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Stock Ideas >> 5 Paisa Bargains >>

5 Paisa Bargains

VSNL		BUY
		Market price : Rs 277

Leading telecom player

VSNL is the monopoly player in the international long distance (ILD) telephony. In the last few years, VSNL has also focused on providing value-added services (VAS), which now account for over 10% of total revenues

Results

Revenues for Q1FY02 are down by 10.2%yoy. Revenues for the first quarter of 2000-01 were higher as these were based on proposed Total Accounting Rates (TAR) which were subsequently finalised at lower levels and the effect thereof was reflected in subsequent periods. Sales for the quarter ended June 2001 are on the basis of revised TAR which are approx. 27-28% lower than the TAR applicable for the corresponding period in the previous year. VSNL was able to achieve this result on account of a healthy growth (17%) in traffic.

Going dirt cheap

The scrip is trading at around 5 times its earnings for FY02. The stock is also available cum-dividend right now with a tax free dividend of Rs50 per share. Considering the current market price of Rs277 (July30, 2001), ex-dividend cost is just Rs227 per share. Given the fact that the company will have cash of about Rs200per share(after taking into account cash profit of FY02) at March31, 2001 the stock is poised for a good upside.

Disinvestment

As per reports, the Government is likely to finalise the shareholders’ agreement for disinvestment in Videsh Sanchar Nigam, as part of efforts to transact the deal during calendar 2001. At present, the government is in the process of receiving comments on the drafts of shareholders’ agreements circulated to the shortlisted bidders for preparing the final drafts for approval of the Cabinet Committee on Disinvestment, according to media reports.

We are of the opinion that the stock is an attractive bargain given its cash reserves and also the upside from divestment. We recommend a BUY.

5Paisa Team

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"India Infoline Ltd (IIL) and India Infoline Securities Ltd (IISL) do not have any positions in any of the scrips recommended and which are currently displayed on the site www.indiainfoline.com and www.5paisa.com. IIL and IISL do not do any deals on their own account (proprietary trading) except for testing and demonstration purposes. IIL and IISL also has an internal compliance manual in place which restricts the team who analyze and gives information on various companies and investment opportunities, to place orders on scrips only through IISL and only after the said recommendation has been displayed on the abovementioned websites."