NEW DELHI: Shareholders of , shares of which have jumped over 3000 per cent in the last one year, could be in for a rude shock on Wednesday when the market opens as the board of the company has gone Vodafone Idea’s way.
Tata Teleservices on Tuesday said it will convert the interest on deferred AGR dues into equity shares, giving the central government a 9.5 per cent stake in the firm. The interest comes out to be Rs 850 crore as per the company’s estimates.
“The average price of the company’s shares at the relevant date of August 14, 2021, as per the calculation method provided in the DoT Communication works out to be Rs. 41.50 per share,” Tata Teleservices said in a release.
It simply means when the share is allotted to the government, it will likely happen at this price. Even the company accepted that in case of conversion, it will result in dilution of all the existing shareholders of the company, including the promoters.
The news can deflate the rally in Tata Teleservices, analysts said.
“There is a lot of speculation around the stock and the announcement will negatively affect the stock price. The stock was way ahead of its fundamentals,” said Kranthi Bathini of Wealth Mills.
The stock had risen higher on speculation that the company could turn out to be a winner replicating the success and business model of Tata Elxsi or Tata Communication, other multibaggers from Tata Group stable.
“The stock is always either at upper circuit or lower circuit, which shows the speculative nature of trade in the counter,” Bathini said. The stock closed at the upper circuit on Tuesday as well, before the company announced the possible conversion of debt to equity.
Though, however bad this news could be for investors, the step makes sense for the company. Tata Teleservices has AGR dues of Rs 16,798 crore of which it has paid Rs 4,197 crore and had opted for the 4-year AGR and spectrum payment moratorium.
Deven Choksey, Managing Director of KRChoksey Shares and Securities said that giving a stake to the government by converting debt is always a better option for both the government and the companies.