GTL and GTL Infra share price fell by massive levels

Stocks

oi-Shoaib MD

By Shoaib Md

Published: Monday, June 20, 2011, 12:20 [IST]

Investors have been dumping GTL group of shares in Panic. The three main reasons that they are quoting for this dump is: high debt by the company, scrapping of fund raising plan and the news that Mauritius government may change the tax treaty with India.

GTL and GTL Infra had fell approximately 60% and 40% respectively to Rs 138 and Rs 18 respectively in the first hour of trade only to recoup later.

Analysts which track companies of the group are struggling to find any reason for sharp fall.

The Company's Manoj Tirodkar, Chairman & Managing Director, of GTL said on a leading business channel that this fall is highly speculative attack on the stock price. He contends that the fundamentals of the business remains strong.

One of the analyst said, that a 10-15% fall would have been considered as natural because of the fear but it is hard to explain such a major fall. The analyst added that "If company fundamentals remain unchanged, we will not de-rate GTL stocks based on current news flows."

Institutions holding in the company stands at 16.5% in case of GTL and 3.3% for GTL Infra.

Reports state that GTL Infra scrapped the fund raising plans which would have brought USD 300 million.

Also approximately half of promoter's stake in GTL is pledged.

In general the stocks which have investments from Mauritius are under pressure today. India, Mauritius are going to renegotiate the tax treaty. With more than 40% of the FDI in India is from Mauritius. This news will definitely put them under pressure.

In the prospectus of GTL infra, Technology Infra holds 11 % stake in the company. The company, Technology Infra is classified as FDI in the GTL Infra's prospectus. Though the company has denied the possibility of Technology Infra withdrawing their investments from the group.

The latest book value of the company is Rs 131.86 per share. At current value, the price-to-book value of the company was 1.17. The dividend yield of the company was 1.94%.

Investor take: This is a good time to initiate a small purchase of the company's stock. A further fall where the company's price discounts its book value by another 20 to 40% would be an excellent opportunity for long-term investors to invest in the stock. For now a small portion, just to test the waters would be a good strategy to invest.

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