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Interim Payout Fails To Cheer Vsnl Scrip

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BUSINESS STANDARD
Last Updated : Jan 28 2013 | 12:29 AM IST

Telecom major Videsh Sanchar Nigam Ltd (VSNL) gained marginally today on announcement of a lower-than-expected 750 per cent interim dividend, amid clocking the highest volume for the year. The stock closed at Rs 239.10, up 1.83 per cent on the Bombay Stock Exchange (BSE), after touching an intra-day high of Rs 246.75.

"The market was expecting about 1,000 per cent dividend -- which works out to Rs 100 a share -- and the company announced a dividend of Rs 75 per share, which restricted the otherwise sharp rise in the stock price," a dealer said.

The VSNL counter was firm right from the beginning of trade, ahead of the company's board meet to consider an interim dividend. The stock clocked heavy volumes of 16 lakh shares on the BSE and 21 lakh shares on the NSE.

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The counter today saw the highest daily volume for the calendar on both the exchanges. On November 15, 2001, the stock had clocked a volume of 9.01 lakh shares, which till date, was the highest daily volume for the stock.

On Wednesday (December 12, 2001), VSNL shares rose 3.84 per cent to Rs 239.15, after the company announced that it was calling a board meeting on Friday to consider an interim dividend. On Thursday, the stock pared part of that gains as it eased 1.8 per cent to Rs 234.80 due to a broadbased fall on the bourses following terrorist attacks on Parliament. The stock gained again today.

The special interim dividend of Rs 75 per share, or 750 per cent, is subject to the condition that it is cleared by the competent authority as the amount involved is more than the up-to-date current year's profit and would need also to be paid out of past profits. The dividend is higher than market expectations of Rs 35 per share. The huge dividend would entail an outgo of Rs 2,137.50 crore for the telecom major. This is even higher than last full year's (FY 2001) net profit of Rs 1,778.80 crore. With a 53 per cent stake, the government will reap a bonanza of about Rs 1,100 crore from the dividend.

In fact, the VSNL board cleared the huge 750 per cent dividend at the behest of the government.

The government is taking out cash from the telecom major ahead of it divesting another 25 per cent stake, along with management control to a strategic investor. A few months ago, VSNL had paid a dividend of Rs 50 per share, which included a special dividend of Rs 40 per share.

The government recently announced liberalised international long distance (ILD) norms by accepting the Telecom Regulatory Authority's (Trai) recommendation of a very low entry fee of Rs 25 crore and annual revenue sharing of 15 per cent for ILD operators. VSNL's monopoly in international telephony will come to an end with effect from April 1, 2002. Currently, VSNL derives a majority of its revenues from international telephony.

Analysts said, while low entry norms are certainly a negative development for VSNL, it remains to be seen as to how many players actually enter the sector after the liberalisation.

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First Published: Dec 15 2001 | 12:00 AM IST

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