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Bharti shares under pressure for second day; drop 3%

Bharti shares under pressure for second day; drop 3%
PTI
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First Published: Tue, Feb 16 2010. 11 11 AM IST
Updated: Tue, Feb 16 2010. 11 11 AM IST
Mumbai: Shares of Bharti Airtel slid over 3% in the morning trade, continuing the slide for the second straight day after its $10.7 billion offer for Zain Telecom’s African operations.
Bharti Airtel shares dropped to Rs276.05, down 3.28%, over the previous close on the Bombay Stock Exchange.
On the National Stock Exchange, shares dropped 3.50% to Rs275.60 within minutes of opening. Over 1.40 crore shares changed hands on the bourses.
The scrip had plunged 9.22% yesterday after Bharti Airtel confirmed it has initiated an exclusive discussion with Kuwait’s Zain Telecom for buying its African operations, a deal which investors feared could strain the telecom major’s financials.
Following yesterday’s steep fall, the market valuation of Bharti Airtel came down by about Rs11,000 crore to Rs1.08 lakh crore.
Analysts, however, are optimistic that if Zain starts performing, the deal could reap returns to Bharti in the long term.
“African telecom market has scope for penetration. If Bharti is able to implement its low tariff scheme there successfully, the deal could prove to be value accretive,” Angel Broking research head Hitesh Agarwal said.
Meanwhile, Bank of America-Merrill Lynch downgraded Bharti shares to “under-perform” from “buy”, citing rich valuation of the potential deal and unexciting growth outlook of Zain’s African portfolio.
Last year, shares of Bharti were pummelled after its $23 billion merger bid for the South African MTN on concerns of increase in debt burden.
“The borrowing and additional interest cost will dilute the earnings of Bharti. The balance sheet would continue to be stretched unless Zain Africa starts to contribute,” Angel Broking’s Agarwal added.
The broader market was trading flat with the BSE Sensex quoting up 36 points at 16,074.97.
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First Published: Tue, Feb 16 2010. 11 11 AM IST