 index held steady at 1580.60 against its previous close of 1580.55.
Reliance Zee Telefilms, Hindustan Lever, HCL Technologies, Bhel were among the main gainers. In the specified group, 113 stocks, including 24 from the sensex, notched up increases; 45 finished with losses.
The volume of business rose sharply to Rs 1518.58 crore from Rs 1391.08 crore on Friday. Satyam Computers was the top traded share with the highest turnover of Rs 200.7 crore.