Videsh Sanchar Nigam Limited (VSNL), the state owned international telephony service provider, has posted a drop in net profits for the first quarter ended 30th June 2001. The reduction in international telephony rates by the Telecom Regulatory Authority of India (TRAI) has clearly taken its toll on the value growth for VSNL. However, a closer look reveals that net profit has actually gone up by 0.5%.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy)
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On an average, the accounting rates are lower by 27%-28% compared with the correponding quarter of the previous financial year. We had expected a marginal decline in telecom revenues in the first quarter against which VSNL has reported a significant fall. Sales in 1QFY01 also include Rs 211 m as income from Intelsat, which was corporatised recently and as a result sales in 1QFY02 does not include income from Intelsat.
Operating margins, on the other hand, have also gone up from 25.7% in 1QFY01 to 27.4% in 1QFY02 and are is in line with our projections. Extraordinary item here pertains to prior period adjustments to the tune of Rs 229 m. Other income has fallen significantly because other income in 1QFY01 includes interest earned from GDR proceeds. Excluding both the fall in other income as well prior period adjustments, net profit has actually gone up by 0.5% to Rs 2,288 m in 1QFY02.
The scrip is currently trading at Rs 264 at a P/E multiple of 5.1x the annualised 1QFY02 earnings.
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