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Sharp spike in shares of Tata Tele arm shares puzzles analysts

Sharp spike in shares of Tata Tele arm shares puzzles analysts
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First Published: Fri, Aug 31 2007. 12 48 AM IST
Updated: Fri, Aug 31 2007. 12 48 AM IST
Mumbai: The stock price of Tata Teleservices (Maharashtra) Ltd (TTML), the listed arm of Tata Teleservices Ltd (TTSL), a Tata group telecommunications company, gained more than 20% in five trading sessions since 22 August. The big spurt in the stock price has surprised a pack of telecom analysts in Mumbai, as well as the company officials.
Telecom analysts at three leading multinational brokerages said they find no fundamental reason behind this rise in the price of TTML stock.
These analysts did not wish to be identified or quoted because they were barred from commenting for media reports by company policy.
One of the analysts said all the major telecom scrips (stocks) had rallied in the last five trading sessions, backed by positive news flows about the developments in spectrum allocation and policy reforms in the telecom sector. But, the huge gain of momentum in TTML stock price was surprisingly high, he added. The stock price rose from Rs27 to Rs32.5 during this period.
Major telecommunications stocks gained 2.8-5% during this period. TTML’s immediate rival in the code division multiple access (CDMA) technology space, Reliance Communications Ltd, the second largest telecommunications player, gained just under 5% during the same period. The country’s largest telecommunications player, Bharti Airtel Ltd, added 3.7%, while state-owned Mahanagar Telephone Nigam Ltd stocks gained 2.8%.
Madhav Joshi, company secretary of TTML, said no company-specific developments are brewing at TTSL or TTML in the immediate future.
“This stock movement was really surprising,” Joshi said. “We do not see any trigger behind this spurt. We hope that the stock is not being pulled up by a cartel.” Cartel is a term, usually derogatory, used to describe a group of industrial units that club together to pre-fix or manipulate prices.
The possibility of a bulk equity deal occurring at TTML or TTSL in the mid-term future is very minimal, said Joshi, when asked about potential merger or acquisition deals involving TTML or its parent company.
“We received calls from some investors and analysts trying to clarify market rumours about a deal with AT&T,” said Joshi, adding that the speculation is logically incorrect. “Tata group will never part with its controlling stake in the telecommunications business and a minority stake will not help the cause of any strategic buyer.”
In Thursday’s trade, however, TTSL was the biggest loser, shedding 3.08%. Reliance Communications gained about 2.7%, while Bharti, Idea, MTNL and Spice remained flat.
Harish Shah, who tracks the telecommunications sector for Mumbai-based Angel Broking Ltd and Amar Ambani, vice- president of research at India Infoline Ltd, another domestic brokerage, both agreed that there is no fundamental reason that could have driven TTML’s stock up over 20% in just five sessions.
Shah and Ambani said they did not wish to comment on whether any cartels are operating in the equity market, or whether they are manipulating stock. The Tata group companies, led by TTSL, owns about 69% of TTML’s total equity.
The free float amounts to about 31%, including shares owned by institutional investors—such as Life Insurance Corp. of India (1.64%)—which is the only investor outside the Tata group holding more than 1% equity stake in TTML, according to BSE data.
Ashwin Ramarathinam contributed to this story.
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First Published: Fri, Aug 31 2007. 12 48 AM IST