Shares of GTL , formerly Global Telesystems, crashed 62% to close at Rs 127.80, its lowest closing in over five years, struck by multiple theories, none of which could be confirmed. Shares of group companyb GTL Infrastructure closed at Rs 16.85, down 43.27% over the previous close.
GTL chairman and managing director Manoj Tirodkar blamed the bruising decline in his stocks to "speculative attack", but his answers to CNBC-TV18 were not convincing enough to attract bargain hunters.
Over 7.32 crore shares of GTL were traded on both exchanges combined, nearly 75% of the equity base of the company, and 1.6 times the non-promoter holding.
There was talk that the company was facing a liquidity crisis, that lenders had liquidated shares pledged by the promoters, that a major Mauritian shareholder had pulled out, that the company was struggling to raise capital, and that it had defaulted on interest payment to banks and institutions. Tirodkar denied all these.
"The fundamentals of the business are strong and will remain," Tirodkar told CNBC-TV18. "We will continue to build it as we did in the past whenever there have been any problems," he said.
But the stock closed near the low for the day, indicating that investors are not convinced.
Tirodkar was evasive when asked whether his firm was facing liquidity problems.
"Post 2G scam, issues in India concerning telecom companies have been generally bad. As a result, raising funds for any telecom companies including debt or equity has been extremely difficult," he said.
"Show me a single company in the telecom sector today which doesn't have issues. In the past, almost every major company has got those issues. New capital inflow into telecom sector has been a matter of concern largely due to what is happening on the interest rates front. Same thing happened in Europe and USA," he said.
Volatility in the company's stock is not new to Tirodkar, who set up Global Telesystems in 1987 as a reseller of telecom equipment.
During the technology stocks-led rally of 1999-00, GTL—then Global Telesystems—was one of the favourites of market operator Ketan Parekh, and went on to touch a record high of Rs 3500 in February 2000 from just Rs 100 in 1998. When the market collapsed, the decline in GTL stock was as spectacular. Once the favourite of fund managers and punters alike, GTL crashed to Rs 48 by September 2001.
There were allegations that the promoters of GTL had colluded with Ketan Parekh to rig the stock price during the bull run. The company figured in the list of firms that Joint Parliamentary Committee probed for market manipulation, but was not indicted.
Over the next few years, GTL gradually repositioned itself as a network services company, offering services and solutions to telecom services firms and technology providers.
In November 2005, it sold infrastructure and related business and assets to its wholly owned subsidiary, GTL Infrastructure, and listed that company. GTL shareholders got one share of GTL Infra for every one share in GTL.
In January 2010, GTL surprised the market by acquiring 17,500 towers of telecom company Aircel for Rs 8400 crore in an all-cash deal, the biggest such deal in the country till then.
For a while it appeared that the company had managed to put its past behind and would be able to make a comeback of sorts, even its share price was unlikely to see the high of February 2000 for a long time.
In June 2010, GTL said it was considering a merger with Reliance Infratel, the wholly-owned subsidiary of Reliance Communication in a deal valued at close to $10 billion. In an interview to a leading business daily, after signing the agreement with Reliance Communications, Tirodkar said the combined entity will generate Rs 6,000 crore from 85,000 towers with operating margin of up to 75% in its first year of operations.
By mid-July 2010, the stock had climbed to a near nine-and-a-half month high of Rs 477. Nowhere near its record high, but still a tenfold rise from its low of September 2001, something very few market players expected.
Unfortunately for Tirodkar, the mega deal with Reliance Communications never fructified, and in September, both companies called it off after failing to agree on the terms for the deal.
Veteran brokers say it is very likely that the liquidation of pledged shares would have caused much of the damage on Monday. But the bigger question is: what exactly triggered that sell-off? At Monday’s closing, GTL’s market capitalization was Rs 1242 crore, while revenues for financial year 2010-11 was Rs 3130 crore. In short, the company is available for 0.4 times full year sales, while just two trading sessions back, it was going for 1.26 times.
If the stock price does not recover much of the losses over the few sessions, it could mean that the company is facing some serious problem which makes the stock unattractive even at this valuation.