HEADLINES
JOBS
COM:PORT
POLICY POLICE
ARCHIVES

The Mahanagar Telephone Nigam Limited is likely to become the first public-sector corporation to buy back its equity.

The proposal is being discussed in the finance ministry. However, talks are at a preliminary stage and no decisions have been taken yet.

Buying back of the shares is being considered because MTNL is a cash-rich company and will be in a position to carry out such an exercise.

T O D A Y

• Just buy chance • Comdex India '98 • HCL offers Dragon • Telecom conference

Another reasons for the proposal to have come up is that the government may not be able to meet its fiscal 1999 targets for divesting investments in public corporations.

The government is also identifying other cash-rich public-sector undertakings that may be able to buy back their equity.

How does this make sense for the government? The MTNL case is the best example for an explanation.

If MTNL buys back its shares, the regulations of the Securities and Exchange Board of India will force it to 'extinguish' the shares. This will reduce MTNL's equity base. But it will simultaneously increase the 'earnings per share' considerably. The government could then move in quickly and sell its now high-EPS stock at a premium.

However, the reduced equity base is a factor that is being debated. Currently, the large equity base is worth Rs 6.2 billion.

An improved EPS may also help MTNL raise money by issuing shares again.

Analysts point out that MTNL offers exposure to one of the world's most rapidly expanding telecom markets with the fiscal 1999 earnings projected upwards of Rs 13 billion, a jump of 24 per cent over the previous fiscal.

The scrip valuation remains conservative with a projected EPS of Rs 21, valuing the MTNL scrip at just nine times the forecast earnings for the on-going fiscal.

MTNL registered a growth of 17.5 per cent in its profit during the first half of 1998-99 compared with the profits during the first half of previous financial year.

As per the unaudited results of the company, the Net profit earned during the first half of this financial year is Rs 6.75 billion.

While the Net profit during the corresponding period last year was Rs 5.3 billion.

The revenue of MTNL has increased by about 27.7 per cent compared with the revenues during the first half of the last financial year.

The total revenue during the period ending September 30, 1998, is Rs 26.04 billion. During the first half of last financial year, the total revenue was Rs 22.16 billion.

- Compiled from the Indian media

Tell us what you think