VSNL, the state owned telecom major, has posted a 34% growth in net profits for the third quarter ended 31st December 2000 backed by a 23% growth in sales. Operating margin has also gone up from 26% in 3QFY00 to 31% in 3QFY01. The growth in operating margins would have been sharper but for decline in accounting rate (VSNL negotiates accounting rates with international carriers every year for transfer of calls between countries, which has been on the decline). The Total Accounting Rate (TAR) has gone down by 20% compared to the corresponding quarter of the previous year.
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Telephone traffic for the quarter ended 31st December 2000 was 707 m paid minutes, compared to 543 m paid minutes in quarter ended 31st December 1999, a growth of 30%. This could be attributed to the fact that tariff rates for international calls were reduced during the current year, which has added to the top line growth. The other reason for a 23% growth in topline could be from value-add service like Internet and leased lines.
Income from value-add services has gone up by 19% to Rs 5,705 m for the nine months period ended 31st December 2000. VSNL reduced rates for Internet and leased lines by 50% and 75% respectively, during the third quarter of the current year, which has led to this higher growth.
The stock is currently trading at Rs 312 at a P/E multiple of 5.5x the annualised 3QFY01 earnings. On the annualised sales of Rs 70,893 m, market capitalisation to sales works out to 1.3 times (market capitalisation is Rs 88,920 m)
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